The Aftermath Of Greed-Updates

The Ronald - Wealth DNA - Interview with H. L. Quist

2012-01-09T09:32:00.000-08:00

Hello World,

Ron Nawrocki says of this show:

"What's likely to occur in 2012?
We'll be asking our special guest H.L. (Buster) Quist to share some of his insights he just sent to his newsletter subscribers. And listeners get to hear his predictions at no charge, and can even ask questions during the show. We'll be focusing on the 3 E's that directly affect our portfolios: Economy, Elections, and Earning money. You may recall he was a guest on the Wealth DNA radio show in the fall of 2010. If you enjoyed that show, I know you'll be joining us and will be ready to take notes!
H.L.Quist is a economic historian, an expert on economic cycles, and author of 5 books and an investment newsletter. His most recent book is "How to Profit From The Coming Inflationary Boom And Avoid The Next Crash". H.L.Quist started his career in financial services, changed to real estate brokerage and development, and now he's back to managing money.
He's one of my key economic & financial advisors, so don't miss this show, and you'll want to invite a few good friends to join us!"

H. L. Quist on Wealth DNA Radio

Download the show here

This was an outstanding interview, share with your friends and family.

My books are also available as ebooks too.

http://www.lulu.com/spotlight/hlquist

H. L. Quist

Free Preview of January 2012 CMV

2012-01-03T04:21:00.000-08:00

Market Overview

CMV has erred. Yes, we make mistakes. One error is our perception, shared by many, that the battle for the presidency and the financial security of America in November will be principally waged between the “haves” and the “have nots” – between the independent self-reliant capitalist mind-set and the dependent redistribution socialist mind-set. And, of course, the one percent would clearly be aligned with the rich, Wall St., Republican crowd. Much to the dismay of the Occupy Wall St. Group and the to the surprise of the Right, we now know that the left has strong financial support from the ostensibly opposed 1% Wall St. “Robber Barons.”

How could that be when there would be such a wide ideological shift? And, the President’s ardent supporters are confident that they will raise an unprecedented one trillion dollars for the 2012 Campaign. How could they raise that amount from “poor folks?” Read page 10, “Throw Them All Out” and you will gain an insight into the emergence of a new political system in this country which CMV has dubbed “American Fascism.”

The second error was financial. Regrettably, CMV did not issue a SELL signal on September 1, 2011 for all precious metals. As we go to press it appears that gold is searching for a bottom, rallying sharply on the last two days of the year! Read page 4 for our positive outlook on the Sector for 2012.

CMV attempts to spot growing social, political and economic trends that could materially impact our security and way of life in the future. Here are a few:

You’ve probably seen Charles Binder, the lawyer in the cowboy hat selling his services to the disabled telling the viewer he’ll do all the necessary work to get you your disability benefits because, “you have enough to worry about.” Social Security Disability (SSDI) is a separate fund from Social Security (SS) that was established to provide benefits to those workers who were totally and permanently disabled. In the past, it was difficult for anyone to qualify for SSDI. Twenty years ago it took a family member almost five years to finally get approved for benefits. Now, thanks to the efforts of Charles Binder and his firm Binder & Binder (B&B) and a liberalized judicial review system, SSDI benefits have ballooned. $130 billion has been paid to 10.6 million employees in 2011. Fees paid by the Social Security Administration to B&B has risen in just 5 years from $25 million to almost $100 million and the time to review a case has declined to 360 days. 771,318 cases are presently waiting to be heard.

What’s the problem? The SSDI fund will be broke in 5 years. The abuse of the SSDI system to obtain benefits for the non-disabled is indicative of a growing entitlement society that scams as much money as it can from what is perceived as an unending source of funds – the Federal Government. Certainly there are many people that truly need and are entitled to benefits but to a large number of recent applicants its an early retirement plan. The SSA is investigating the practices of B&B and other firms as well as a number of judges who have a 100% case approval record. It doesn’t occur to any of these beneficiaries (as yet) that their disability checks could end, be reduced or be consumed by inflation.

At the city and state level entitlement cuts are already being instituted. Last month retired city employees of Pritchard, Alabama experienced a complete termination of their retirement income. Former employees in Vallejo, California are receiving about 30% of their former retirement after the city filed bankruptcy. In Central Falls, Rhode Island, retired firefighters and police officers agreed to cut their pensions by 25% and support a plan that would give bondholders 100% of the money owned on city debt. Before Central Falls collapsed Rhode Island lawmakers passed a law that puts bondholders first in line amongst all creditors of municipalities in the state. State and local governments all over the US are viewing this law as a solution to their unfunded pension liabilities. Once the rating agencies downgrade the cities and states, funding becomes extremely expensive or unavailable. At the Federal Government, they simply print more money with the click of a mouse.

In Arizona, a major journalistic effort by the Arizona Republic not only revealed that Phoenix Metro area County and State employees enjoy top salaries and benefits, they have the ability to receive unused sick-leave cash payouts at retirement. Payouts in 2010 to Phoenix employees was $10,798,370 or $11,958/employee for 903 employees. In Scottsdale the payout was $24,443/employee and the State of Arizona had 502 employees with payouts of $12,994 each. What is remarkable about this situation (other than affected employees) is that few citizens knew that this practice existed especially at a time when the State was facing a severe financial crisis. Public pressure and the coming economic reality will change this benefit all over the US but to bureaucrats, it couldn’t possibly happen.

Another phenomenon is occurring which not only highlights a disturbing trend, it signals a societal shift. A riot broke out during the holidays at the Westfield South Center Mall in Seattle, Washington. As a large number of young people (how about thugs?) were pressing to buy the new Air Jordan $180 sneakers, a melee ensued to the extent that officers had to use pepper spray to disburse the combatants. A popular sport of young thugs (“Flash Rob”) is to raid a store and take as many items as possible before the police arrive. Many mom and pop retail outlets are financially hanging on by a thread. Nothing will drive the consumer to on-line purchases faster than unruly kids roaming the malls and streets. The bigger picture is more meaningful. Civility, decorum, politeness and mutual respect for our fellow man, is rapidly evaporating in American society. Road rage is provoked at the slightest provocation. Athletes and fans want to fight at virtually every venue and it’s growing exponentially.   This phenomenon is a harbinger of civil unrest to come. As CMV has said many times, the abuse of freedom will lead to the loss of freedom. A police state is in the making.

Closely aligned with the above, the National Defense Authorization Act (NDAA) of Fiscal Year 2012 has been passed by the House and the Senate and is has been signed by the President (with reservations), despite petition efforts to request he veto it for its very controversial features. The bill authorizes the President to indefinitely detain terrorist suspects, including US citizens, without trial, and that detention can be by the US military on US soil. CMV never thought it would be on the same side as the American Civil Liberties Union (ACLU) on any issue.

A report produced by the US Army War College’s Strategic Institute warns that the US may experience massive civil unrest in the wake of a series of crisis which it terms as “strategic shock.” The report was authored by (RET) Lt. Colonel Nathan Frier. The Tea Party, free rights advocates and conservatives fear that the NDAA is a critical move by the Congress towards creeping state-ism just like the New World Order elitists utilized in Libya. As the President told us “we’ll fundamentally change America.” Only CMV and a select few knew what the word fundamentally meant.

Let’s examine critical financial trends.

US banks are awash in cash referred to as “hot money.” At the end of the third quarter there was a total of $10 trillion in our banks with 20% of it in non-interest-bearing accounts which most often prove to be “flighty” or prone to leave as fast as they were deposited. A large amount is coming from the EU. Why non-interest-bearing? The Dodd-Frank Act provided for unlimited FDIC insurance on these accounts, whereas there’s a $250,000 limit for interest-bearing accounts. The catch is that this insurance expires at the end of 2012 and the banks use of ‘free money” will likely end.

A meaningful step was made by China this past week when they entered into a currency agreement with Japan that gives the Chinese yuan a more powerful role in international trade. More importantly perhaps, it gives both countries the opportunity to diversify away from the dollar and move the yuan towards recognition as a global currency. The Chinese are master chess players. This is another strategic move in their quest to replace the present number one.

A year ago Illinois Governor Pat Quinn and his Democratic-controlled legislature passed a $2 billion take hike in an attempt to bailout the near bankrupt state. Income taxes rose 67% and the corporate rate rose from 7.3% to 9.5%, one of the highest business tax rates in the US. What happened? More than a dozen companies have left the state for Wisconsin and Indiana. And, the Chicago Board of Trade and the Chicago Mercantile Exchange who employ thousands threatened to leave the state. Quinn responded by giving both $85 million in tax relief leaving the small business sector to fill the gap. Lesson learned is – this is what will happen in California and similar states to the benefit of zero and low corporate tax rate states like Texas and Nevada. It also sends a message to the tax and spend advocates in Washington who insist this is the way to growth and deficit reduction.
The Coming Gold Rush Of 2012

History not only repeats it often has a REBIRTH. That’s about to occur in the gold market as we begin the new year. First, the history.

Gold Bullion (Au) began its’ brilliant bull market in 2001 at $265/oz. Despite a number of minor corrections, Au reached a new record (in nominal terms) of $1,000/oz in the fall of 2008 just prior to the collapse of Lehman Brothers (LEH). Fear, a run to the safety of US Treasuries and profit taking caused Au to decline over 30% to about $700/oz by the end of 2008. Then, in a sudden and unexpected reversal, Au began to rally off its’ lows in January 2009 and by the end of February (in just 3 months) Au retraced 100% of its’ decline to $1,000/oz. There was a brief correction in March and April and then Au, along with most of the commodity and equity market, began its’ relentless run to $1911/oz by September, 2011, posting 732 days above its’ 200 day moving average. This rally was accurately forecast by H. L. Quist in his book, “How To Profit From The Coming Inflationary Boom: And Avoid The Next Crash.” Au began 2010 at $1100/oz after a 20% correction in late 2009 and it barely took a pause on its’ way to $1911.

Despite a reversal in the overall economy in the summer of 2011 and forecasts of a negative outlook on Au by Larry Edelson and others, Au exploded in price from $1500/oz in June, 2011 to the high of $1911 by September – a move of almost 30% ! A major correction was due, especially after the “double top” formation in late August and the fear that permeated the markets precipitated by the crisis in Greece and most of Europe. You’ll note on the chart the September surge in liquidation that took Au down from $1800 to a low of $1535, a rally back to $1800, then a recent sell-off to $1566.

Lost in all the hand-wringing and omniscient prognostications of Au’s demise from Dennis Gartman and others, Au is up 10% for all of 2011 and is the top performing Sector in the US unless you had a leveraged long US Treasury position (TMF) or utilities. Also forgotten is the fact that Au has had a positive gain every year for 10 years and is up 491% in that period. No other asset class comes close.

This history gives us a point of reference as we try to determine what does the future hold for Au and the planet earth in year 2012 and beyond. Here are some of the fundamental issues that all markets will be factoring in going forward, including gold.

●   According to the Hightower Report, the total world demand for gold in 2011 will equal about 3400 tonnes. Total world mine production is about 2700 tonnes. A demand-supply deficit has existed for over 10 years. A similar deficit should exist in 2012. China’s demand could soar.

●   Au did NOT assert itself as a flight to safety asset in the 2011 EU debt crisis, still unresolved. This was probably caused by an overriding fear of a severe contraction and depression and the perception that inflation would not be a salient factor. CMV maintains that ongoing deficits, sovereign debt defaults and social unrest due to worsening employment opportunities and food shortages will result in monetization of debt and increased spending in the EU, US and China that could result in global inflation.

●   Central Banks in the EU are actively involved in the bullion market to meet their liquidity needs. Germany is the second largest holder of bullion (119,825,037 million oz) to the US, Italy third, France fourth, and the Netherlands seventh. Greece, Portugal and Spain also have sizable gold reserves. Some Central Banks have been “leasing” their gold out to bullion banks such as JP Morgan Chase and HSBC who use the leased gold as collateral for additional fractional paper short sales in order to drive prices lower. Some Central Banks may have conducted “Swaps” of gold to the Bank of International Settlements (BIS) to obtain cash for liquidity needs with the intent to reverse the trade when the crisis ends. As CMV has previously reported, the supply of gold bullion at Fort Knox, the COMEX warehouse and other depositories is in question. Most traders and analysts believe that a strong demand for Au could precipitate a short-covering rally similar to the one experienced in early 2009.

●   An unsavory and unsettling political battle in the US in 2012 could reduce the desirability for US Treasuries. China has already indicated that it plans to diversity out of the US dollar. The US must rollover $4.2 trillion in debt in 2012. Who will be the buyers?

●   Most assuredly, the Federal Reserve will be involved in some sort of Quantitative Easing in 2012. A proliferation of US dollars and resulting monetary inflation could be the key driver of Au prices in 2012.

●   As Paul Brodsky (QB Asset Management) reports:

    “Real interest rates (nominal rates less CPI) are negative across the majority of the largest developed and emerging economies, implying that a stable or rising gold price has positive carry.”

    “...global inflation is already substantially higher than common price baskets indicated, meaning real interest rates are even more negative than the CPI currently suggests.”

    “...the future growth of paper currencies will continue to exceed gold production by a wide margin, which implies the price in paper currency terms of physical gold should continue to rise substantially.”
    “...there will be global hyperinflation that peels the skin off your face.”

One of the axioms in the investment business is, “it’s different this time.” The bullet points above offer additional factors that are different compelling reasons for a bull market in Au in 2012. Remarkably, Citigroup just forecast a price target of $2400/oz within two years for gold which is surprising since the bank is not regarded as a prominent player in this Sector. Citi’s ultimate target? $6000/oz.

If the investing public marveled how $1.2 billion could vanish into thin air from MF Global’s customer accounts, the revelation that solid silver bars could shrink by 28% defies comprehension. Customers and traders who are holding warehouse receipts for delivery of silver bars have been advised by the bankruptcy Trustee that they won’t receive full delivery! To add insult to injury futures accounts that were frozen have seen their accounts fall by 31% since then and the situation supports CMV’s contention that the silver (and gold) bars do not exist. The question is, will the forthcoming customer lawsuits open Pandora’s box and reveal Wall Street’s dirty secret? Stay tuned!

The New World Order – Its’ Time Has Come

The concept of a New World Order (NWO), contrived by a secret cabal of global leaders and elitists whose goal is to control the world, has been the focus of ridiculed conspiracy theorists for the past 50 years. Now, the NWO is no longer a secret. Here’s what David Rockefeller, the last surviving son of John D. Rockefeller and the number one point man for the NWO, is quoted as saying:

“This window of opportunity, during which a truly peaceful and inter-dependent world order might be built, will not be open for long...we are on the verge of a global transformation. All we need is the right major crisis, and the nations will accept the New World Order.” – David Rockefeller speaking at the United Nation’s Ambassador’s dinner, September 23, 1994.

The NWO’s time has come. The “right major crisis” is the collapse of the European Union, itself a creature of the NWO. Mike Krieger (Zero Hedge) has provided the following insightful analysis to events that are in motion that will impact all of us. Mike believes that “Greece and Italy have now officially been placed into the receivership of ‘technocratic governments’ and are now in the final phase of their looting” by the NWO.

Mario Monti has been “chosen” to lead Italy out of its’ financial chaos by the powers that be (TPTB). Monti is a member of the Bilderberger Group, is the European Chairman of the Trilateral Commission (a think tank founded by David Rockefeller in 1973 and responsible for the elevation of a peanut farmer to the US Presidency in 1976) and is tied closely to Goldman Sachs whose advice to Greece doomed its’ fate. A coup has taken place in Italy without a vote of the citizenry. According to Krieger, Italy and Greece will be “looted” of their gold reserves in a disguised quest for financial stability. Spain and Portugal are the next candidates although Spain has just thrown out the Keynesian Socialists and intends to resist intervention by the NWO crowd.

Kreiger offers CMV readers an insight to how the “reorganization” of the EU is impacting gold bullion. He says the reason why the EU doesn’t come up with a solution is because the TPTB doesn’t want a solution. They know that if they announced a Quantitative Easing or monetization of debt scheme, gold would skyrocket in price and the NWO’s ‘gig’ would be up. The plan is to announce nothing (of substance), sell sovereign gold behind the scenes out of public view and perform all kinds of manipulation of the markets behind closed doors. Chaos will ensue and the NWO will assume control. China, Russia and other members of the Shanghai Cooperation Organisation know exactly what’s going on in Europe and, as outsiders, will happily acquire the EU gold at these discounted prices.

The European Central Bank’s (ECB) new President, Mario Draghi (Santa Claus) delivered a Christmas present to all the EU members in the form of a Long Term Refinancing Operation (LTRO). This gift amounted to 489 billion euros ($638 billion) in the form of 3 year loans at 1% to EU banks – the largest in EU history. 523 banks camped out all night like shoppers at Wal-Mart to get their gift. The immediate liquidity needed to avoid bank runs has been met but the sovereign debt problem still exists. However, before Santa departed some of the banks used their new-found euros to buy their country’s sovereign debt. Santa with a wink and a nod and a hearty ho, ho, ho, climbed into his sleigh and with Rudolph in the lead, disappeared into the fog of Euroland. By Easter, the banks will need $700 billion more. Just in time for the Easter bunny.

The NWO knows that the western-centric fiat monetary system is about to collapse. They’ve known that for several years especially since the contrived Greenspan Plan of 2002 led to a bursting of the debt bubble not only in the US but also the EU (Remember, Wall St. sold tons of MBS to the EU banks.) So, if the Euro currency evaporates into the dustbin of history, what will be the NWO’s currency of choice? IT certainly won’t be gold, the enemy of the banksters. Kreiger says it could well be “SDRs” – Special Drawing Rights.

SDRs is a product of the International Monetary Fund (IMF) created in 1969 as an international reserve asset. It’s value is based (presently) upon a basket of currencies consisting of the USD, the Euro, British pound, and the Japanese yen. Since the NWO goal all along has been to have a one world currency, how convenient the SDR would be minus the euro. The result could be a massive devaluation of all existing western world currencies plus Japan and the USD’s purchasing power would plunge. The SDR would be sold to us as a solution to the EU and US massive unsustainable debt problem, but in reality it would be another fiat currency scheme, just as the euro. Obviously, the focus in 2012 will be on the EU but if the banksters pull it off, David Rockefeller’s dream could come true in his lifetime (now 96 years old). The NWO’s Plan B might be to allow the present monetary system to crash first and let the proles (proletariat) demand a solution. In the end NWO folks (the real 1%) want control of a totally dependent and subservient population. To those who called us conspiracy theorists, look around and observe how America and the EU is fundamentally changing.

The Great American REFI – Part II

The Great American Refi – Part 1 was launched in the fall of 2002 which was dubbed the Greenspan Plan by H. L. Quist. This deliberate strategy conceived in the solitary confines of the US Federal Reserve Bank as a means to get the moribund consumer to spend money was the nucleus of the debt bubble that has destroyed lives and property values throughout the world. Now, in a desperate attempt to help homeowners and the residential real estate market take on some semblance of recovery, the Wizards of Washington have announced a second edition of the Home Affordable Refinance Program (HARP).

HARP 2 is aimed at refinancing approximately $5 trillion in Fannie and Freddie mortgages owned or guaranteed by these two taxpayer-owned agencies which make up about 50% of the total mortgage debt. The plan is to offer refinancing at rates at or below 4% with minimal closing costs to those who have equity or are deeply underwater on their mortgage. The catch 22 is that HARP 2 is only open to those with “strong repayment records” with Fannie and Freddie, but borrowers no longer have to demonstrate their ability to repay the mortgage. Critics of HARP 2 say it will only generate about 1.6 million refinancings out of 14 million Fannie and Freddie loans and hardly be worthwhile. Joseph Gagnon, formerly of the Federal Reserve in Washington, has floated his plan called “The Last Burst” and wants to push rates down to 3% and have the Fed initiate a QE program buying $2 trillion in mortgage-backed securities from the “evil twins” and refinance everyone! Now we know why Treasury Secretary, Hank Paulson, kept the twins alive. Like vampires, they never die. As the election debate heats up don’t be surprised to see HARP 2 become the great American giveaway.

Meanwhile, across the hall Barrack Obama’s operatives are exercising muscle which seems to be at cross purposes with HARP 2. Get this! The Administration appointed an Inspector General to supercede the regulator (Federal Housing Financing Agency) in looking into the operations of Fannie and Freddie. Steven Linick has the power to make arrests, issue subpoenas and conduct searches (without warrants) of all the employees of these two agencies. Linick’s agents who carry guns and have badges have gotten everyone’s attention at Fannie and Freddie! David Felt, a former senior lawyer at FHFA said, “It creates a very chilling atmosphere.”

As of this date, Linick and his storm troopers have 48 investigations underway and his federal agents have raided several homes of Fannie employees as part of an investigation related to defaulted commercial mortgages. Sources have cited numerous cases of kickback schemes and fraudulent loans as one cause of the investigations. The question CMV raises is, where were these troopers when the real serious money was stolen by Franklin Raines et al?

As a side note, the SEC has just filed charges against six former senior officers of Fannie and Freddie for failure to disclose to Congress the true condition of the ‘evil twins’ who have cost taxpayers over $150 billion to date. And, the SEC is seeking “disgorgement of ill-gotten gains with interest” which should send a message to these crony capitalists in the future. At least we didn’t have to pay the $12 million in executive bonuses this year.

China Has Hit Its’ Wall!

China’s past voracious appetite for industrial and agricultural commodities and consumer goods has been the driver for the global economy. No calculation of world-wide growth can be projected without looking at the Chinese economy going forward into 2012. Here’s a compilation of facts (provided principally by Ambrose Evans – Pritchard of the Belfast Telegraph) that may surprise the reader but are essential to projecting what’s ahead for what is now the world’s second largest economy:

●   China’s credit and real estate bubble has burst. Home prices fell 35% in Beijing in the month of November from the month prior. As reported previously by CMV there are reportedly 66 million vacant apartments in China plus the infamous “ghost cities.”

●   The growth in the money supply fell to 12.7% in November, the lowest in 10 years. New lending has fallen 5% on a month to month basis but the central bank has begun to reverse its’ tightening policy initiated to stem inflation that was at double digits.

●   The Shanghai Stock Index is down 30% since May and off 60% from its’ high in 2008.

●   Investors are grossly underestimating the risk of a hard landing in China which will impact the BRICs (Brazil, Russia, Indian and China). China exports 21% of its goods to Europe. Negative GDP growth there going into 2012 will create excess manufacturing capacity in China and a possible fire sale for its’ products worldwide.

●   China’s $3.2 trillion of foreign reserves is dropping rapidly as “hot money” is flowing out of the country. The central bank may devalue the yuan at the same time that the US is demanding an increase in the value of their currency.

Perhaps the most noteworthy sign that not all is well in China is the recent revolt in the Village of Wukan in the Province of Guangdong. Villagers have forced local officials and police to flee after the death of one of the residents who was protesting the seizure of land in the city. It is estimated that officials in China have taken about 16 million acres of land from citizens and farmers since 1990 depriving owners of about $314 billion due to the discrepancy between the compensation they are paid and the land’s real value. The police have responded by blockading the city stopping the flow of water and food and preventing fishing boats from leaving the harbor. Uprisings are occurring all over the country for this and other reasons.

The bottom line is that China faces unexpected and potentially irreconcilable challenges. They must re-inflate their economy or face ever-increasing civil unrest and another round of monetary stimulation which will fan the fire of inflation. Welcome to the world of Capitalism. CMV is betting that the Chinese will try to inflate the dilemma away. And, for possibly a year, will succeed.

Throw Them All Out

“Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Tips, Land Deals and Cronyism That Would Send The Rest of Us To Prison” is the recent book by Peter Schweizer that has created angst among the Washington establishment and anger amongst the public. The longest book title in the annals of literature, clearly states what is within the pages but the well-documented detail will infuriate the reader like none other. Here are some of the bipartisan low-lights.

Representative Dennis Hastert (R-ILL) who served (or should we say took) in the House of Representatives from 1986 to 2007 and became the Speaker, is an example how an elected official can enter public service with modest resources and leave a rich man. In 1986, Denny had a net worth of about $200,000. Eleven years later, he was worth about $11 million. Since average current salaries are approximately $175,000 per years (plus another $100,000 in benefits) how could Mr. Hastert amass such a fortune? Simple – land deals. Hastert bought a piece of farmland near his home in Illinois, got local officials to design a parkway that would run through the property, got Congress to approve a $207 million earmark to build the parkway and then sold the most favored location to developers – a nice 140% profit. More deals followed.

There was perhaps no greater “wheeler-dealer” in Congress than Lyndon B. Johnson (D-TX) who secured his Senate seat by fraudulent means and parlayed his position to a fortune. His investment in a small radio station in Austin, TX (KBTC) of $17,5000 grew into a media empire through exercising industry control through the Federal Communications Corp.

And, there’s the story of Representative Tom Lantos (R-CA) who played a key role in the phenomenal growth of Boeing by serving on the House Committee on Foreign Affairs. Through the Export-Import Bank, Lantos was able to direct the lion’s share of Boeing’s international sales financed through the E-I Bank. When Lantos died in 2008 Boeing stock was $85/sh and Rep Lantos had been buying the stock for 25 years.

Of all the Congressional transgressors, however, nothing is as onerous as insider trading. To Registered Investment Advisors (RIA) and traders this means revocation of their authority to do business, fines and jail time if found guilty. It is an entirely acceptable practice to Congressmen if their respective ethic committees approve it. And, without exception they do. Time and space do not permit the entire story but, as Obamacare and Medicare D (Rx drugs) were being debated in Congress, both John Kerry (D-MA) and John Boehner (R-OH) profited enormously by purchasing and selling stock in pharmaceuticals and health care companies.   Since members of Congress do not have to report stock transactions that are in “blind trusts” or simply report transactions in dollar ranges “like one million to five million,” the actual profits are not known.

Then there’s the case of Nancy Pelosi (D-CA) and her husband Paul that profited handsomely in early 2008 with shares in Visa, secured prior to an Initial Public Offering (IPO). Representative Pelosi played a key role in defeating legislation that would have been damaging to VISA and initiated another bill that enhanced the card company’s profits. The couple reportedly has a net worth of $200 million. As Schweizer states, “...professional athletes can’t bet on games but politicians can.”

The penultimate insider trader title goes to Spencer Bachus (R-MT). He was in attendance in the meetings with Hank Paulson (Secretary of the Treasury) and Ben Bernanke (Fed President) when the financial crisis reached its’ perilous peak in the fall of 2008.   Knowing that General Motors, Fannie and Freddie and other companies were facing bankruptcy and the banks were in dire straits, Bachus loaded up on options going short or betting that all the stock prices would plummet. Then just prior to the passage of TARP (Troubled Asset Recovery Program), Bachus switched sides and went long betting that stocks would recover – and they did. As the author so poignantly points out, Bachus was able to buy stock with one hand while playing the role of overseer with the other. A massive conflict of interest as well as profiting from insider information. All condoned by the Ethics Committee.

All of what you’ve just read appears almost minor compared to the prime example of Crony Capitalism by what Schweizer refers to as the “Permanent Political Class.” The author lists all contributors to Barrack Obama’s 2008 campaign, the amounts paid and how these contributors benefited (say paid back) from various programs. One prime example is the 1706 Loan Program through the “green jobs” initiatives by the Department of Energy (DOE). Of the $20.5 billion allocated to the DOE (from taxpayers) guarantee program $16.4 billion went to alternative energy companies owned or controlled by contributors to Obama’s National Finance Committee. The $573 million loan guarantee and subsequent bankruptcy of Solyndra to Obama’s “bundler” George Kaiser, is the most publicly recognized deal. Most Phoenicians don’t know that the big players in First Solar were Ted Turner and Goldman Sachs who contributed one million dollars to the President’s campaign and, virtually all Americans would never expect the name of Warren Buffet to surface as one of the largest benefactors of taxpayer’s money. Schweizer refers to America’s most recognized and admired capitalist as the “Baptist Bootlegger” – an apt description of one who has a pious public persona but profits from an illicit operation in the back woods. (NOTE: H. L. Quist’s “Open Letter To Warren Buffet” submitted to the WSJ in the December CMV.)

Berkshire Hathaway BRK.A made, what most observers believed at the time, were risky loans to Goldman Sachs (GS) ($5 billion) and General Electric ($3 billion) when the world was coming to an end in late 2008. President Obama considers Mr. Buffet as a valued advisor. As an advisor Mr. Buffett was privy to the fact that TARP would be passed and provide three quarters of a trillion dollars to the banking and key industry giants. BRK.A firms received $95 billion in TARP funds thus assuring that $500 million in dividends would be paid per year from GS to BRK.A. Other companies in the Berkshire family would successfully leverage taxpayer money and realize much higher stock prices. George Soros, who CMV has labeled “the most dangerous man in America” also became an advisor to the President – one day after the election. Schweizer details his involvement.

Schweizer’s exposé reinforces American’s distrust of Congress and the failure of our political system, which is morally and ethically bankrupt. Washington is so corrupt that leadership is arrogant. They could care less that the public is onto their game. We do have recourse. United we can throw them all out but CMV sees another aspect of this contemptuous situation that no one wants to talk about.

FASCISM comes from the Latin word Fascis which means to “bundle.” In CMV’s opinion what is taking place in America today, as evidenced above (and what we experienced with Fannie and Freddie which worked so well), is the bundling or the merging of government and large businesses together in order to consolidate power, to control the population and to accumulate wealth. Most political pundits consider the Presidential election of 2012 to be a face-off between the haves (Republicans) and the have-nots (Democrats). That’s not the case. Many of the 1% are squarely aligned with the radical left in what could be classified as Neo-Fascism or American Fascism (to differentiate it from Mussolini’s fascism which sought to use its’ power for expansion through force.) Barrack Obama’s principal objective is to destroy Capitalism in order to “fundamentally change America.” What Americans (and the 1%) do not know is, will the bundling continue after the coronation in 2012 or will the 1% be re-characterized as Capitalists and be purged?

Forecasts 2012
2011 was a bad year for optimistic forecasters including CMV. The unexpected downtown in the US economy at the end of the second quarter forced us to revise our forecast for the remainder of the year. As a result, the CMV forecasts of:

●   The Economy and Financial Markets Will Surprise to the Upside.

●   The “Shock and Awe” Real Estate Loan Program (would lift sales)

●   The Bond Bubble to an Asset Bubble (would lift stocks and commodities)

Did not materialize.

Amazingly, however, it appears that all of the above forecasts were simply delayed principally due to the unexpected decline in GDP in the second and third quarters and fear generated by the severe crisis in Euroland, the downgrade and US debt and the extreme volatility in the US and global financial markets. Using the same lead lines above, here is what CMV sees for 2012 in these 3 Sectors plus new forecasts for the year ahead.

1.   The Economy and Financial Markets Will Surprise to the Upside.
    All of the ten prominent strategists and money managers quoted last year picked the S&P 500 to finish 10% higher in 2011 but it finished absolutely flat at 1257. None of the experts forecast the 10 year T-Note anywhere near 1.89% up 17% for the year thinking rates would rise. And the consensus was that technology would be the top performer, when it had a -1.8% return and was the worst performer. No experts, as is almost always the case, picked gold to outperform the indices but it turned in a +10% performance for 2011 in third place behind bonds 17% and utilities 15.6%. CMV was correct when we said S&P 500 earnings would be negatively impacted by increased raw material costs but we missed the boat when we called for inflation and higher interest rates for the year. You win some, lose some and some get rained out.

So, what’s ahead for 2012? Punt?

CMV can’t recall when, historically, there have been so many dynamic factors that could directly influence the financial markets. For evidence read those discussed below. We could build a solid case for substantial gains and all Sectors – stocks, commodities and real estate, which could be impacted by one or two of these events, discrediting the Bullish case. In addition to those factors listed below we thought that George Hoguet, the Global Investment Strategist for State Street Investors, made a statement that is apropos (Barron’s January 2, 2012):

“Given that the EU is larger than the US economy it is impossible for the US to decouple from a significant recession in the EU.”

What is the most likely scenario? Again CMV defers to someone whose point of view is much more unbiased than fund managers and advisors who want you to contribute more funds and not withdraw them. Thomas G. Donlan is the Editor of Barron’s. He said: (January 2, 2012):

“Muddling through (which is exactly what happened in 2011) is our best hope. The world is heaping up money and debt in such quantities that the ultimate blow-off will require a new word to describe it.   Depression will just seem inadequate.”

Tom, there is a word for it. It’s called a “crack-up boom.” CMV believes that we could experience the BOOM (blow-off) and the crack-up will follow. The Boom is the “last rodeo.” The Crack-Up is the depression.

2.   The “Shock And Awe Real Estate Loan Program”
    Please refer to page 8 for the Great American REFI- Part II. As this point we do not know how extensive HARP 2 will be. If Joseph Gagnon’s “The Last Burst” (Harp 2+) plan is augmented, 2012 will be an exceptional year for residential real estate. One fact is known. A revival of this market and the bailout of millions of homeowners is the centerpiece of Barrack Obama’s re-election strategy. The market is presently mending on its’ own. HARP 2+ would accelerate it to levels even the most optimistic and aggressive real estate prognosticators have forecast.

3.   The Bond Bubble To an Asset Bubble.
    In H. L. Quist’s “How To Profit From The Coming Inflationary Boom” And Avoid The Next Crash” the premise was that Federal Reserve monetary policy and the multitude of Congressional stimulus packages would create asset inflation starting in March of 2009. That forecast was 100% on target from that date to the fall of 2011. Commodities had the biggest run during this period and understandably, took the biggest hit when asset Deflation became the fear of the day. Gold fell 15%, Copper 22%, Wheat 22% and Cotton 62%, illustrate the point. The major stock indices, beginning in August, started the scariest roller coaster ride in our 50 year memory and the S&P 500 ended about -0.4% YTD, far below expectations. Barring (again) unexpected events (some outlined below) all the major indices could challenge their all-time 2007 highs if all goes right. Thus, the forecast BOOM in 2012 will be “reinstated” which (unfortunately) sets the markets up for a resounding CRASH in 2013. CMV’s consistent theme has been that the US is about to experience “The Last Rodeo” which to investors means, get on board the raging bull in 2012, enjoy a rocky ride but be prepared for a sudden exit to avoid a hard landing. When? We do not know now but when the rodeo clown makes his appearance, the ride is over.

New Forecasts – 2012

1.   The World Will Be Hostage to Chaostan
    Richard Mayberry (“Early Warning Report”), coined the word for the geographical area referred to as the Middle East – the land of chaos. Twenty years ago, Richard boldly forecast that this region of the world, which has experienced little peace in 4,000 years, would eventually become the planet’s dominant theater of war. That time has arrived. It was naive for the US and the world to believe that the “Arab Spring” would result in Egypt, Iraq and other states to become as Barrack Obama proclaimed, “sovereign, self-reliant and democratic.” The Shiites’ grand scheme is to control most all of the Middle East including Saudi Arabia. Only days after US troops left Iraq, extreme violence broke out and Prime Minister Nouri al-Maliki issued a warrant for the arrest of a Sunni leader and made it clear that he would break up the multi-sect government coalition kept intact by the US. The purge has begun.

Of critical importance is Iran’s nuclear program. Un-named sources indicate that Cyber attacks have been unleashed on the Iranian facilities to sabotage them and a number of nuclear scientists have disappeared or have been murdered. The sanctions have created angst amongst the civilian population. There’s a distinct possibility that Israel will bomb the nuclear plants which conceivably will bring a host of combatants into the fray, namely: Russia, China and of course, the US.   The Iranians will immediately respond to the bombing by blocking the Straits of Hormuz and oil prices will skyrocket to $150 to $200/BBL. The entire global economy will be at risk.

2.   The Two Party Political System Will Fragment.
    The 2012 presidential election will be the most onerous and potentially fraudulent one in American history. There is a concerted effort being undertaken by “traditional” and “blue dog” Democrats to replace Barrack Obama as the party’s nominee. Like Harry Truman in 1952 and Lyndon B. Johnson in 1968, who were encouraged not rot run for the sake of the party, mainstream democrats fear that Obama’s extreme methods and attacks on his republican rival will wreak such havoc on the party that it could render it powerless for 20 years. Hilary Clinton could be the candidate of choice by acclamation at the convention. Whether or not Obama is the candidate and regardless whether he wins or losses, the party will ultimately split. The left will become the Socialist or the Progressive Party. (See page 12)

The Republicans also face a dilemma. Donald Trump could run as an Independent. Ron Paul and Gary Johnson and others could contend for the Libertarian nomination. Either Mitt Romney or Newt Gingrich, or a dark horse, will be the Republican nominee. Any one of the above fragmentations will probably cinch Obama’s re-election (regardless of affiliation) and will make the year 2013 the year of the CRASH.

Barrack Obama presumably has read Machiavelli. Divide and conquer is a simple but effective strategy in political war. Obama is Machiavelli’s Prince.

3.   Solar Storms Could Knock Out All Electrical Power Worldwide.
    One thing we know for certain. In the past couple years the world has experienced an unprecedented number of, and to a severe degree, earthquakes, tsunamis, floods, volcanic eruptions, drought, wind storms and other natural catastrophic events. Are these events simply a coincidence or are they a precursor of things to come? Astrophysicist, Alexei Dimitriev and NASA scientists reveal that our solar system is entering an interstellar energy cloud that will cause the sun to become more active and create solar storms. These storms can cause the Carrington Effect which could knock out all electrical power and all forms of communications for months. That means no cell phones, PCs, radio or TV. The lack of electrical power could also severely limit water and food supplies. It appears that the Mayans had also figured this out. Their calendar ends on December 21, 2012. Normalcy bias will prevent 95% of the world’s population even considering the probability of this event occurring. Google:   Solar Storm Warning and learn for yourself. Whether or not these storms are a threat to our existence, like Y2K, the December headlines will dominate the news later this year and effect human behavior. We’ll pray that this is NOT our last forecast.

4.   Arizona Professional Teams Will Sparkle In 2012.
    ●   SUNS – Despite an eclipse in their start they will shine late and make it into the playoffs.

    ●   DIAMONDBACKS – Will rattle and slither to win 100 games. If they win the National League title they’ll win the World Series.

    ●   CARDINALS – The Red Birds will fly to 10-6 and make the playoffs but the Super Bowl is out of bounds.

    ●   COYOTES – We know little about hockey but it appears that they’ll skate into the playoffs.

Plan For The Worst And Pray It Doesn’t Happen.

Happy New Year!

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.

Subscription box in in the left side bar here on the blog.

"GREED" and "PROFIT" are now available for you iPad users.

You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.

-- H. L. Quist

For All Shareholders of Pan American Goldfields Ltd (MXOM)

2011-12-13T08:31:00.000-08:00

Hello World,

Special Bulletin from the Contrarian Market View

Mr. Neil Maedel, Chairman of the Board of Pan American Goldfields Ltd, will be in Phoenix on Thursday, December 22nd, and will host a informal get-together for shareholders and guests at the Ritz-Carlton Hotel, 2401 East Camelback Road, Phoenix, Arizona at 10:00 a.m.

The purpose of the meeting is to inform shareholders of the company's plans for 2012.

Please call (602) 840-4117 and advise of your attendance as soon as possible.

hlquist@djmwealth.com

HL Quist Leads Seminar Tomorrow - December 7th

2011-12-06T16:56:00.000-08:00

SPECIAL BULLETIN

Seminar Wednesday - December 7, 2011

Reservations Required

H L Quist will be conducting a two and one-half hour seminar tomorrow afternoon (12/07/2011) at 1:00 p.m. at the Gainey Ranch Golf Club in Scottsdale, Arizona, sponsored by Southwestern School of Real Estate.

In addition to a discussion of trends and cycles in real estate, H L will take up current US and global economic issues and reveal his forecasts for 2012. There will also be a Q & A session. A charge of $10 is required for all attendees.

Please call Burt Sweetow at (480) 656-0017 for reservations.
burtandsusan@gmail.com

hlquist@djmwealth.com

Free Preview of December, 2011 CMV

2011-12-04T17:54:00.000-08:00

Market Overview

Jon Kyl, Arizona’s Senator, who served as one of the twelve on the Super Committee, gave an articulate post-mortem on the failure of the effort to reduce the federal deficit. He said (the committee) “was probably doomed from the start because of the absolutely irreconcilable views of the parties about the goal of its’ work.” Kyl went on to say that “The White House was perfectly satisfied with failure because it fit with the President’s campaign to run against a ‘do-nothing’ Congress.” Americans will be faced with another year of out-of-control fiscal deficits but one analyst saw the lack of action as a plus. Chris Edwards at the Cato Institute said, “A Super Committee plan might have paired phoney spending cuts with real tax increases.” He also added that if Congress did nothing the budget could be balanced by 2021. On January 1, 2013 the “Bush Tax Cuts” will automatically end thus raising taxes which is precisely what the President wanted.

As CMV predicated last month, the third quarter GDP was revised downward from the original estimate from the Commerce Dept of 2.5% to 2.0% – a drop of 20%. The recent decline in Consumer Confidence would have an implied negative sales growth of a -7% which are recession levels but actual positive results are confounding the experts. BMO Harris Bank says that the top 20% of income earners are creating 50% of retail sales. CMV, after observing lines of almost maniacal shoppers on Black Friday and documenting the various forms of entitlement benefits that the US Government pays out to low-income recipients, takes the view that the bottom 20% of income earners are holding their own when it comes to retail spending – especially during the Christmas holiday season. Remember, 47% of all Americans receive some form of government entitlement. The upper 20% is actually funding the bottom twenty.

Stephanie Pomboy, who heads Macro Mavens and has been quoted often by CMV because she’s not only smart but she’s also has raised a cogent issue regarding spending. She says, “...what if the gains in spending, like the gains in the stock market, have also been a paper illusion – a function of higher prices, not rising demand?” She adds that in nominal terms growth is up $783 billion from its’ pre-crisis levels but in real terms GDP is up an imperceptible $27 billion. In short, after TARP and an alphabet soup of various government programs, and after the $787 billion stimulus program all the US got was a 0.2% increase in real growth and a 0.96% increase in consumer spending. Stephanie concludes that consumers aren’t spending because they want to, it’s because they have to and prices are increasing at an accelerated pace. QE 2, of course, was the major culprit. QE 3 is coming soon and we’ll experience more of the same. James Dines calls this condition an INFRESSION – an inflationary recession.

Here’s another invisible trend that has dramatic implications. In Barron’s (November 28, 2011) OTHER VOICES section, Bob Adams cites the research of American Wave (AW), a firm that has been tracking the trends of Americans considering relocation overseas since 2005 using the IBOBE-Zogby opinion survey firm. AW reports that 40% of young Americans 18 to 24 are thinking about leaving the US to seek opportunity abroad. There are 42 million Americans between the ages of 25 and 34 who are amongst the most energetic, innovative and creative Americans. Approximately 5% of this age group is actually in the planning stage to relocate. In the 18 to 24 age group nearly 40% indicated a desire to relocate to mostly Asia or Latin America. Ominous overtones for a US economy and culture desperately in need of creative and motivated young people who fear they will have to support an aging population.

Another rude awakening fact that now effects more than 44 million Americans is that the Pension Benefit Guaranty Corp announced that it has a $26 billion deficit. This is the government agency that insures pensions of those whose employers have gone bankrupt and can’t pay pensions to their former employees. In addition some retirees currently receiving a pension are selling their pay-outs for cash at a deep discount. BuyYourPension.com is one of the sources. In one instance one retiree sold what was calculated to be $125,000 in future payments for a cash sum of $57,000. Senator Tom Harkin (D-Iowa) has launched an investigation into this practice to make certain that “our laws are respected and pension participants are not abused.” CMV takes the view that Congress should also examine the role that it played that has created this act of desperation.

CMV has opined as for back as a year ago that Barrack Obama would not be the Democratic nominee for President in 2012. In an Op-Ed piece in the November 21, 2011 edition of the WSJ, Patrick Caddell and Douglas E. Schoen, both long-term Democratic Party consultants and advocates, called for the President to step down because the President “can’t win by running a reconstructive campaign, and he won’t be able to govern if he does win a second term.” In order to win, the two men believe, the President would have to wage the most negative campaign in American history. One year ago, in the WSJ, Caddell and Schoen warned that Obama’s partisanmanship would result in 2 years of political gridlock at a time when the nation could ill afford it. That’s exactly where we’ve been the past year and 2012 will be the same. Who do the consultants propose? Secretary of State Hillary Clinton, who has played the role of “good soldier” and has never criticized the President or his policies though justified to do so.

On November 21, 2011 on FOX with Neil Cavuto, Charlie Gasparino, who is privy to all the scuttlebutt on Wall St., said that the “tipping point” for the withdrawal of financial support for the President from the “Masters of the Universe” came when the Occupiers posted the pictures of the heads of the banksters on spikes and paraded down Wall and Broad Streets. If Warren Buffett and George Soros also come to the conclusion that BO can’t win, the President’s tenure is over. Like Herbert Hoover in 1932, these tent cities will come to be known as “Obamaville.”

Hillary Rodham Clinton has more baggage than her potential opponent Newt Gingrich. Her Senior Thesis at Wellesley College, unretrievable in 2008, will certainly surface which mirrors the President’s far-left ideology and Ms. Clinton’s relationship with Saul Alinsky. Certainly the videos of her “F Bomb” rants while she was the first lady of Arkansas will run rampant on youtube. And, of course, the mysterious death of her former lover, Vince Foster will be resurrected. With so much baggage Hillary will need a valet. Bill is available. Yes, it will get ugly but the nation desperately needs strong leadership not partisanship. The challenges for the next five years will be as formidable as they were in 1932 and 1941. May we have the courage and the will of the past to overcome the obstacles of the future.

The Coming EU Implosion

Just a week prior to Thanksgiving in the US, the newly anointed Prime Minister of Italy Mario Monti, startled all Europeans when he raised the prospect of “the end of the euro.” Monti may have had a flashback to 1999 when the euro was introduced and Milton Friedman, one of America’s premier economists and forecasters, said that the euro would fail at the first major financial crisis in Europe. That event is at hand.

It is generally agreed by the French and German leaders that the collapse of Italy, the euro-zone’s third largest economy behind the two aforementioned countries, would indeed cause the end of the euro. Investors worldwide fear that this event could spark a global contagion that could be more devastating than the collapse of Lehman Brothers in 2008. This was effectively stated by David and Joy Levy (Levy Forecast) in Alan Abelson’s “Up & Down Wall St” column (November 28, 2011) when they said that they had never seen anything like this when “an enormous external crisis with sufficiently severe consequences to take out the US expansion.” There is a prominent school of thought that maintains that a EU crisis will NOT impact the US and that corporate earnings and stock prices will enjoy a robust 2012. CMV disagrees and sides with the Levys.

Americans, unknown even to those who consider themselves erudite and in “the know,” have a major financial stake in what happens in the Euro-zone. The first ever Government Accountability Office (GAO) audit of the Federal Reserve was just carried out recently due to the persistent efforts of Ron Paul, Alan Grayson, Jim DeMint and the Socialist Independent Senator Bernie Sanders. The Audit was vehemently opposed by Ben Bernanke, Alan Greenspan and the super secretive banksters who have successfully resisted an audit for 100 years.

Information revealed from the audit was mind-boggling! The US Federal Reserve doled out $16,000,000,000,000 (that’s trillion) to US banks and corporations and foreign banks and governments all over Europe between December 2007 and June 2010. The Fed calls these “loans” but virtually none have been repaid and was loaned out at 0%. These funds were ostensibly to prevent a global financial crisis and collapse of the world economy. Now, the Euro-zone has returned to the same precipice as 2008 and it appears to CMV that the urgency and the amount of money needed to forestall a collapse is even greater. There’s more that you may not know.

EU law prohibits the European Central Bank (ECB) from making direct loans to euro-zone governments. The “self-appointed committee” of banksters to save the euro has concocted a scheme whereby the ECB would print a massive supply of new euros, lend them to the International Monetary Fund (IMF) and the IMF in turn would lend to Portugal, Italy, Greece and Spain (PIGS). Ireland has been removed from the list of the destitute thanks to the nationalization of the Irish banks and the resolve of its citizens to fulfill its’ obligations to creditors. The problem for Americans is that the US contributes 17% of all funds assessed by the IMF. For the euro-zone a total of 75% of all funds would be coming from countries outside of Europe!

Oliver Sarkozy, Chairman of the elite global investor Carlyle Group, recently (November 23,2011) stated on CNBC that the amount of money needed to bailout the EU was probably in excess of 10 trillions euros – $13 trillion dollars. CMV believes that the money-well is going dry. What the world is about to experience is the beginning of the end of the western-centric monetary system that was created 100 years ago. It will be the end of a fiat money system that believed it could create, without limit, massive currency and debt without dire consequences. The euro-zone will soon be forced to nationalize most if its’ banks and trillions of euro debt will never be repaid. Who takes the loss? Pension funds, mutual funds, hedge funds, and investors worldwide.

The over-encumbered and over-entitled socialist EU system will fail. Yet, the US has a President whose goal is to replicate this system which is also doomed to fail. The handwriting is on the wall. Read It and Weep!

Cities Robbing John Q To Pay Paul

As previously reported by CMV, city and state governments across the country are facing severe budget shortfalls that expose bond holders and taxpayers to possible default and bankruptcy. Harrisburg, PA, Jefferson County, AL are two high profile cases, with Jefferson County being the largest in US history. Now, compounding an already deteriorating situation, cities are diverting money intended for specific purposes such as fixing roads, sewers and the like to projects that are more aesthetically or socially acceptable and neglecting the essentials.

For example, in Portland, OR, money raised for water and sewers was used for other purposes including remodeling of a building of a non-profit organization that runs the city’s Rose Festival. The diversion of funds may have appealed to the general public who simply do not ‘get it’ but in doing so the city violated state law, city code and most importantly, bond covenants. A municipal borrower that misleads investors, when funds are used for other purposes, could violate anti-fraud provisions also. Cities nationwide have persisted in this type of practice so in an effort to curtail this activity the Securities & Exchange Commission (SEC) fined individual officials in San Diego to settle allegations the city had misled bond investors. City and state bureaucrats, as long as they can hide under their blanket of anonymity, will continue this practice until they are personally accountable or their muny bond funding dries up.

Adding to the shortfall is the cost that major cities are incurring on police over-time, clean-up and repairs during the Occupy Wall St. revolt. A recent analysis indicates that 18 cities have incurred about $13 million in costs directly related to the protestors. Oakland, CA for example, has spent $2.4 million when they are already faced with a $58 million budget deficit. The eventual outcome should be obvious even to the oblivious but it’s not. Cities and states will be forced to layoff employees, police, firemen and cut essential services and entitlements. All city officials and employees should read the story of Vallejo, CA. Ex-employees there have experienced all of the above. Now, Detroit has declared bankruptcy. Meredith Whitney was blasted by Wall St. for her forecast, but she was right. Rolling defaults will roil the Muny Bond market.

Real Estate

A feature WSJ article dated November 15, 2011, entitled, “Mortgage Insurer’s Cash Depleted, Auditor Warns,” written by Nick Timeros, indicates that there is close to a 50% chance that the Federal Housing Administration (FHA) could run out of money and require another taxpayer bailout in the next year.

As private lenders have withdrawn from the housing market over the past four years, FHA’s market share of mortgage loan guarantees has ballooned from about 5% in 2006 to 33% in 2010. Federal law requires that the agency have cash reserves above 2% of the level of loans outstanding to bank future potential loan losses. As of September 30, 2011 reserves stood at 0.24% of all $1.1 trillion mortgages insured. Industry experts say FHA could require an infusion of $13 billion in additional funds that, of course, do not presently exist at the US Treasury.

Gone un-noticed by those in the real estate industry and specifically mortgage companies is that the Obama Administration promised in February 2011 to wind down Fannie Mae and Freddie Mac and rein in the FHA in order to encourage the revival of the private mortgage market. Now, in a typical backroom deal on November 14, 2011, a bipartisan Congressional Committee announced an agreement to increase FHA’s maximum mortgage limits from the present $625,500 to $729,750 through December 31, 2012. The Administration’s promise was to return FHA “to its’ pre-crisis role as a targeted provider of mortgage credit access for low and moderate-income Americans and first-time home buyers.” These limits seem hardly geared to low income buyers. This decision plus the recent increase in funding for Fannie and Freddie bringing taxpayer losses to $169 billion to date, indicates that the Administration’s goal is to be the nation’s lender of first resort.

As of this date, the $25 billion settlement against the “robo-signers” is nearing a potential conclusion with all the states except California and the Administration’s mortgage reduction and refinance plan is also gaining momentum. All of these initiatives are geared to revitalize the morbid real estate market by mid-2012 giving the President a strong leg to stand on provided by you know who.

In many of the nation’s housing markets mortgage loan payments have fallen so far that it cost significantly less to own vs. rent. In Atlanta the average monthly mortgage payment is $539. Rent is $840. In Phoenix the average mortgage is $651 and rent is $723. On the surface it would appear to create perfect conditions for a residential recovery. Qualifying for a loan, however, remains a key issue preventing many renters from becoming buyers. Some renters simply will not buy.

A Monolith Crumbles

According to a November 22, 2011 feature article in the WSJ “for years Penn State’s (PSU) football program and its’ four-decade tenured coach, Joe Paterno, were considered to be a model for all college football. PSU had won two national championships, its’ players graduated at rates far above the national average and it was one of only four major-conference athletic programs never to be sanctioned for major violations by the sport’s governing body the NCAA.” The recent child sexual abuse scandal involving Jerry Sandusky, a long-time assistant coach at PSU, has dramatically changed that reputation and uncovered a culture that has a much greater societal significance, which is CMV’s primary focus.

The philosophy and purpose of the PSU football program and college sports in general, has taken a dramatic and profound shift in the past 10 years. Today, its all about, “show me the money!” In the case of PSU, all sports brought in total revenue of $106 million in 2010. About $70 million was generated by football. In addition, if PSU would have been invited to one of the five BCS post-season bowl games they would have earned an additional $22 million that would be shared with other Big Ten member schools. In effect, college football is big business. It’s virtually equal to the Pro games in the public view without a huge (direct) payroll expense for the players. In addition, the Big Ten, and other conferences, have their own TV networks. On any given Saturday you can watch at least 20 games on major networks or cable all day long. An enthusiastic fan base at PSU plus other alums, has created a $1.7 billion endowment at the school. All of these numbers bring us to the obvious conclusion: PSU, as well as most other institutions, will do most anything to preserve the goose that lays the golden egg – including a cover-up of one of the (potentially) most onerous cases of child sex-abuse in the country.

Coach Joe Paterno made certain that “extra-curricular activities” of his players would also be sheltered from criminal prosecution and an inability to perform on Saturdays. In 2003, PSU hired Dr. Vicky Triponey to become Vice President of Student Affairs, who was responsible for enforcing a student code of conduct of any incident on or off the campus. Dr. Triponey soon discovered that PSU football players were getting in trouble at a “disproportionate rate” from other students and often for very serious acts of violence. In 2007 about 24 players broke into an off-campus apartment creating a brawl that destroyed property and knocked one student unconscious. Police filed a criminal complaint against 6 of the players. Largely due to the intervention of Coach Paterno police dropped most of the charges and none of the players missed a single game. The Coach was quoted as saying, “it should be his call if someone should practice and play in athletics.” Somewhat prophetically before the Sandusky incident, Dr. Triponey resigned under pressure saying, “Coach Paterno would rather we NOT inform the public when a football player is found responsible for committing a serious violation of the law and/or our student code...despite any moral or legal obligation to do so.” (Thanks to Rachel Bachman, Kevin Helliker and John W. Miller of the WSJ for this information.)

So, college football, not only PSU, but also at Southern Cal, Ohio State and other programs have been above the law. Like our contemporary American society, priorities and values are out of balance. In the future, the PSU incident (though not the sole cause), will be recalled as the time when college football reached its’ pinnacle of financial success and influence. These massive stadiums seating over 100,000 mostly maniacal fans are somewhat reminiscent of the Roman Colosseum, near the end of the world’s greatest empire. These monoliths will begin to crumble and decay as a recessionary US economy inhibits discretionary spending and attendance shrivels. TV revenue will decline as sponsors cut their advertising budgets. State funding to colleges which has been declining substantially in recent years will continue to fall. And, college tuition, growing exponentially at 8% per year ever since taxpayer subsidized student loans were created, will cease to be available as the number of defaults accelerate. Excess always breeds abuse of power, corruption and over-indulgence in any system. College athletics is a window in to the emerging change in America.

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.

Subscription box in in the left side bar here on the blog.

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-- H. L. Quist

These Are The Times That Try Men's Souls!

2011-11-08T13:36:00.000-08:00

Hello World,

View my new YouTube video.

-- H. L. Quist

Free Preview of November, 2011 CMV

2011-11-03T07:00:00.000-07:00

Hello World,

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for November, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

CMV’s Special Notice

The November CMV was written one day prior to Greek Prime Minister George Papandreou’s announcement that he would call for a public referendum in January 2012, on the EU bailout package approved by the 17 EU countries just days ago. A public “NO” vote which presently has support of 58.9% of Greek citizens according to a recent survey, appears headed for rejection of the bailout. The fear amongst investors is that the resultant Greek default will spread to Italy, Spain, Portugal and other EU members. Greece also faces the prospect of expulsion from the EU and the euro. Most of the October sector gains highlighted below have been erased by the overnight sell-off in the global markets. CMV will advise by SPECIAL BULLETIN if any changes should be made in any sectors.

CMV Recommendations Comparisons

                       YTD        52 Weeks
The CMV Portfolio           -14.8%                18.8% (since 1/1/10)
Dow Jones Industrial Avg.        5.65% 10.01%
S&P 500                                     2.2%       8.6%
NASDAQ Composite                3.2%      9.2%

Market Overview

“A wave of euphoria swept through the global markets last Thursday in giddy response to the communiqué out of Brussels that the 17 nations in the euro zone . . . cobbled together a financial care package to rescue Greece and stave off a widely dreaded contagion of downgrades and defaults that threatened to engulf a good chunk of the continent,” said Alan Abelson in his October 31st “Up & Down Wall Street” column. It was like the world was whistling “Happy Days Are Here Again” while walking past a graveyard of deceased and dying EU nation states.

In sum, the EU leaders announced a deal with three key points:

1. Private sector banks will take a “voluntary” haircut of 50% to the principal of the Greek bonds they own which ostensibly lowers the Greek debt from 170% of GDP to 120% which still can’t be paid.

2. EU banks will be required to be re-capitalized by 106 billion euros ($150 billion USD) by June 30, 2012 with no indication where the funds will come from, and

3. The Bailout Fund, European Financial Stability Facility (EFSF) will be leveraged (5x1) to provide a one trillion euro backstop to future bond issues. The strategy when faced with massive de-leveraging is to leverage up again.

In CMV’s opinion it’s the “samo, samo, plan” – dig a deeper hole to get out of the one you’re in – Another short-term fix that sets up the EU for a more colossal failure down the road. It’s the same model that the Masters Of The Universe in the US have used for 40 years that has brought us to the brink. BUT, and it’s a big BUT, the deal has spawned a huge stock and commodity relief rally that substantially improved the CMV portfolio about 10%.

The resultant rally made October’s surge reverse most of the third quarter’s loss and move stocks to near 2011 highs. “The overall US stock market has surged 17% since October 3 and 6% from its’ 2011 peak,” says Kopin Tan in the October 31st, Barron’s. Specifically, the Dow Jones Industrial Average gained 422 points or 3.6% to 12,231. The S&P 500 closed up 3.8% to 1285 and the NASDAQ Composite Index added 100 points or 3.8% to 2737. Gold, after it reached an inter-day low of $1535 in Mid-October, closed October 29th at $1746/oz and a remarkable move of 211 points or 14%. Everyone is asking the same question. Is the rally for real? How long will it last?

There are solid reasons to have doubts and misgivings while at the same time seizing the opportunity of the moment. The US Bureau of Economic Analysis (BEA) report on Thursday, which also spurred the markets, said that the 3rd Quarter GDP gained a robust 2.5%. Before we enthuse too much, a word of caution. Every quarter after the original announcement, the BEA issues two revisions and they’re almost always downward. The 2.5% will probably end up being 1.5% 60days from now but few will notice. John Williams of Shadow Government Statistics says the 2.5% is “utter nonsense” and in truth the US economy is edging along barely positive.

Additional stats seem to support Williams’ claim. Personal income rose a mere 0.1% in September while consumer spending climbed 0.6%. Personal savings shrunk from 4.1% to 3.6% meaning people are using more plastic and reducing savings to get by. The Department of Agriculture (DOA) last week on Tuesday reported that food prices will increase 3.5% to 4.5% this year after climbing just 0.8% in 2010. As CMV pointed out last month, beef prices are going to rise substantially next year far in excess of DOA’s forecast. If CMV is accurate, all the focus next year will be on the “Inflation Jeannie” as she again pops her pretty head out of her master’s bottle.

Barron’s interviewed 9 asset managers in its October 31, 2011 issue called “The Smart Money Speaks.” Here’s what Felix Zulauf and Stephanie Pomboy, two of CMV’s favorite authorities had to say:

Felix Zulauf:
   “The (EU) crisis will drag on for a number of years, with the result that countries on the periphery will remain in recession for a long time.” (Felix lives in Switzerland)

“...the US will have very low growth for a long period of time . . . investors should be defensive, look to preserve capital and prepare a list of short-sale candidates for the next leg down. And they should buy more gold on dips.”

“...commodity prices will experience a cyclical correction into the second half of next year. But oil could pop to $100 a barrel and some Exchange Traded Funds such as XLE, OIH, and HAP could be played as short-term trades.” (CMV believes that oil will go much higher in 2012.)

Stephanie Pomboy:
   “We have yet to sow the seeds of a sustainable recovery, meaning employment gains.”

“Yes (QE 3 is inevitable) because we haven’t cured the disease . . . The Fed needs to keep huffing and puffing until the wealth effect eventually starts to work and creates jobs.”

“But for the long term I still like hard assets, specifically gold and oil.”

What is really interesting in that none of the “smart money” commentators or any of the journalists in the WSJ or Barron’s forecast anything resembling an inflationary period or a hyper-inflationary “Crack-up Boom.” CMV is the lonesome cowboy in the “Last Rodeo.” All of the major global economies must create growth through inflation. The EU, US and yes even China, can’t service their existing debt at present levels. How will they be able to handle another layer of IOUs? Ever since the days of the Roman Empire governments have devalued and debased their currencies in an attempt to inflate the debt and entitlement problem away. All have failed. But, there could be one last BOOM. CMV calls it the LAST RODEO. China has committed to reflating their economy and the boom has begun in the Pacific Rim. The EU bailout should provide, at a minimum, temporary relief. The US QE 3, when announced, chould propel stocks and commodities to potentially new all-time highs. Get your tickets for the LAST RODEO. It’s going to be a wild ride.

Who Stole America’s Gold From Fort Knox?

The US Government has steadfastly maintained for decades that it owns 261 million ounces of gold bullion (8,100 tons) – far more than any other nation in the world. A recent book “Good As Gold? How We Lost Our Gold Reserves And Destroyed The Dollar” by Chris Weber, debunks the myth that America’s gold reserves are safely stored at Fort Knox, Kentucky.   CMV has read Weber’s meticulously researched book and it, coupled with Steve Orlowski’s (Insiders Strategy Group) supplemental updates, CMV will reveal here for you not only the biggest scandal in America’s history but it also presents to you one of the greatest opportunities.

The mystery of America’s missing gold begins with Franklin D. Roosevelt’s Executive Order in April 1933 banning the private ownership of gold bullion by any US citizen. Under the threat of a $10,000 fine and imprisonment, all Americans were required to deliver to any Federal Reserve Bank all their gold and receive $20.66/oz in newly printed Federal Reserve Notes that were backed by nothing. In 1936 an underground bullion depository was built in Fort Knox, Kentucky to store this vast horde of gold which by 1949 amounted to more than 700 million ounces – equal to 70% of the entire world’s supply! FDR, once the gold was confiscated, “revalued” bullion at $35/oz and since the Fort Knox gold was higher than the world market price, central banks around the world were eager to trade their gold for dollars. Then, in 1961, when the shiny metal became more valuable than $35/oz the Fort Knox horde began to disappear. That’s when the US Federal Reserve Bank (Fed) and seven other central banks initiated the “London Gold Pool” – a coordinated scheme to defend the official price of $35/oz by dumping bullion on the London market. It has been established that between 1961 and 1974, 509 million ounces of gold was removed from Fort Knox. The scheme allowed wealthy investors, including US citizens, to buy gold at $35/oz and store it outside the US.

Frank Chelf, an 11 term Congressman whose home district was Fort Knox, charged that the government was secretly removing gold from Fort Knox by the truck load in the middle of the night. Edwood Durell, a businessman in Berryville, VA, was able to obtain an official document from the US Mint detailing more than 10 years of shipments from Fort Knox. He caught the Mint and US Treasury officials red-handed. They admitted that 1,762,386 ounces of gold in one shipment was a “mistake” and never entered into the official record. What we don’t know, of course, was who were the entities who acquired the bullion at $35/oz that would soon skyrocket in price to $850/oz in just a few years?

The story gets dicier.

CMV has pointed out numerous times that Robert Rubin’s (Secretary of the US Treasury) “Strong Dollar Policy” initiated in 1995, was the beginning of the demise of US manufacturing jobs but it also played a critical role in the gold market. Rubin and Federal Reserve Board Chairman, Alan Greenspan, knew that low interest rates would produce higher gold prices which would undermine their “Strong Dollar Policy.” They had to control the price of gold. What did they do? The Fed began to “lease” gold from its’ (supposed) reserves to the biggest banks on Wall St. at an interest rate of about 1% per year. The banks then would sell the leased gold bullion on the open market and invest the proceeds at a much higher rate of return. The huge amount of sales would continue to suppress the price of gold then at about $300/oz. Alan Greenspan even admitted in testimony before Congress in 1998, that the purpose of the leasing was to manipulate the price of gold. The cogent question is, where did the Fed get the gold to lease out? That’s the dirty little secret the Masters of The Universe (MOTU) didn’t want anyone to know but the cat has just been let out of the bag. The Fed leased out more gold than it owned or had access to. It was gold that only existed on paper. And, the gold at Fort Knox was US Treasury / US Taxpayer gold – not Federal Reserve gold.

China, as well as many countries around the world, sensing that the price of gold could skyrocket in price as currencies are being debased, purchased 60 metric tonnes of gold in October 2009. The Hong Kong bankers who received the gold tested the bars to guarantee their density and weight. They were shocked to discover that many of the bars had only an outer coating of gold! The centers were filled with tungsten – a cheap metal with the same weight and density of gold. The Chinese claim that the stamps on the bars showed that they originated in the US and had been stored according to Orlowski, in (you guessed it) Fort Knox. In order to perpetuate its’ price-fixing scheme and attempt to hide the fact that it was out of gold, Orlowski states that it appears that the US Fed and the Treasury have created perhaps up to a trillion dollars of counterfeit gold bars at today’s price of $1700/oz. Thus, the biggest financial scam in US history begs the simple question: If this story is true, where are the indictments? These MOTUs should be in jail.

There’s more to the story.

You probably know the story of DSK – Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF) who was accused of assaulting a hotel maid in New York City this past summer. You don’t know that Makmoud Abdel Omar, former Chairman of one of Egypt’s largest banks and a close friend of DSK, was also arrested and charged with a similar sexual attack of a hotel maid just blocks away from the DSK incident only two weeks later! What are the chances that these two men ages 62 and 74 years old would both make the unlikely decision to accost maids in their hotel rooms? Here’s the rest of the story.

While head of the IMF, DSK had required the US to deliver 191 tonnes of gold to the IMF to fund the US share (17%) of reserves necessary for the IMF’s “Special Drawing Rights.” It is revealed by Steve Orlowski in his report that “rogue elements” within the CIA informed DSK that the reason the US Treasury was repeatedly stalling on the delivery of the gold bars was because of the counterfeit gold at Fort Knox. Orlowski maintains that the charges against both DSK and Omar were contrived to keep them silent. Even Russia’s Vladimir Putin came to DSK’s defense. Obviously, a tactic was being implemented that is well-known to the KGB.

This entire sordid and mind-boggling story would be worthy of a John Grisham novel and a film at a future time. Importantly, what does all this mean to you aside from the political and legal ramifications? In CMV ‘s opinion, it validates the point that the supply of gold (and silver) simply does not exist to meet demand. As Eric Sprott said at the Casey/Sprott Summit “When Money Dies,” The demand will overwhelm the bank’s ability to control the price of bullion.”

BUY the miners who have the proven reserves in the ground and the coins that can be authenticated by a reliable dealer. CMV believes the next leg up in bullion could go parabolic.

“The Chinese Are Coming. The Chinese Are Coming!”

The National Governor’s Association Conference (NGA) was held in Salt Lake City, Utah in mid-July. Directly across the street a forum on US and China Trade, Culture & Education Conference also met. Just a coincidence? Hardly.

As most of us are aware many states in the US are deeply in debt and are desperate for funds especially since the flow of subsides from Washington, D.C. have slowed to a trickle. The Chinese are willing to help extracting a major price. The states would sell or give the Chinese land for Enterprise Zones (EZ) within the states whereby the Chinese would setup their own businesses run by Chinese workers. While the EZs would employ some US citizens, the Chinese will achieve their primary goal – colonization. The fact that some locations are in proximity of sensitive military facilities doesn’t seem to alarm the US officials.

At the end of the dual conference, four state governors signed at least 20 trade agreements with the Chinese despite the fact that Section 10 of Article I of the US Constitution prohibits states from entering into treaties. The China Daily had numerous articles and photos of governors shaking hands with Chinese officials. After all it was a major coup for the Communists. Very little, if any, news was reported in the US media and if it weren’t for the New American magazine, there probably wouldn’t have been any revelation whatsoever. The Chinese have planted their flag in the EZs. It’s their sovereign territory. The US Rule of Law no longer applies.

Occupy Wall Street

Douglas Schoen, who served as a pollster for President Bill Clinton, and is the author of “Hopelessly Divided: The New Crisis in American Politics & What It Means For 2012 & Beyond,” wrote a defining OpEd piece in the October 18, 2011 edition of the Wall St. Journal. A researcher for his firm polled 200 protesters in New York’s Zucotti Park. Some of the their observations are remarkable and instructive as we should all try to understand what is happening in America;

•   52% have participated in a political movement before.
•   98% say they would support civil disobedience to achieve their goals.
•   31% would support violence to advance their agenda.
•   15% of the protestors are unemployed.
•   51% now disapprove of the President and only
   48% will vote to re-elect him in 2012, and
   25% will not vote.
•   32% call themselves Democrats, while almost the same portion, 33%, say they are not represented by any political party.

Contrary to public opinion, Schoen’s research shows that this movement doesn’t represent unemployed America and is not ideologically diverse. What binds this group together according to Schoen regardless of age, socioeconomic status or education, “is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas. Sixty-five percent say that government has a moral responsibility to affordable health care, a college education and a secure retirement – no matter the cost.” In short, the OWS crowd wants exactly what the Greek and other EU citizens have and are about to lose. If the OWS crowd wins, they’ll lose but that won’t deter them.

As a political analyst, Schoen concludes that the Obama Administration’s support for the OWS crowd will prove to be catastrophic for the Democratic Party. He says 41% of Americans define themselves as Conservative, 36% as Moderate, and only 21% as Liberal. If more radical elements of the OWS become violent, the President won’t even be (in CMV’s opinion) the nominee next November. You only have to harken back to the 1968 Democratic convention in Chicago to attest to that point.

Schoen’s observations are enlightening but CMV believes that the OWS crowd should focus more pointedly on a limited number of individual and institutions who were instrumental in creating the conditions in America that has invoked this “revolution.” After all 99% of those who are employed on Wall St. are simply carrying out the policies set by 1% or less of those at the very top. It would behoove corporate management to insist that their employees read James Owen’s Cowboy Ethics: What Wall Street Can Learn From The Code Of The West, a book CMV has highly recommended in the past.

Ever since Americans unwittingly ceded control of the nation’s banking system to private interests through the Federal Reserve Act of 1913, policy has been promulgated at all levels of government to principally serve these private interests, mostly at the expense of the American public. The history of America’s lost gold (page 3) is just one example of how a very few individuals can successfully carry out a scheme for the benefit of a few at the expense of the many through the destruction of our money. Here’s just one contemporary example of how one man and a board’s complicity effected a strategy and formulated a policy that directly led to the desperate financial chaos that gave birth to the OWS movement.

Alan Greenspan was appointed by Ronald Reagan in 1987 to serve as Chairman of the Federal Reserve. The President’s choice was not made in a vacuum and not without assistance from the banking industry that Greenspan was, principally, to serve. All Chairmen of the Fed are in effect hired guns, to make certain that the objectives of the banking industry and the Masters of the Universe (MOTU) are realized. (CMV’s opinion.) See page 10 “Coming Money Trust” which became The Federal Reserve Bank of the United States in 1913.

One of Mr. Greenspan’s primary ‘directives” was the repeal of the Glass-Steagall Act of 1933. Congress, after a long and contentious investigation in 1932-33, concluded that the commercial banks and their reckless trading and speculation were one of the major causes of the stock market crash of 1929. Glass-Steagall, amongst an array of other provisions, prohibited the commercial banks from speculating in the stock and commodity markets for their own account. The big commercial banks by the 80s, wanted to play high stakes poker like the Investment Banks and Glass-Steagall had to be repealed in order to do it. It took 12 years, but on November 12, 1999, with Greenspan’s encouragement, the Act was repealed. (Gramm–Leach-Billey Act).

In 1998 Long Term Capital Management (LTCM), a hedge fund, collapsed which created another financial global crisis. LTCM made highly leveraged bad bets using various derivatives. Greenspan, Treasury Secretary Robert Rubin and his Assistant Secretary, Larry Summers, were celebrated on the cover of TIME magazine, as the Committee Who Saved The World, for preventing a world-wide banking contagion. Congress, however, later raised the question of the use of derivatives and excessive leverage, particularly by the banks. During extensive Congressional hearings on the “hill” the principal proponent for the continued use of derivatives was none other than the Fed Chairman. At one point during the confrontation as Congress was determined to ban the use of derivatives Mr. Greenspan quipped (paraphrasing), “It won’t prevent the banks from engaging in the use of these instruments...they’ll simply take trading them offshore.” Greenspan won the argument and the next six years during the sub-prime bubble, the notional value of these leveraged bets grew five times to $600 trillion and was the primary cause of the collapse of the housing market and the bankruptcy of America’s middle class. Mr. Greenspan was referred to as the “Maestro” by pundits and the media. They were right. He orchestrated the biggest bubble in American history that served his MOTU and devastated tens of millions of homeowners. Forgotten was the fact that he and his board devised the cash-out refi strategy in 2002 as a means to get the consumer to spend. By 2004-05 when it was apparent to Ed Grandlich and other board members that the low interest rates, unlimited credit and Wall Street’s greed were getting out of control, the Maestro refused to intercede and slow the bubble train that was headed for a crash. Greenspan claimed that he was a Libertarian who believed in a “hands-off” policy. The truth was imbedded in the profit orgy that the banks were drinking from the horn of plenty and the Chairman wasn’t about to take away the punch bowl.

OWS should also focus their ire on other key characters such as:

Former Senator Chris Dodd and Representative Barney Frank
   These two key policy-makers were responsible for mandating a “quota system” through the amended Community Reinvestment Act, that required lenders to make home loans to low income and poor credit borrowers. By 2007, over 50% of new loans had to be made to unqualified applicants. As a result of the carnage they helped create these two lawmakers crafted the Dodd-Frank Wall St. Reform & Consumer Protection Act of 2010 to protect consumers from the lenders who profited from their mandates just eight years earlier.

Henry Paulson
   While CEO of Goldman Sachs (GS), he successfully lobbied the Securities & Exchange Commission (SEC) to allow the banks to increase their leverage from 10 x 1 to 40 x 1. While at GS he condoned the creation and sale of “synthetic” CDOs that had no underlying assets. GS sold short some of the very assets they created and marketed, knowing their value would fall to zero. As Secretary of the US Treasury, Paulson had the final say in the demise of Lehman Brothers, a principal rival of GS, which cost creditors untold billions in losses, and sent the global markets into chaos in October 2008.

Franklin Raines
   The former CEO of Fannie Mae (FNM) from 1994-2004, who used the Government Sponsored Enterprise (GSE) as a vehicle to buy the mandated sub-prime debt originated by Countrywide Financial (CF) and an array of other unscrupulous lenders. He then “cooked the books” at FNM to hide $10 billion in losses which has ballooned to $150 billion that are now born by the US taxpayers. He and his fellow officers also paid themselves obscene bonuses based upon fraudulent numbers. Congress and the Justice Department refuse to connect the dots linking the criminal enterprise between the GSE, CF and Congress.

Former Senator Phil Gramm
   As Chairman of the Senate Banking Committee from 1995-2000 he led the Congressional repeal of the Glass-Steagall Act. Gramm was also responsible for exempting various derivatives from regulation. Gramm’s wife served on the board of Enron and its’ use of these leveraged bets led to the firm’s collapse prior to the real estate debacle.

Kathleen Corbett
   Was the head of Standard & Poors, the country’s largest bond rating agency, which affixed AAA ratings on the toxic sub-prime debt in exchange for hefty fees from the MOTU. The AAA rating enabled the debt to be sold world-wide without due diligence.

There are numerous other players that should be in the “Hall Of Shame” and the focus of the OWS crowd but you get the point. What do all these MOTU have in common? Virtually all deny any role in the financial collapse and none of them will ever serve jail time. And, all (with the exception of Frank) are comfortably retired, set for life without any fear of recourse. No accountability and obscene profits are the root cause of the continued boom and bust cycles. That must change.

CMV’s message to the OWS crowd is to turn your focus to the MOTUs and not the Capitalistic system. Set up your camp at the doorstep of Congress and the homes of the MOTU. It’s the only recourse that we can, as citizens who, to some degree, are all victims of the MOTU.

One other observation. The OWS crowd is being exploited as “useful idiots.” This revolution, like almost all others (except America’s first) are being financed and promoted by those who want to take the power from those who now possess it. Once the likes of George Soros, et al, obtain control they will cast aside those who were instrumental in bringing about the change. Even Barrack Obama is expendable if the polls show he’s unelectable. Did the proletariat thrive after the French Revolution? The Russian? And, do we really believe that the Arab Spring will foster democracy and a better life for the Middle Eastern masses? CMV doesn’t think so, but I won’t mind being proven wrong. As the chaos in Greece demonstrates, their abuse of freedom will result in the loss of freedom and the return to bondage. It can happen here.

. . .

This “not so funny” cartoon appeared in an unknown periodical in 1912 prior to the Federal Reserve Act of 1913. The artist used the name National Reserve Association. This depiction of the Fed as an octopus with its’ tentacles controlling all government and private enterprise through a “private syndicate” (Cartel) accurately forecasted the inevitable destruction of the US monetary system 100 years later.

The “Aldrich Plan” was written by Senator Nelson W. Aldrich (whose maternal grandfather was Nelson A. Rockefeller) to form a new central bank that promised financial stability and an end to bank panics. The crash of 1929 occurred only 16 years later and an on-going series of boom and bust cycles has continued since. CMV strongly recommends that you read “The Creature From Jekyll Island” by G. Edward Griffin. You will understand why we’re about to experience the collapse of the US monetary system. And, those who control the Fed will soon propose a solution to its’ demise.

September 21, 2011

An Open Letter To Warren Buffet

You are presently celebrated in the US as an iconic epitome of American Capitalism. Under your direction and guidance Bershire Hathaway Inc. (BRK.A), which is a cross-section of American enterprise for a half a century, has employed millions of workers and has produced admirable returns for its shareholders.
   Now, however, you have made the mind-boggling decision to not only support President Barrack Obama, an anti-capitalist, for re-election but to lead an effort to help him raise one billion dollars for his campaign. Please tell us, Mr. Buffet, given the freedom and opportunity to excel in your career under an economic system that is the envy of the world, how you can reconcile your success with your decision to support a man who has lived up to his campaign promise, “We are five days away from fundamentally transforming the United States of America.”? A promise to destroy capitalism. It’s a given that there are those Capitalists who have abused the present system and they need to be held accountable. We shouldn’t, however, destroy the goose that lays the Golden Egg.
   You are a man whose success and reputation was, in part, a result of comprehensive due diligence before BRK.A made an acquisition of a company as an investment. Certainly you must have investigated the close association that Barrack Obama has had with the blasphemous hater of America, Jeremiah Wright, the convicted and unrepentant terrorist Bill Ayers and his childhood mentorship by Frank Marshall Davis, a die-hard communist? Perhaps you didn’t know that Saul Alinsky’s son, L. David Alinsky, has recently stated that Barrack Obama has followed his father’s “Rules For Radicals” to a tee ever since he moved to Chicago and President Obama helped fund the Alinsky Academy. Why would you align yourself with those who openly advocate the overthrow of the U.S. Government?
   We got a mirror into your change in mind recently when you revealed that the IRS was “coddling” the rich, such as yourself, and that you should be paying more taxes – a Populist theme by the left. Since we assume that most of your income is from dividends and your rate is 15%, are you advocating that all savers pay more? We understand that BRK.A is currently in dispute with the IRS over unpaid taxes. Given your stance, we would think that you will gladly acquiesce and pay your fair share to avoid any assertion of hypocrisy.
   In event you are successful and the President is re-elected next year, you should expect BRK.A to also undergo a “fundamental change.” Your “A” shares are now down about 25% from the post-crash high. Within four years you could expect your share value to drop an additional 50%, your shareholders should revolt and remove you and your board. In the end, the Marxists will turn on you and all their benefactors. They will be in power and this country will be in chaos.

Please Mr. Buffet – change your mind!

Signed:
H. L. Quist
Quist is an author and economic forecaster who resides in Phoenix, Arizona
Submitted to the Wall St. Journal but not published.

Athens, California

There isn’t a more fitting microcosmic example of how the over burden of debt will ultimately crash the economy and a lifestyle than is present in the State of California.    In Michael Lewis’ recently released book “Boomerang,” the author interviews Arnold Schwarzenegger, the former governor. The “Governator” came into office in 2003 with an approval rating of 70% with a mandate to fix California and left in 2011 with a rating below 25% with little or nothing accomplished. Even an iconic film actor with macho muscle failed. The answer to why, is the most instructive and forecasts the inevitable.

Lewis quotes from “California Crackup” written by two non-partisan journalists, Joe Mathews and Mark Paul who answer this critical question:

“...he (Schwarzenegger) was never going to win. California had organized itself, not accidentally, into highly partisan legislature districts.   It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or muddle with spending decisions . . . Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them . . . the system is very good at giving Californians what they want . . . people want services and not pay for them. And that’s exactly what they’ve now got.”

Schwarzenegger came into office with boundless faith in the American people and given his image and popularity he felt that he could appeal directly to them to do what had to be done to save the state. In November 2005 he called a special election that sought approval on four reforms:

•   Limit state spending
•   End Gerry-Mandering of legislative districts.
•   Limit public employee union spending on elections
•   Lengthen the time for public school leaders to get tenure.

All four propositions were designed to address the state’s looming financial crisis. All four were defeated soundly. They weren’t even close. As just one example, pensions of state employees doubled from the time Schwarzenegger came into office to when he left which now has a shortfall of about $200 billion. In 2010, the state spent $6 billion on 30,000 prison guards who could retire after only five years of service (after age 45) at almost full pay. The head parole psychiatrist for the prison system made a salary of $838,705 in 2010. The system became unsustainable and most of the prisoners have been released. That coupled with the reduction of state and city police officers presents an opportunity for career criminals to continue their trade and the public’s growing need to protect itself. In Oakland, California, the police will not respond to a 911 emergency call unless there’s a risk of homicide. During the recent Occupy Wall Street protests in that city, officers were called in from the entire Bay area to assist to control the mob. It wouldn’t take much for the mob to overwhelm the police in just about any city in the US.

California, like many other states, have been receiving billions of federal government stimulus funds and proceeds from Build America Bonds to pay the salaries and entitlements of state and municipal employees for the past three years. (Note: The funds weren’t intended for investment to create jobs.) Those funds are no longer available as the President’s American Jobs Act, has been defeated in the Senate. The crisis that has been postponed is now upon them. Californians, like the Greeks, have come to expect that there’s no limit to the amount of money available to perpetuate their lifestyle. As Lewis says, “The richest society the world has ever seen has grown rich by devising better and better ways to give people what they want.” Now, it’s over. Pensions of state and municipal employees will be cut from 25% to 50% or more in many jurisdictions.

On October 27, 2011, California Governor Jerry Brown, unveiled what is considered one of the nation’s widest-reaching pension overhauls raising the retirement age to 67 from 55, and increasing the pension contributions by future employees through the use of 401(k) plans. Brown’s proposal was immediately attacked by Dave Low, Chairman of Californians for Retirement Security, a group representing dozens of unions in the state. Mike Genst, of California Pension Reform, taking the opposing view said, “It (Brown’s plan) doesn’t go nearly far enough” because it wouldn’t apply to current employees.

Reality will come hard on the left coast. Will Californians and all Americans recognize the problem and work together to solve it or will we add another chapter to the Greek tragedy and continue to riot and protest that will destroy our culture and our country?

Greece, the birthplace of democracy is toast if they vote “NO” on the referendum and reject cuts in employment, salaries and entitlements. All of us are witness to a political and cultural event of historic proportions – a failure of democracy due to the over-empowerment of the people. As CMV has reiterated many times, the abuse of freedom will result in the loss of freedom. The Greeks are about to experience it and its’ aftermath. May we learn from their experience.

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-- H. L. Quist

Interview with H. L. Quist on "Politics and Patriotism" podcast show

2011-10-19T05:08:00.000-07:00

Hello World,

Justin Oldham of Politics and Patriotism interviewed The Myth Buster recently. Oldham talks with author and financial historian H.L. Quist about his book, "The Aftermath of Greed: Get Ready For the Inflationary Boom." Mr. Quist believes we are headed for a deliberate global financial meltdown. His evidence is compelling. Will he be right?

http://www.politicsandpatriotism.com/podcasts/PnP_podcast_112.mp3

Justin discussed the book in a brief extract from a prior show with Fern Crossley from Alaska.

The link to Quist's podcast site is here - for the book review discussion with Fern click on episode from October 18th.

Books are available from your favorite bookseller, online or at the publisher's site in either print or e-book format.

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Free Preview of the CMV for October, 2011

2011-10-09T19:19:00.000-07:00

Free Preview of The CMV for September 2011

2011-09-03T09:30:00.000-07:00

Hello World,

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for September, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

Market Overview

This past month was, perhaps, the most volatile August in global stock market history. And, few were at the office to deal with it!

August is the well-established month for vacations in Europe when the Greek crisis worsened. The cost to insure against a Greek sovereign debt default (credit default swap - CDS) soared to a rate higher than 2008 and interest rates on two-year Greek notes skyrocketed to 44%. Depositors are withdrawing funds from the Greek banks in droves and 50% of the money is going out of the country exacerbating a liquidity crisis. Converting euros to Swiss francs has prompted the Swiss to attach a surcharge on new accounts as the franc has soared in value against the euro. In short, Greece is heading towards default, a restructuring of their sovereign debt and possible expulsion from the EU. The Swiss franc is so overvalued a Big Mac in Zurich now costs $17.19 and the Swiss National Bank has spent $36 billion in its attempt to hold down the appreciation of the franc. Imbalances such as this foretells a crisis of huge magnitude is waiting in the wings.

Here in the US, Congress passed the Deficit Reduction Act, which was a farce, and proceeded to adjourn for the month of August. We were told that the Act would reduce spending by $2.4 trillion over 10 years but it won’t. What it did do was allow the US Treasury and the President to exceed the current limit and immediately borrow $900 billion in two quick tranches (which most has already been allocated) and another $1.2 trillion after some trade-offs. The “Super Committee” reports on Thanksgiving which seems inappropriate for us pilgrims.

What soon followed was the greatest case of motion sickness the US stock market has ever experienced. The Dow Jones Industrial Average’s week “that was” ended:

Tuesday    August 4    -265.87
Wednesday    August 5    +29.82
Thursday    August 6    -512.76
Friday    August 7    +60.93
Monday    August 10    -634.76
Tuesday    August 1    +529.92
Wednesday    August 12    -519.83

And, it continued in varying degrees for the remainder of August.

Who benefited from this game of yo-yo?   Professional and day traders, of course. And, the exchanges who gain the most from volume regardless of profits or losses. The principal cause is the “robo” High Frequency Trading (HFT) that senses the direction and momentum of the market and piles on. HFT cares less whether the move is north or south. Long-term investing now has come to mean more than one day. It’s devastating because it destroys confidence. The small investor feels that they don’t have a chance. And, they don’t.

CMV sees this phenomenon as a forecast of things to come. It’s as if the traders also sense that we’re in the last stages to exploit the equity market before the pall of deflationary doom wipes away all the momentum and the profit opportunities. Here are a few signs that the last quarter may be a real downer:

● Consumer confidence has taken a significant drop in August.

● The August Chicago Purchasing Manager’s Index has fallen from 58.8 to 53.8.

● Nomura Securities reports that there has been a major decline in payroll tax receipts which could forecast an increase in unemployment for August and validate their opinion that a “new recession” began this past month.

Note: Normura and Rick Santelli were correct. The August job growth was Zero! This hasn’t happened since 1945. Layoffs are the highest in the financial industry and state and local government. It’s official, the “Double Dip” is here whether we like it or not.

● Inflation adjusted GDP for the second quarter was -3.4%.

Assuming for the moment that a slowdown is indeed ahead, what about the Fed and the Fed Head? Traders eagerly awaiting GODOT (Ben Bernanke) speaking from atop the Grand Tetons, were disappointed that he did not reveal another easy QE stimulus plan that would move the markets north. No commands were etched in stone as GODOT descended from the mount. His silence was deafening but perhaps he was reserving his pronouncement until after the Fed’s meeting on September 20-21. (That now appears inevitable given recent data.)

Both Nouriel Roubini (Dr. Doom) and CMV’s favorite asset manager, Felix Zulauf, both agree that the Fed (though dissidents exist on the Board) will be compelled to inject massive liquidity into the economy this fall to prevent the slowdown becoming a slide into the abyss of a depression. In event that these two experts are correct we can expect a stock market and commodity rally that could propel these markets to all-time highs. Gold would knock out the inflation adjusted high of $2200/oz faster than Usain Bolt could run the 100 meters! The “Last Rodeo” would begin. Pick the bucking bronco of your choice and jump aboard. It will be a wild ride and the key will be to jump off before you’re thrown off. The “crack-up boom” will end the party. It’s CMV’s time to shine!

Late News Flash

A highly regarded strategist at Goldman Sachs (GS) (whom CMV affectionately refers to as Goldman Sucks), has issued a 54 page report sent to its’ institutional clients that forecasts that Europe, US and China are in deep doo doo. Goldman’s Alan Brazil has designed a complicated option play that is intended to hedge all these markets that he believes will decline substantially. This report could have triggered the sell-off on September 1, 2011

The Rating Game

The Standard & Poor’s (S&P) downgrade of the US’s credit rating triggered a sell-off in the US equity market pushing the Dow Jones Industrial Average to its sharpest one-day decline since the financial crisis in October 2008. The Dow ended the day down 634 points (5.5%) to 10,810. Trading volume reached the fourth highest level in history. A volatile “Week That Was” followed.

The question CMV raises is, why did S&P wait so long when the burgeoning US debt was rising exponentially for several years. One answer is that S&P has a proven track record of failing to do their due diligence when there would have been time for affected parties to react prior to a credit event or default. Cases in point:

New York City in the sixties or early seventies was an example of political mismanagement and phoney accounting according to an editorial by Thomas G. Donlan in the August 15th edition of Barron’s. While rumors persisted that the Big Apple might be rotten at its’ core, City officials effectively lobbied the two major rating agencies S&P and Moody’s, and their top credit ratings were affixed in 1972 and 1973 by both agencies. By 1975, however, the City finally faced up to its’ inability to meet its bond obligations and a tense period followed when NYC defaulted.

The recent housing fiasco can be directly tied to the AAA ratings by both agencies which enabled Wall St. to market those mortgaged-backed securities all over the world by virtue of their ratings. A critical component of these fallacious ratings were the extension of AAA to Fannie and Freddie and their paper. Both were still rated triple A until the downgrade in August!

S&P has done a horrendous job of forecasting the potential for sovereign debt default in advance when investors need guidance. Of 15 government defaults S&P has tracked since 1975 , the firm rated 12 of the countries single B or higher one year prior to default. To S&P, a single B rating had just a 2% average chance of default within a year. In short, S&P drastically underestimated a one-year default risk in 80% of those cases. They missed the Russian default in 1998 when Long Term Capital Management lost $5 billion in one day and set off a major US financial crisis. They missed the Argentina default in 2001 when the country stiffed the US banks and settled years later at about $.30 on the dollar. There was also Orange County, California in 1995. And, Enron and World Com in 2001 which were massive frauds. S&P just recently announced that it was opening an Investigation into the sub-prime fiasco. Hello!!!

Now, the ratings are playing out in the political arena. As the President’s approval rating dropped below 40%, he reminded all Americans that “despite the ratings the US will always be Triple A.” Tim Geithner, US Secretary of The Treasury, had stated prior to S&P’s decision, “The US will never be downgraded.” There are those who speculate that Republicans conspired with officials of the ratings companies to encourage a downgrade to make those in power look bad. To that CMV responds, they did not need any assistance.

“Un” Real Estate

There are a couple of initiatives that have recently surfaced that could materially impact the real estate market.

J. P. Morgan Chase has notified a number of delinquent homeowners who are fighting foreclosure that the bank will forgive $100,000 in debt on a “short sale” with a kicker for the homeowner: $10,000 to $35,000 to stay on the property and facilitate it’s sale. The reasoning is that the bank recovers more than in a foreclosure and avoids attorney fees and the cost of maintaining the property. It’s also possible that the bank can’t locate the original note and these number of cases may be limited. JPMC, like other major banks, faces a fine for the “robo signings.”

The Obama Administration has floated another of its trial balloons regarding the government’s inventory of unsold real estate in a formal Request for Information (RFI) – turning foreclosures into rental homes. Fannie and Freddie together with the FHA own approximately 250,000 homes at the end of June, 2011 and other 830,000 homes are in some stage of foreclosure. A couple of the proposals are:

1. Sell packages of hundreds or thousands to investors in bulk who agree to rent them out, or

2. Have investors enter into joint ventures with Fannie and Freddie to invest in a pool of converted rental homes. There would also be national property management business to handle the landlord responsibilities.

This administration, keeping a keen eye on the 2012 elections, recognizes that all of the residential real estate initiatives to date have failed and represent a major obstacle to re-election if the problem is not resolved. A market-based solution would be a good idea but CMV’s concern is that the bureaucrats at Fannie and Freddie, whose number one objective is to preserve their jobs, will prevail and the “evil twins” will dodge their programmed extinction and live again to bleed the US taxpayer. What 99.9% of all Americans don’t know is that these two zombies continue to pay huge dividends (despite horrendous losses) to the US Treasury (and others) from taxpayer funds. That’s why, then Secretary of the US Treasury John Paulson, placed Fannie and Freddie into CONSERVATORSHIP rather than Chapter 11 – use taxpayer money to create and service debt with income accruing to the benefit of the government.

It was announced in late August that Freddie Mac plans to accelerate its program to buy loans secured by apartment buildings – up to $16 billion this year. Fannie has already bought $10.5 billion in the first 6 months. It probably hasn’t occurred to these bureaucrats that they are exacerbating the single family home rental market in the process.

Bloomberg reported on August 12, 20011 that Barclays Capital has projected that Phoenix and Atlanta have the best potential for the sale of new homes. Phoenix has the potential for 46,485 new home sales but no time period was given.

The Debt Bubble

Both the Democratic Truman Administration (1945-1951) and the Republican Eisenhower Administration (1952-1960) were faced with the unenviable task of growing the economy, providing jobs and paying down the massive mountain of debt accumulated during World War II. They were both successful and the 1950s came to be regarded as the “Golden Era” in America. Sound fiscal government ended in the mid-60s when Lyndon Baines Johnson convinced Congress that America could afford an entitled “Great Society” and an expensive war in Viet Nam (“Guns & Butter”) at the same time. Thus began a borrowing binge and a raid on the Social Security Trust Fund that has brought the United States to the point that it can’t possibly meet its public obligations amassed over the past 45 years.

Richard M. Nixon, a Republican (in name only), drove a stake into the heart of America’s fiscal sanity when, exactly 40 years ago (August 15, 1971), he declared himself a Keynesian and effectively took the US off the gold standard when bullion was $35/oz. Nixon also instituted wage and price controls which ultimately created severe imbalances in the economy and contributed to the ruinous inflation in the late 70s. The US Dollar has lost 82% of its’ value since that fateful day. And you thought Watergate was Tricky Dickie’s place in infamy.

Your writer remembers that day as if it happened yesterday. It was a Sunday and the Quist family was returning from a weekend at the lake when the news flash was announced on the radio. Somehow your writer knew that this event was a watershed moment. Several years later it became legal for US citizens to own gold again and by 1974 bullion rose to $195/oz. By 1979 it reached $850/oz. The relationship between the federal and public debt and the price of gold over this 40 year period should have been apparent to even a casual observer but it hasn’t registered until now.

Despite all the evidence to the contrary, there are those in Congress who insist that the federal government must borrow and spend more to stimulate the economy. We’ve been there and done that and it’s resulted in a dramatic decline in the nation’s GDP. Worse, these Keynesians have unleashed a vitriolic attack on fiscal conservatives that projects an irreconcilable stalemate that lies ahead.

E. J. Dionne, Washington Post columnist said that Tea Party representatives were content with “blowing up the country.”

Joe Nocera, New York Times columnist said, “Tea Party Republicans have waged a jihad on the American People.”

Maureen Dowd, New York Times columnist, referred to Tea Party members acting like “a maniacal gang with knives held high.”

And, the epitome of criminal aspersions was cast by Vice President Joe Biden who said that Congressional Republicans “have acted like terrorists.”

It isn’t an accident that all these statements characterize conservatives as an evil, destructive force, whose policies will destroy America. The irony, of course, is that there are those, who while cloaking themselves with the intellectual cover of Keynes, are in fact, Marxists whose goal is to destroy Capitalism and America as we knew it. The 1960s Cloward-Piven strategy was to so burden the US Government with entitlements that the economy and by proxy, Capitalism, would collapse. The hope is that fiscally conservative Democrats and Independents who are committed to America’s future have already seen through this charade and this Administration will suffer a humiliating rebuke in 14 months.

Riveting Riots

A wise philosopher once said, “Civilization hangs by a thread.” That frayed rope is close to breaking.

● We witnessed the riots in Egypt as the 30-year rule of Hosni Mubarak came to an end. The revolt reportedly was for freedom.

● We witnessed the riots in Syria to depose the autocratic rule of the Assad dynasty. The revolt reportedly is for freedom which may be quashed.

● We witnessed the riots in Greece where free democracy was born. There the long abuse of freedom has led to the nation’s bankruptcy and ultimately a full circle return to bondage.

● We witnessed the riots in a democratic England where the opinion pools cite criminality as the root cause .

CMV sees the onset of a new movement - egalitarian envy - a rebellious flash-mob outburst from the hooligan have-nots to take from the haves enabled by English law which protects the criminal and imprisons those who defend themselves. All Euroland is faced with a common seed of discontent fostered by high unemployment amongst those under the age of 25. Spain has an unemployment rate of 21% but it is 45% under age 25! Greece 15% and 39%, Italy 8% and 28% and the rest of the Eurozone has similar numbers. The only major exception is Germany at 6% and 9% but given their recent economic data, it appears that those numbers could change for the worse.

The European Union is bound together with one currency and one constitution and has shackled itself. It doesn’t have the flexibility to solve this growing problem. They can’t adjust wages based on productivity and local living costs since wages in many countries are set “centrally.” Most have costly indulgent entitlement programs that decrease the incentive to work and provides the youth the time and motive to create havoc. In the past, these government would improve labor costs and opportunities by devaluing their currencies. That option is no longer available.

Why is this important to you?

1. The European Union is the largest economy in the world. GDP is plunging there at a dramatic rate. The contagion will have a severe negative impact on the US economy which is already slowing. The EU may not survive.

2. The present administration in the US has embarked upon a European-styled central planning strategy that is also doomed to fail.

3. The concept of egalitarianism (equal legal rights, economic benefits and political status for all citizens) is migrating to the US. As the economy worsens social unrest will quicken. As a small business owner, what will you do when they come to take what you have? Will our police, already stretched to the limit in manpower and resources, stand by or be overwhelmed by the masses? Develop a strategy now!

The global social, political and economic infrastructure is crumbling. The rule of law is being circumvented. Fraud and corruption are running rampant. People are becoming more polarized. There is little sense of community. The change we were promised three years ago, was an illusion. And, there are those in power today that see the coming chaos as a means to an end – destroy Capitalism and make the masses more dependent on government.

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-- H. L. Quist

Free Preview Of CMV For August 2011

2011-07-30T17:21:00.000-07:00

Hello World,

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for August, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

The comparative YTD results for July 29, 2011, and Total Portfolio return as of July 29, 2011, were as follows:

                                                       YTD                  52 Weeks
    The CMV Portfolio                      -2.10%                     +31.60% (since 1/1/10)
    Dow Jones Industrial Avg.        +4.90%    +16.00%
    S&P 500                                   +2.80%          +17.30%
    NASDAQ Composite        +3.90%           +22.30%

Market Overview

The global banking system and by proxy the worldwide economy is at a tipping point – a critical juncture. The US, Euroland, Japan, and now China are faced with versions of the same dilemma – too much private and government debt that can not be serviced and by extension, is unsustainable.   Japan has never recovered from its’ highly leveraged real estate and stock market collapse in the early 1990s. The US and Euroland avoided a systemic collapse of their banking systems and their economies in 2008 by creating massive amounts of liquidity through new debt that is now causing a predicable outcome. China’s National Audit Office revealed this past month that its’ banking sector is exposed to some $1.3 trillion in local government debt and as the WSJ remarked on July 7, 2011, “Investors fear those debts represent the tip of a default iceberg.”

Since 1974, the US and much of the world, has experienced 13 boom and bust economic cycles. Prior to the crash of 2008 all bust cycles resulted in a substantial write-down of non-performing debt. For example, after the highly leveraged commercial real estate boom and bust in the 1980s, Congress created the Resolution Trust Corp to take control and dispose of foreclosed properties. Once in place a substantial inventory of commercial real estate was liquidated rather quickly at huge discounts with a coincident write-off of mortgage debt. In many respects, developers, builders and investors relieved of their suffocating debt, had a fresh state and the markets rebounded quickly during the 90s. Instead of less debt, there’s more today and even more ominously the highly leveraged inverse pyramid of derivatives remain intact at over $600 trillion and growing!

Your writer attended a seminar at Arizona State University about 17 years ago after the 1990 crash. One of the principal speakers was the Chief Economist at a major bank. Your writer asked her;

“What will happen to all this unpaid debt?”

The economist replied:

“It will simply be absorbed into the system.”

Your writer persisted:

“How much can the banking system absorb?”

Agitated, she replied:

“I don’t think there’s a limit. It doesn’t matter.”

Bingo! That’s the bankers’ mind-set then and that was the strategy promulgated by Alan Greenspan in 2002. It didn’t matter how much debt the banking industry created. The “system” could absorb the losses. The banksters got it WRONG. They’ve exceeded the limit.

Debt is analogous to a mold or a fungus that’s embedded into the drywall of a home. Rather than remediating the problem, the owner wall-papers over it to hide the problem from the buyer. That’s what our politicians and banksters are doing. They’re printing more and more paper to cover up the fungus that will destroy the infrastructure of the economy and make its’ residents deathly ill. The US is the best house in a (global) neighborhood but it’s infested with mold. The “Gang of Six” are simply paper hangers. Another short-term fix that won’t remediate the problem.

Where is the cash going to come from to create $95 billion per month of Treasury debt previously provided by the Fed’s QE 2? Read and weep this interview with Stephanie Pomboy of MacroMavens in Alan Abelson’s “Up & Down Wall St.” column in the July 18, 2011 edition of Barron’s.

For example, one proposal Stephanie envisions is to require 401(k)s to hold a certain percentage of their assets in Treasuries at the risk of losing tax-free status. Another is encouraging public pension funds to fatten up the share of their portfolios given over to Treasuries. Still another is enticing companies to put a chunk of the nearly $1.9 trillion in cash "burning a hole in their pockets" into Uncle Sam's obligations, possibly as part of a deal for a tax holiday to bring home the huge cache of foreign profits sequestered abroad.
    The impact of such actions, she feels, is bound to be ponderable. Were public pensions to boost their allocation to Treasuries from the current 6% to 16% (pre-Alan Greenspan, 24% was the norm), Stephanie reckons it would mean something like $300 billion of government bond purchases. And that, she points out, would be "chump change" compared with the potential additions by individuals and corporations.
    As things stand today, non-financial corporations have $1.4 trillion in cash and a mere $48 billion in Treasuries. As for individuals and their 401(k)s, only $300 billion of total mutual-fund assets of $8.3 trillion are invested in Treasuries. All of which strongly suggests there's a mega-abundance of room for greater exposure to government debt.
    Creating demand for Uncle Sam's obligations—"whether by carrot or stick," Stephanie says—has the not-inconsiderable advantage of "allowing fiscal stimulus to continue without all the inflationary consequences of dollar debasement" that accompanied QE1 and 2. And then she quickly adds, in patented Pomboy fashion, "until, of course, this, too, goes bad."

Merchants Of Death

In my book “The Aftermath of Greed,” your author labeled the hucksters and mortgage brokers that originated sub-prime loans for companies such as Countrywide Financial, New Century Financial and the Wall St. Firms that packaged and sold the AAA rated mortgages to unsuspecting institutional investors, as “Merchants of Debt.” Motivated by greed and self-aggrandizement, these merchants pocketed 100s of billions in commissions, fees and mark-ups without any concern for the borrowers, ethics or the rule of law. Now, another group of ethically challenged opportunists have surfaced, invading the previously sacrosanct world of life insurance in order to profit at the death of an insured. Appropriately, these people are the “Merchants of Death.”

Viatical Settlements (VS) came into existence in the late 1980s. Originally, the concept of VS was based upon the premise that owners of existing life insurance policies who were elderly or insured owners who had a terminal illness who were in need of cash prior to death, could “sell” their policies to a VS company for an amount less than the death benefit and the VS company would continue making the premium payments until the insured passed away.

The longer the insured lived, the lower the profit to the VS company. Most insurance companies fearful that this practice would raise ethical and moral questions and could open the door for abuse and fraud, prohibited their agents from engaging in the sale of their client’s policies to the VS companies. The insurance companies probably couldn’t envision the extent of the fraud that would follow.

According to a July 9, 2011 article written by Leslie Scism in the WSJ, Esther Adler died in 2009 and her insurer, AXA Equitable, was on the hook to pay out a death benefit of $5,000,000. After her death, the insurer discovered that instead of having a $12 million dollar estate as listed in her application, Mrs. Adler had assets of less than $100,000 and lived on Social Security. Premiums were in excess of $300,000/year. Settlement Funding, LLC, had purchased the policy shortly after it had been issued and stood to profit enormously from Mrs. Adler’s death.

AXA Equitable attempted to void the policy from the inception date citing alleged fraud. The court ruled in favor of Settlement Funding, LLC, and AXA Equitable was forced to pay the claim , in part possibly, that the insurer failed to do adequate underwriting and it relied upon a financial statement that was a fake.

Based upon your writer’s 40 year experience in the life insurance business, it’s reasonable to assume that there was collusion in Mrs. Adler’s case between the insured, the agent and Settlement Funding, LLC.

There is a much bigger story here with deep societal ramifications for America. Just as insatiable GREED, a disregard for ETHICS, the ABUSE of privilege and power and the circumvention of the Rule of Law by those who devastated America’s middle class as a result of the sub-prime scam, these “Merchants of Death” demonstrated that this type of behavior not only has not been curtailed, it continues to thrive and has become “mainstream.” The motive is PROFIT. The MEANS is irrelevant. The consequences are INEVITABLE.

EOAAWKI
(End Of America As We Knew It)

America has lost its’ moral and ethical compass. Hacking, identity theft, insider trading and all forms of fraud is not only undermining our capitalistic system, it is destroying the fabric of our society. Corruption in government at the city, state and federal level isn’t isolated to Chicago and mob rule is hastening the bankruptcy of our political infrastructure. For those of us who grew up in the thirties, forties and the fifties, what was ethically and morally right or wrong was ironclad. There wasn’t a grey area. Progressivism changed America, its’ direction and its’ destiny. Our hope lies in the chaos that will soon envelop our country and the following catharsis that will mark the Rediscovery of America. (Read “Rediscovering America: Growing Up In The Forties” by H. L. Quist.)

Where Did The Jobs Go?

Other than the budget and the debt Sword of Damocles that hangs over our collective heads, no topic commands more attention than the discussion of JOBS. What American’s don’t hear, however, is how did we lose these jobs in the first place, and why most of them will never return. A little history is necessary.

In 1994, Robert Rubin, then the CEO of Goldman Sachs, became the US Secretary of Treasury. President Bill Clinton was faced with the prospect that he would not be re-elected principally because his party was responsible for the largest income tax increase in US history and rising inflation could make him suffer the same fate as Jimmy Carter in 1980. Enter the global market strategist Rubin who immediately declared, “We believe that a strong US dollar is in the nation’s best interest.”

Little did Americans know at the time that Rubin’s patriotic-sounding policy would begin the mass exodus of manufacturing jobs out of the US. Putting it simply, the strong dollar made US exports more expensive and made Chinese imports cheaper. The cheap (in quality and price) Chinese goods held inflation in check and by 1996, despite the sexual sideshow, the economy was humming and the President’s principal goal was accomplished. A perfect example of a short-term fix which, of course, led to a longer-term problem (unemployment) but by that time Clinton and Rubin were off to more fertile fields. (You’ll recall that the Greenspan liquidity-induced .com bubble burst just months after Clinton made his exit.)

Current reports indicate that there are 14 million unemployed workers today. A large percentage are casualties of the “strong dollar policy” which the current administration pseudo-advocates while the USD continues its’ devaluation. The U-6 unemployment rate (includes those who have been out of work more than six months) is 25 million or 16.2% of the workforce. The Bureau of Labor indicates that there has been a cut of 659,000 government jobs. Very little information is available as to how many of this number are state and municipal employees where these governments have had no alternative due to lack of income but to terminate employees. But that doesn’t account for the largest loss of all.

To CMV’s knowledge, there is no published number indicating how many jobs have been lost to TECHNOLOGY. The hard reality is that the massive technological revolution is creating huge numbers of casualties. An owner of a small business, for example, doesn’t need an assistant or a bookkeeper. He or she can do it all by themselves and probably more efficiently and effectively. Large corporations dramatically cut their staffs in 2008 and 2009 and then discovered that they didn’t need the laid off 10% to 20% in 2010 and 2011, despite the fact that their business rebounded sharply.

Some large corporations have just made a “restructuring” move to increase profitability. CISCO Systems, Inc. announced recently that it will lay off 6,500 employees, or 9% of its’ staff. 15% would be executives holding the title of Vice President or higher. CISCO, above all, would comprehend efficiency and productivity.

Going paperless has practically eliminated file clerks. Realtors, financial advisors, insurance agents and other professionals no longer need assistants and many no longer need offices and work from home. Of the 9.2% unemployed it’s possible that the rate, at best given an improved economy, could be reduced to 7.5% and the U-6 to 12%. In CMV’s opinion, the only factor that would change this outlook is a re-birth of the construction business. A DROID doesn’t hammer nails – as yet!

NOTE: The Myth Buster erred in his July 10, 2011 PODCAST. The Bureau of Labor’s birth/death model refers to newly-started businesses (births) as opposed to business closings (deaths) and not individual workers. Thanks to subscriber Kirk Fergus for bringing this to our attention.

European Banks Are On The Verge Of Collapse

This is the opinion of Sean Egan, President of Egan-Jones Ratings Co. (EJR), who was interviewed by Jack Willoughby in the July 18th edition of Barron’s as well as CNBC on the same day. EJR reinforced its’ reputation, by downgrading well in advance several years ago, the ratings of firms like AMBAC, CIT, Countrywide, General Motors, Indy Mac, Lehman Brothers, MBIA and New Century, which all experienced a severe financial crisis or collapse. The Philadelphia-based firm is a Securities & Exchange Commission-regulated rating agency whose customers pay for the research on other companies. In contrast, Moody’s, S&P, and Fitch are paid by the issuers of the securities they are rating as readers all too well recall in the sub-prime mortgage triple-AAA fiasco.

Much of the recent focus has been on Greece, and the European Central Bank (ECB) and the IMF’s resolve to continue to lend the country about $500 billion euros to prevent a contagion that would spread throughout all of Europe. In reality, Greece can only service 10% of that debt, according to Egan. The European bankers think that 30% of Greece’s debt will be “restructured.” Egan believes they’ll have to write down 90% ! The real problem, of course, is that soon Ireland and Portugal will find themselves in the same debt quagmire. If the trend does not reverse, Spain, Italy and Belgium will follow and there’s not enough euros or dollars to bail all of their EU brothers out.

So, why is this important to you?

1. US taxpayers contribute 17% of all the funds deposited to the International Monetary Fund (IMF). The IMF will continue to assess its’ member nations to cover its’ bad loans until Americans cut the umbilical cord.

2. As CMV reported in its’ July issue, five of the largest US money market funds have about 50% of their assets invested in debt of European banks which have considerable exposure to Portugal, Italy, Ireland, Greece, and Spain (PIIGS). Review the Prospectus of your money market fund ASAP.

3.The Federal Reserve Bank of the US (Fed) has swap lines with the ECB which guarantees bailout funds in the event of a contagion, while the US is faced with an enormous deficit and debit crisis of its’ own. In 2008 and 2009 Ben Bernanke “swapped” $580 billion with other central banks. What will the number be this time? Where will the money come from?

CMV has repeatedly said that we are all witnessing the end of the western-centric fiat money system. This is not about saving Greece. It’s about saving European and US banks. The global banksters have created an enormous mountain of debt that can not be serviced. Two questions remain?

1. When will the debt bubble burst? And,

2. Will the western-centric nations experience an inflationary blow-off (crack-up boom) prior to a contraction (deflation) or will global insolvency result in a 2008-type meltdown and depression?

The banksters have (in their view) only one solution. Print more euros (in violation of the EU charter) and more dollars and lend more money that won’t be repaid. At present, CMV’s call is rapidly accelerating inflation and the prospect of HYPERINFLATION.

NOTE: Read chapter six in “How To Profit From The Coming Inflationary Boom: And Avoid The Next Crash”, on ‘hyperinflation.’ If you’re prepared you can profit and survive. The best of both worlds.

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.
Subscription box in in the left side bar here on the blog.
"GREED" and "PROFIT" are now available for you iPad users.
You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.

-- H. L. Quist

A Real Estate Anomaly

2011-06-14T09:10:00.000-07:00

Hello World,

Don't miss my newest youtube video - here on the sidebar or at my youtube page.

http://www.youtube.com/hlquist

A real estate boom has begun! Conventional wisdom says, the real estate market will not rebound for 3 or 4 years. H. L. Quist says, there is an anomaly occurring that has already created a boom and will drive real estate prices much higher in the next 2 years.

-- H. L. Quist

Free Preview of CMV for June, 2011

2011-06-01T09:01:00.000-07:00

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for June , 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

The comparative YTD results for May 27, 2011 were as follows:

                        YTD                                                         52 Weeks
    The CMV Portfolio           - 2.54%*        +44.99%
    Dow Jones Industrial Avg.        +7.46%        +22.74%
    S&P 500            +5.84%        +22.19%
    NASDAQ Composite           +5.43%        +23.92%

* Realized gains in Silver and Gold shares in April are not reflected in this number. Current software does not credit any gains or losses on names that are sold YTD. CMV is attempting to find a new program that meets our needs.

Market Overview

Richard Russell's "Dow Theory Letters" which was first published in 1958, is the longest-running investor newsletter continuously written by the same person in the financial industry according to several sources. Given Russell's historic presence, world-wide recognition, and proven past track record, CMV readers should pay close attention to what Richard has had to say recently about gold:

"Gold-- The desperate battle to keep gold below 1500 continues. I watched the erratic action of gold near yesterday's close. I'm fascinated to see whether June gold can close above 1500 or whether the anti-gold contingent can manage to knock gold down (again) below 1500.
The action is now so blatant that it literally screams of manipulation. At its high yesterday, June gold sold at 1506.50. At yesterday's close, June gold was trading at 1498.10. It's almost embarrassing to watch the action. What we're seeing is the anti-gold crowd and the manipulators vs. the great primary trend of gold."

The battle about gold closing above 1500is that once above 1500, technically gold will be on its way to 2,000.And from there 5,000 will be the target. So 1500 is a psychological barrier that, from the bull's standpoint, must be bettered. But from the anti-gold crowd's standpoint, gold must be held (on a closing basis) below 1500.

The answer: As I see it, the primary trend of gold remains bullish. In due time, gold will gather the strength to close above 1500. The gold-bears will be defeated. It's only a matter of time.
The panic to buy gold will override everything else. It will be one of the greatest financial phenomena that most of today's investors will ever see. It will blot out everything else like a cloud blotting out the sun.

After the calm, comes the storm. We've been watching ten years of gold climbing amid an atmosphere of calm. The great gold tsunami lies ahead. It will be historic."

CMV believes this octogenarian has it right.

A Major trend , that the US and the global economy is slowing, may be developing in mid-May just as talk of a "double dip" occurred one year ago after the "flash crash." The Institute of Supply Management (ISM) index of leading indicators which gauges a broad cross section of the US economy, foretells of a slowdown. Goldman Sachs just issued a SELL recommendation on Intel (INTC) indicating that the demand for semi-conductors is waning.

In the retail sector the Gap reported a 23% drop in earnings citing increased raw material and labor costs. The Wall St. Journal article stated that analysts were "surprised" at the drop. Surprised? When the price of cotton had risen in 18 months from $.45/lb to over $2.00/lb the handwriting was on the wall but obviously some experts couldn't read the message. CMV reported months ago that bottom lines would be "squeezed" by raw material costs. Polo Ralph Lauren Corp. also reported a 36% drop in earnings which sent its' shares down 11% on May 25th. There are exceptions however. Limited Brands which owns Victoria's Secret just reported robust earnings. No wonder. Victoria's real secret is that it uses so little cotton in its translucent nighties that they were unaffected by the 300% rise in cotton!

In the casual and luxury sectors, Starbucks has priced its' favorite stimulant of choice, the latte, at $5/cup. Coffee beans have risen 164% in 5 years and management blames speculators. Jewelry retailer Tiffany reported an exceptional 25% gain in profit in their most recent quarter as the nouveau riche get richer. A unique phenomenon is occurring in consumer spending that escapes a pedestrian view. It appears to CMV that almost all increases in gross sales is coming from an increase in prices which distorts the amount of goods sold in YOY basis.

According to government officials, high gasoline prices, government budget cuts and weaker consumer spending has caused the economy to exhibit weaker growth in the first quarter than estimated. The US Commerce Dept. revised its' GDP estimate down to 1.8% for the first quarter of 2011. The final fourth quarter number for 2010 was 3.1%. Given the plethora of negative economic data, why isn't the stock market taking a hit? Bob Paisani on CNBC offered a remarkable insight. Traders are anticipating that despite claims to the contrary, Ben Bernanke will continue the QE stimulus this month. That's exactly what CMV stated in the last issue of CMV.

Just as it did one year ago the European debt crisis has festered again. Greece's band-aid fix, as forecast by CMV, didn't cure the problem and major surgery separating the Greeks from the EU will ultimately be necessary. One of the European Central Bank's (ECB) governors, Christian Noyer of France, labeled the call for a restructuring of Greece's debt a "horror scenario." Barely a year after receiving a $115 billion bailout from the ECB and the IMF, Greece is on the brink of a default, again. Then there's the remaining PIIGS (Portugal, Ireland, Italy, Greece & Spain). The problem can simply be reduced to this: The strategy of all of the central banks in the Western World is to inflate the debt crisis away. In order for that fix to work, the creation of more debt must produce at a minimum, increased growth and increased tax revenue. If a slowdown occurs, as anecdotal evidence indicates, the last resort is ominous in its result. The creation of more fiat money will ultimately lead to hyper-inflation and a ‘crack-up boom.'

What Europe and the US are beginning to experience is an "Inflationary Recession" or stated in another term "Stagflation." The worst of all worlds. Rising prices and stagnant growth. The Western World is reaching the tipping point. As CMV has stated previously, we're witnessing the beginning of the end of the western-centric fiat money system. More than ever you need to understand what is unfolding here and develop a strategic plan to survive financial Armageddon.

Paradigm Shift

Philosophers, futurists, analysts and writers often speak of Paradigm Shifts, Black Swans and use other obscure terms to chronicle macro economic events that most observers can't understand or, more importantly, can't quantify or relate to. But when a reliable, knowledgeable and trusted source says, that, "There is, in fact, a paradigm shift – perhaps the most important economic event since the Industrial Revolution, occurring" it behooves the reader to not only take notice but take action.

Alan Ableson, the erudite writer for Barrons' and a mentor to CMV, introduced his readers to Jeremy Grantham of GMO, LLC in the May 16th edition. GMO is an advisor and asset manager to large institutional and individual investors worldwide, with minimum investment capital of $10,000,000. His firm is paid big bucks by big players to be right. On the GMO website you'll discover Jeremy's recent posting entitled, "Time To Wake Up: Days Of Abundant Resources and Falling Prices Are Over Forever." The bottom line is that the world is using up natural resources at an alarming rate and "this has created a permanent shift in their value."

In particular, Jeremy says the global population which now numbers 7 billion will rise to 10 billion by 2100 (according to the United Nations) and this explosive growth, Jeremy warns, will "have eaten rapidly into our finite resource of hydrocarbons and metals, fertilizer, available land and water." Ableson adds, "Despite a massive increase in fertilizer use, the growth in crop yields per acre, has declined from 3.5% in the 1960s to 1.2% today." We should all revisit the Malthusian Theory advanced 200 years ago which forecast that the world would run out of food to feed the population.

A table accompanies Grantham's piece, which estimates China's share of world commodity consumption. Some notable numbers are:

Cement 53.2% Steel 45.4%
Iron Ore 47.7% Copper 38.9%
Coal 46.9% Eggs 37.2%
Pigs 46.4% Oil 10.3%

Back in the 60s and 70s when your writer was closely involved in agribusiness, farm products such as wheat was under $4.00/bushel, corn about $2.50/bushel and gasoline was about $.25/gallon. The grains have more than doubled and of course gasoline has skyrocketed. Grantham's point is that absent a global depression on the scale of the 1930s, these prices will continue to rise. This isn't a short-term supply / demand imbalance. This is a PARADIGM SHIFT. Commodity prices have reached a "new normal."

The Fed Myth Debunked
(By The Myth Buster)

Ever since the Federal Reserve Act was passed in 1913, the US Central Bank has assured Americans that it acts independently and its' monetary policy is not influenced by Congress or political pressure. David R. Kotak and Joseph R. Mason, in a Barron's article dated 5/23/11 assert that recent Federal Reserve Board appointments and new regulatory responsibilities under last year's Dodd-Frank law substantiate their claim that the Fed no longer acts independently.

It has been long assumed by most observers that the Fed's independence has been protected by the 14 year staggered terms of its seven governors. That veil of protection was eroded during the second Bush administration when Senator Chris Dodd (D-Conn) used his Chairmanship of the Senate Financial Committee to hold up the confirmation of two Bush appointees and the Board was short two governors during the worst financial crisis since the Great Depression. As a result, Fed watchers have no written record of any discussions held by the Board concerning the merger of Bear Stearns, the purchase of toxic bank debt or the failure to bail out Lehman Brothers. The Fed still operates with 5 governors.

Under the new Dodd-Frank law the Fed is to fund the as-yet-unspecified-activities of the new Consumer Financial Protection Agency, headed by an ultra-left Tzarist Elizabeth Warren, despite the fact that it has no oversight power over that agency. Kotak and Mason maintain that Congress will continue to use the Fed's balance sheet to fund various programs that circumvent the traditional appropriation process.

As a side note, you'll recall that it was the co-author of Dodd-Frank, namely Barney Frank, who publically declared in 2003 that Fannie and Freddie had no "explicit or implicit or no wink-‘n-nod guarantee" by the US Treasury that created a $160 billion loss for taxpayers. It should also be mentioned that it was Frank's demand that Fannie and Freddie adopt "quotas" that the "evil twins" make sub-prime loans to unqualified borrowers. Congress passed Dodd-Frank without the text of the regulations. We're about to discover what's contained in the Bill. Dodd and Frank were co-instigators of the financial chaos and are the co-authors of the law that governs the industry they corrupted. Gheez!.

A new threat has emerged which has promised to end this charade. Ron Paul (R-Texas) who is Chairman of the House Panel which oversees the Fed's activities has subpoena power and intends to "audit" the Central Bank. He could also introduce legislation to end the Fed as we know it.

The bottom line is that the Fed has been the key instrument in all of the 12 boom and bust economic cycles in the US since 1974 save the first one in that year, caused by the oil embargo. The Greenspan Plan in 2002 paved the way for the real estate bubble and subsequent collapse that has devastated middle class America. We're now experiencing the "Bernanke Bubble."

Read "The Creature From Jekyll Island" by Edward Griffen. You'll understand why the Fed myth has been debunked and why the Federal Reserve Act should be repealed.
The Oil Enigma

As CMV outlined in its' SPECIAL BULLETIN dated April 19, 2011, Goldman Sachs (GS) announced eight days earlier that they were selling all commodities and "demand destruction" would end the commodity rally. In particular, GS indicated that there would be a sharp decline in the price of crude oil. The market responded with a brief 15% decline in the price of crude, as well as a corresponding drop all across the commodity sector. Five weeks later (on May 24th to be exact) GS did a 180° reversal and took a bullish stand on oil. A Wall St. Journal article the following day said, "Goldman has a history of making influential recommendations to buy or sell certain commodities, including a 2008 call for oil prices to reach $200 a barrel that helped fuel the rise to record price levels that year."

No one, including the WSJ, bothered to ask the obvious. What facts changed GS's outlook on oil and other commodities in just five weeks? CMV has speculated that GS's announcement on April 11, 2011 was timed to placate the BRICS (Brazil, Russia, India, China and South Africa) who were demanding that the US "control" commodity prices and "stabilize" the USD. As an ancillary benefit, of course, traders profit from the movement in prices. They make gains on both bullish and bearish moves. A lawsuit filed by the Commodity Futures Exchange (CFTC) on May 24, 2011, accused Arcadia Petroleum of manipulating oil prices in 2008. The CFTC has more work to do.

Adding to the emerging murky oil picture is recently obtained information that has previously escaped the eye of the media and oil analysts.

Accoring to a May 22, 2011 WSJ article, the Prudhoe Bay oil discovery in Northern Alaska in 1968 (which is the largest oil field discovered in the US) gave birth to the famed Trans Alaska Pipeline which at its' peak in the late 1980s carried 2 million BBL of oil per day 800 miles overland to the Port of Valdez in just 3 days. Now, due to dwindling production on the North Slope, the pipeline only carries one third of the volume it once did and it takes 5 times longer to get to its destination. But decreased production is only the tip of the iceberg on the slippery North Slope.

As the flow of oil diminishes the freezing temperatures greatly enhances the chance of clogging which increases the risk of ruptures and spills. Ice crystals congeal wax which WSJ says "potentially turning the 48 inch pipeline into the largest tube of chap-stick in the world." The solution is two-fold. 1) Get more oil into the pipeline or 2) find a technological solution that would prevent the oil from turning into thick molasses. The Department of the Interior holds the key to increased production to solve #1. If a decision to issue new drilling permits are delayed long enough the pipeline would be forced to shut down. At that point, by law, the pipeline would have to be dismantled and a victory for the multitude of environmental groups who would gloat over its' demise while the price of crude would escalate.

Even more ominous is what is occurring in the Arabian Peninsula. Entitled, "Facing Up To The End Of Easy Oil," a feature article in the May 24th WSJ, Saudi Arabia became the world's largest producer of oil due to its' vast reserves of high-quality light crude. As the fields of "easy oil" begin to dry up the Saudi's are resorting to drilling for much heavier and thicker oil which is more difficult to recover and costs more to refine into gasoline. Wood MacKenzie, a Scottish energy consulting firm says, "The easy oil is coming to an end..." Other analysts say "peak oil" has been reached in the Arabian Peninsula and that Saudi Arabia has pumped out 50% of their reserves. The Saudi's have constructed giant boilers to pump steam into the ground in order to extract the heavy oil. The technological challenge and the cost of recovery however, pales in comparison to the growing Arab Spring revolution that threatens to disrupt production throughout the region.

One more unmentioned development that will directly and immediately impact the supply of US imported oil. Venezuela is the number four exporter to the US. America possessed one of the few refineries in the world that was able to refine the heavy-sour crude (high in sulphur) produced in Venezuela. Hugo Chavez has recently inked a deal with China which will finance a to-be-built specialized refinery with all the production going (surprise) to China.

The bottom line is clear, oil and gasoline are going to become short in supply and high in price. Refer to page 17 for suggested recommendations to deal with an inevitable outcome.

The International Malevolent Fund (IMF)

Dominique Strauss-Kahn (DSK) the head of the International Monetary Fund (IMF) recently dominated the headlines with his (alleged) sexual assault on a housekeeper in a plush New York City hotel. While most observers were focused on the sensationalism of the sordid event, they wouldn't connect the dots to a much bigger story. Namely, what is the IMF, what does this organization do and why is DSK's behavior a metaphor and a window into the clandestine activities of this powerful globalist organization?

In 2004 an insider, who was appropriately labeled an Economic Hit Man (EHM), told the compelling true story of how global organizations such as the World Bank, the Agency for International Development (USAID), the IMF and other entities have utilized taxpayer money to further empire building and funneling mega billions of dollars of profits to major global corporations. John Perkins was the EHM. The title of his book, "Confessions of An Economic Hit Man," is a tale that would rival any fictional espionage thriller. A must read!

Perkins says in his Preface:

Economic hit men (EHMs) are highly-paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.
I should know; I was an EHM.

Once you read this book you'll understand the metaphor. These "elites" have been raping the global landscape for years in the guise of assisting underdeveloped countries. But, in the end they indentured these countries to the extent that some of their economies fail, countries go bankrupt, chaos reigns and individual lives are ruined. (Think Greece.) Of particular interest to Americans is the fact that the US contributes 17% of all the funding to the IMF and it isn't very comforting to know that we're paying a $3,000/day hotel tab for IMF heavyweights like DSK who routinely use taxpayer money to live lavishly. Of principle importance is that the IMF could play a pivotal role in the new global monetary system that would replace the US dollar as the world's reserve currency.

A case in point would be the nation of Zimbabwe. An opinion letter written on November 12, 2009 by Thoms J. Hornes (Google: IMF/Zimbabwe) is entitled "IMF Contributes to Zimbabwe's Hyperinflation." Zimbabwe printed 21 trillion Zimbabwe dollars starting in 2005 to payback its' debt to the IMF which eventually caused an inflation rate in excess of one trillion percent per annum and devastated the country. The IMF's position is that Zimbabwe didn't enact the "macro-economic and structural reforms," recommended by the IMF concurrent to making the loans. (Neither has Greece!)

Just before the Zimbabwe economy collapsed in 2009, the nation's Central Bank was issuing a 1– trillion-dollar note! The actual note can be purchased today for about $5 (US) on e-bay. There are numerous lessons to be learned from this example of globalism and banking at its worst but few, if any, understand the implications for the US of a fiat money system that is in its death throes. In the meantime, DSK lives in a lavish $14 million dollar townhouse complete with gym, pool and other amenities at a cost of $8,500/day! These elites sure know how to spend someone else's money. That's the definition of a socialist.

A Real Estate Boom Begins!

It had to eventually happen. Only the timing and circumstance was delayed. The residential real estate market has sprung to life although most industry observers don't see or relate to the events that are occurring. CMV will limit its' comments to the Phoenix metropolitan area but these observations should be germane to many metropolitan areas in the US - except Detroit.

Investor Capital inflows are dramatically changing the landscape in the residential real estate market. After meeting with several successful market movers, property managers and getting industry feedback after your writer has spoken to five real estate groups in the past two weeks, an anomaly is taking place. Investors, anxious to buy residential property are discovering that bargain-basement prices for foreclosed and auctioned homes are rapidly disappearing and available inventory, particularly under $200,000 is rapidly declining. Banks are withholding REOs (real estate owned) from the market and refusing to accept short sales in anticipation of price increases. A principal with one company that buys homes, fixes them up and re-sells them, said that "the market is returning to par," meaning that an investor is now paying close to replacement cost for a home or condo that a year ago could be purchased at 50% of par.

The anomaly that has emerged is that the absorption is principally created by investors and not home buyers and a majority of residential users would prefer (or must) rent rather than buy a home. In some cases the monthly rental could be twice the amount of a mortgage payment. At some point this "spread" between ownership and rent will revert to the norm but for the intermediate term the return on investment (ROI) is attracting an inflow of capital from all over the world and it's the driver.

Several events are happening as CMV goes to press that could propel this market on an even faster track. The House Financial Services Panel has submitted the HOUSING & REFORM ACT of 2011 to Congress which will end the taxpayer bailout (if passed) of Fannie and Freddie and create five new "little" Fannies to replace the big fat one that failed. After a year of discussion and initial resolve to find a means to replace the "evil twins" without government guarantees, the proposed law, you guessed it, includes the full "faith and credit of the US government to back the mortgages" which will attract institutional money. The key, of course, is what will be the underwriting requirements and will renters qualify to buy? Stay tuned.

CMV has reported in numerous editions that the US Justice Department, the Attorneys General of all the states and the banks have been negotiating for months to reach a settlement on a fine to be paid by the banks for "improper mortgage-servicing practices " namely the "robo-signing" and other questionable practices that came to light last fall. The government has demanded a fine of $20 billion. The banks have offered $5 billion. CMV's guess is that the final figure will be around $10 billion. This settlement is to be paid to those who were wronged in the foreclosure process. What the amount will be that finally trickles down to the homeowner is anyone's guess. Will it be sufficient for a down payment to qualify for a FHA or Little Fannie loan? Just a thought. Politically, the present administration knows that they have to solve the real estate disaster before the 2012 election.

CMV forecasts that there will be a significant decline in residential inventory by the end of 2011 in Phoenix. Combined with the continued devaluation of the USD, there will also be a rush (and possible mania) to convert dollars to hard assets with real property prices reaching unexpected increased levels in 2012, unanticipated by even the most optimistic analysts and real estate experts. All this despite a "Shadow Inventory" of about 100,000 homes that could appear on the market.

On the other end of the financial spectrum, former Alaskan Governor and Vice-Presidential nominee, Sarah Palin, has bought a 8,000 square foot home in North Scottsdale, Arizona for $1,695 million. An investor, Ian Whitman, bought the uncompleted home a year ago from J. P. Morgan-Chase Bank for $800,000 according to tax records. Less completion costs, a high ROI in one year grabs the attention of both buyers, sellers, and investigators. This story will spread through the local real estate industry like a wildfire through range grass. It can (and will) change the psychology in the market place. Absent a collapse in the Muny Bond Market (quite likely) or a US Treasury default (not likely) this moment marks the beginning of a real estate boom in Arizona! You read it here first.

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.
Subscription box in in the left side bar here on the blog.
"GREED" and "PROFIT" are now available for you iPad users.
You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.

-- H. L. Quist

A Real Estate Anomaly!

2011-05-31T17:04:00.000-07:00

Hello World,

I just posted my video on youtube about what I see as a Real Estate Anomaly - a boom.

My contrarian newsletter offers investors my contrarian view of market conditions and the current economic and factors which impact the investor and small business owner.

You can subscribe through the link on the side bar here.

-- H. L. Quist

Free Preview of CMV Newsletter, May, 2011

2011-05-03T17:11:00.000-07:00

Hello World,

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for May , 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

The comparative YTD results for April, 2011 were as follows:

                                                      YTD
    The CMV Portfolio            +   7.63%*
    Dow Jones Industrial Avg.        + 10.65%
    S&P 500               +   8.43%
    NASDAQ Composite            +   8.32%

* Realized gains in Silver and Gold shares in April are not reflected in this number.

Market Overview

To QE or not to QE? That is the question! Ben Bernanke’s soliloquy didn’t match the life-defining decision of Hamlet, but the immediate economic and career-defining significance of Ben’s June decision was eagerly awaited by an anxious audience on Wednesday, April 27th. The Shakespearean-looking Ben Bernanke said QE 3 will not follow QE2.

CMV, cutting through all the theatrics, poses a simple question. With the FY 2011 deficit of $1.5 trillion and the US Treasury requiring $5 billion a day in new money to keep the lights on at the Capitol, who, in the absence of the Fed creating $600 billion in six months, out of thin air, will step up and buy $900 billion or more of the bills, notes and bonds this year? And, what about that portion of the existing $14 trillion debt that has to be rolled over when the buyers elect not to renew? Certainly it won’t be the BRICS - Brazil, Russia, India, China and South Africa. They’re busy forming and funding reserves for the Shanghai Co-Operation Organisation that will not only compete with the world’s reserve currency (the USD) it intends to replace it. As a piece issued by the Daily Bell on April 9, 2011 stated, the Alliance of the BRICS:

“...has been watching the death throes of the American empire and is reacting by creating the groundwork for a post-American global construct. Following the recent BRICS summit on Hainan island in China, Brazilian Finance Minister Guido Mantega told the International Monetary Fund in Washington that the United States and other western countries were attempting to “export their way out of difficult economic situations” by printing money and driving down interest rates– which is the core principle of quantitative easing. It was clear that Mantega was speaking for the other BRICS nations in warning Washington that business as usual is approaching an end.”

A well-worn device utilized by the Fed and the Treasury could also run into a wall. To demonstrate to the world that the US Treasury has a plethora of suitors, a bond buyer bids at the Treasury auction and a sale is recorded and publicized. Three days later, the Treasury or the Fed repurchases the debt from the buyer under a pre-arranged Re-Po agreement. How long can this charade continue on the massive scale of financing and re-financing required? And, who would want to take on the ever-increasing risk with such a meager return? And, Mr. Bernanke assured us that interest rates will decline at the end of QE 2. We don’t have long to wait to find out how this tragedy ends. Hamlet, to those who don’t recall, met his demise in Act IV.

The US stock market discounting the “Perfect Storm” has rallied at the end of the First Quarter on positive earnings news provided by (in large part) QE 2. As of April 25, 2011, of the 137 companies in the S&P 500 who have reported earnings for the first quarter to date, 75% have exceeded their forecasts. According to Thomson Reuters, only 17% of their list of companies that have reported missed their targets. Early results indicate that higher raw material costs have yet to eat into earnings at this point. The VIX which measures market volatility reached a 52 week low of 14.30 on the index which usually indicates that the market could be poised for a major move. Unexpectedly, the initial estimate for the First Quarter GDP came in at 1.8% whereas 3% plus was anticipated. Also disturbing was the uptick in unemployment claims when most analysts expected a continued drop. The question is which way will the market move? A solid case can be made for north as well as south. Here’s what the experts say:

(Taken from Barron’s Mid-Year Big Money Poll)

Investment Outlook Through Year-End 2011
Very Bullish    2%
Bullish    57%
Neutral    30%
Bearish    10%
Very Bearish    1%

What Is The Major Risk To The US Economy?
Inflation        57%
Deflation        4%
Stagflation        25%
None of These    15%

What Will Be The GDP Growth This Year?
2.0%        7%
2.5%        25%
3.0%        36%
3.5%        22%
4.0%        7%

What Will Be The 10 Year Bond Yield At Years End?
3.0%        3%
3.5%        29%
4.0%        48%
4.5%        16%

All told this consensus of BIG MONEY fund managers forecasts a favorable environment for equities and a seemingly nonplused concern about:

1. The S&P downgrade of US Sovereign debt from “Stable” to “Negative.”
2. The absence of buyers for US debt (see page 1).
3. The move away from the US dollar as the world’s reserve currency (see page 1).
4. Japan’s critical need to repatriate dollars for yen to rebuild their country. (They own $886 billion in US debt).
5. The rapid rise in the real inflation rate far exceeding the official Bureau of Labor Statistics Consumer Price Index (CPI) of 2.1% and the prospect of severe inflation or hyper-inflation.
6. The prospect that there will not be a meaningful cut in the federal deficit.
7. The acceleration of chaos in the Mid-East, a disruption of oil production and gas prices reaching up to $5 / gallon this year.
8. Greece’s inevitable default (see page 5) and an EU monetary crisis.
9. The recent suggested alignment of Afghanistan with Pakistan and its Chinese ally which is intended to oust the US from Afghanistan prior to the scheduled 2014 date. Now that the US has found and executed the mastermind of 9-11, we should pack our bags and leave. NOW!

CMV envisions a confluence of many of these events within the next twelve months. What is an unsustainable trend must end. The question is, how and when?

The Fed’s Credibility Gap

Ben Bernanke’s press conference on Wednesday, April 27th, was as unprecedented as it was disingenuous.

The Fed Chairman said that the Federal Reserve will phase out its’ controversial program of pumping money into the financial system in June completing its’ $600 billion bond-buying program and would maintain its’ unprecedented microscopic interest rates for an undetermined period. Bernanke’s critics, CMV amongst them, weren’t impressed by the Chairman’s remarks because he failed to address when the Fed would tighten monetary policy in order to fight inflation that now, more than ever, is impacting manufacturers and consumers.

It appears that the Fed is more concerned about creating jobs than combating inflation. Never in its near 100 year history has creating jobs been a core of the Fed’s mission statement but it fits with the Administration’s populist rhetoric. Bernanke said inflation was ‘transitory’ and rising gas prices were merely the result of growing global demand and potential disruption of the supply of oil in the Mid-East. That’s where Mr. Bernanke becomes a tad disingenuous. Why? The Fed’s ultra-expansive monetary policy has triggered a massive sell-off in the US dollar and directly caused a rapid rise in not only oil and gas prices but an explosion of all commodity prices. As CMV has reported ad nauseam, the USD is (presently) the world’s reserve currency and all commodities are priced in US dollars. When the dollar loses value, it takes more greenbacks to buy the commodity. Mr. Bernanke should look in the mirror as one of America’s most famous philosophers (Pogo) did when he concluded, “We have seen the enemy, and he is us.”

Mr. B added mightily to his credibility gap when he and Treasury Secretary Tim Geithner said in unison, “Our policy has been and will always be...that a strong dollar is in our interests as a country.” The USD crashed to 73.12, a new low on this outrageous proclamation. As Mr. B was speaking, the price of gold and silver took off like a rocket demonstrating the market’s conviction that the Chairman’s credibility was “suspect.” As the WSJ states, “One mystery is how Mr. Bernanke can take credit for a rising stock market while saying the Fed has nothing to do with rising commodity and other asset prices.”

The Defining Moment – Haves vs. Have Nots

When Paul Ryan (R-WI) produced his budget to solve the fiscal crisis he was reported to have said:

”This is a defining moment.”

And, the battle for America’s financial future has been joined and the rules of engagement have been posted. In response to Ryan’s proposal, it was expected that the President would offer an outline of his views on spending and deficits. Instead, as penned by Daniel Henninger in the April 14, 2011 edition of the WSJ, what the President delivered “was an invitation to the gunfight at the OK Corral.” (Who is Wyatt Earp?)

The Ryan-GOP budget core goal is to reduce spending to 20% of the GDP. President Obama has targeted federal spending at 24% of GDP. When you realize that our nation’s output is at $14 trillion, a 4% spread is a ton of money, and guarantees a trillion dollar deficit for as long as the eye can see. As Henniger says, “Inside those four points, you can define and decide the nation’s future.” He’s referring to the future of Federal spending, the future of entitlement programs and the future of taxes. Our future.

The President’s cry to raise taxes on the rich resonates loudly with those who believe any family with joint income over $250,000 is rich. The unspoken reality is that this group could pay 100% of their income over a quarter of a million in taxes and it wouldn’t come close to curing the deficit. The individual income tax brought in 7-8% of GDP from 1952 to 1979 when the top tax rate ranged from 70% to 92% and 8% of the GDP in 1993 to 1996 when the top rate was 39.6%. The President wrongly believes and defies history when he figures that raising taxes on the rich would significantly increase the tax take and reduce the deficit. Franklin Roosevelt raised taxes to 70% on the rich during the Great Depression which was largely responsible for causing a second depression within the depression in 1936. Individual taxes have consistently remained in the 8% of GDP range but demagoging the mythical rich is a populist theme that garners votes from the masses.

The bottom line? The way to raise tax revenue going forward is to raise the real GDP. Government spending and increased taxes won’t do it. Free enterprise and less government will.

The reality? The bond market will refuse to fund the Obama budget. The net interest cost to service the Federal debt will exceed all the estimates and create catastrophic results.

The Vanishing Dollar

The March, 2009 low for the Dow Jones Industrial Average (DJIA) was 6,440 down from a high of 14,198 in October 2007. Currently it stands at about 12,400 and in “unadjusted” terms, the Dow has rebounded a smart 92% from the March 2009 low.

Before you make a toast to your good fortune and savvy, what if someone told you that your “real gain” was only 19.6%?

Larry Edelson’s April 14, 2011 edition of Uncommon Wisdom (e-letter@e.uncommonwisdom.com) lays out effectively how the persistent devaluation of the US dollar erodes value when measured against real money – Gold. This is a critical exercise because you presently have and will continue to experience the loss of purchasing power going forward in all the goods and services you buy.

Suppose that at the end of 2001 you had (theoretically) invested $10,000 in the DOW which was equal to 10,000 on the DJIA. Gold was approximately $263/oz at that time. $10,000 would have purchased about 38 oz of gold bullion. At the end of 2007 when the DOW was close to its’ all-time high of 14,000, its’ equivalent in dollars would have purchased about 13 oz of gold. At the March 9, 2009 low at the bottom of the crash your investment would have purchased only 7 oz of gold since bullion had almost tripled and the DOW had crashed 50%. (In 1980 there was a 1X1 ratio. Both the DOW and Gold were 850.)

Theoretically today your $10,000 investment in 2001, in DOW terms, is worth $12,400 – a 10-year gain of about 24% – and up a seemingly robust 92% from the March 9th low. Observe however, what the dollar has lost in purchasing power. The DOW at 12,400 will only buy the same amount of gold in ounces as it did when the DOW was almost 6,000 points in dollars higher than it was in March, 2009. In “real money” terms, your gain since the market low in 2009 has only been 19.6%, when the value of real money has doubled to $1500/oz. The DOW will only buy 6.7 oz of Gold at present.

Assessing real estate values in terms of real money is equally as dramatic. At the market high in March, 2007 the median home price was $262,000 equivalent to 346 oz of gold. Today’s median price is $156,000 and in nominal terms has lost 40% of its value. However, in terms of real money the median home price has fallen 69%!

People often say, “What difference does it make if the dollar is devaluing?” Now you know the answer. Now you know why it takes so many more dollars to buy gasoline, groceries and all the stuff you need to live. Gold is not only a hedge against your loss of purchasing power, it is “real money.”

The Big Fat Greek Default
(The Wedding Is Over)

It has been a year since the financial travails of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) aroused the awareness of the world. A bailout was arranged by the EU and IMF at the eleventh hour to avoid default and the angst subsided – for the moment.

What has elapsed since has been ignored by the media but bears mention here for the significance of the aftermath. The problem is not Greece’s solvency but its’ governance or, lack of it. Takis Michas, the international secretary for Greece’s new Centrist-Liberal party (the Democratic Alliance) writes in an op-ed piece in the WSJ:

“The country is at the mercy of militant activists who are inspired by the various factions of the hard left. The heaviest hitters are Greece’s Communist Party and the Anarcho-Stalinist Coalition of the Radical Left ... their followers have taken to harassing citizens and destroying public property – even taking over whole villages ... The real Greek disease is the contempt for the law and the political failure to combat it.”

Greece, the birthplace of democracy and the ancient model for world governance, is on the verge of collapse. The government workers refuse to participate in an “austerity” program so Greece can reduce its’ deficit and stabilize its society.

The lesson to be learned by Americans is that these mobs number only 13% of the population but as Michas says, “The problem, rather, lies with the political and ideological passivity of the parties that do represent Greece’s broader middle class.” Mobocracy is spreading throughout the globe. The blight has already infected America and its’ goal is to preserve their entitlements without regard to fiscal reality. If we remain the passive silent majority, the radical left will destroy America as we knew it and ironically, they will lose the most.

ROUND TABLE APRIL 29th, 2011

On April 29, 2011 “Face Off On The Future,” a round-table discussion was held at Gainey Ranch and almost 100 people attended this event. The principal speakers were Elliott D. Pollack, the well-known economist and CEO of his own economic and real estate consulting firm in Scottsdale, Arizona, Fletcher Wilcox, V.P. of Business Development for Grand Canyon Title Agency, Inc., in Phoenix, Arizona and H. L. Quist, the author of CMV and expert in boom and bust economic cycles.

Mr. Pollack gave a very effective snapshot of the national as well as the Arizona economy. His command of the numbers backed up with power-point graphs was enlightening. He said, “You might not like what I’m going to say but the hard data supports what I’m about to say.” The most revealing conclusion that Elliot noted as far as Arizona is concerned is that “no one is showing up.” After the recessions in 1980-82, 1990-92 and 2001-02, the Arizona economy recovered quickly, largely due to the fact that Phoenix and Arizona had a significant increase in net population and growth. Mr. Pollack used the well-worn phrase, jokingly, “It’s different this time.” Go to:
www. arizonaeconomy.com which should have his entire presentation on his website this week.

Fletcher Wilcox is a numbers guy and he had all the recent real estate stats that revealed that residential sales hit 10,000 in March. The following is from the introduction of his presentation.

For only the fourth time ever in a month residential sales were over 10,000 this March. The three other months of sales over 10,000 were June 2004, June 2005 and August 2005.

Single family detached sales were 8,350 or 84% of the 10,000 sales. Seventy-seven percent of all single family sales were under $200,000. Single family sales under $50,000 were 862 with 90% purchased with cash.

Overall, 46% of the single family sales were purchased with cash, 26% with a conventional loan, 23% with an FHA loan, 4% VA loan, and 2% with other financing.

Phoenix led all cities with 2,024 sales. This was a 19% increase in sales over March 2010. The cities with the highest percentage increase in sales in March 2011 over March 2010 were San Tan Valley with a 66% increase, Tempe at 39% and Maricopa at 38%.

When combining all residential sales 43% were lender-owned sales (REOs), 19% were short sales and 38% categorized were neither a short sale nor a lender-owned sale, though many of the sales in the other category were recent lender-owned sales that were fixed and flipped.

The single family rental market remained hot with a 1.5 month supply of single family rentals in Greater Phoenix.

You can reach Fletcher at: fwilcox@glta.com

H. L. Quist exposed the Federal Reserve’s “credibility gap” expanding on Ben Bernanke’s first press conference. Most of the “gap” is noted in this issue of CMV. The Myth Buster reminded the attendees that even in an “End of America As We Knew It” scenario, there is always opportunity. Two young entrepreneurs in California raised $100,000 in 2006-2007 and shorted sub-prime debt. They walked away with $10 million dollars when 98% of all investors were wringing their hands. A CONTRARIAN MARKET VIEW can be very rewarding.

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.
Subscription box in in the left side bar here on the blog.
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You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.

-- H. L. Quist

Round Table Registration - Last Chance To Sign Up!

2011-04-25T05:23:00.000-07:00

Hello World,

I am participating in a Panel Discussion on April 29th at Gainey Ranch Golf Club in Scottsdale, Arizona and want to invite you to attend.

Registration is in process, but time is running out to ensure your seat at this lively discussion. A delicious continental breakfast is included in the inexpensive registration fee.

Deflation? Recession? Hyper-Inflation? Stagnation? Inflation? -- A panel of leading experts will give you their bottom line opinions! Elliott Pollack, Fletcher Wilcox, and H. L. Quist will provide a lively discussion on the concerns of business owners/investors. Adequate time will be provided for audience questions.

Friday, April 29, 2011
8:30AM—9:00AM Continental Breakfast
9:00AM—11:00AM Round Table
Gainey Ranch Golf Club
7300 E. Gainey Club Drive
Scottsdale, Arizona 85258

RSVP ASAP to ensure your seat

Cost::$25.00/Person

Checks made payable to:
H. L. Quist and
Mailed to: Kas Baird
c/o Grand Canyon Title
10607 N. Hayden Rd., F-102
Scottsdale, AZ 85260 by April 15th,
Or
Pay by credit card at the link below
https://www.paypal.com/cgi-bin/webscr?cmd=_s-xclick&hosted_button_id=SR58Y9JWQXZ9A

Be sure to indicate the number of persons attending by updating your information on the payment page.

Questions? email hlquist at djmwealth dot com

-- H. L. Quist

Round Table Registration - Reminder

2011-04-19T06:28:00.000-07:00

Registration for Round Table - Time Is of the Essence.

2011-04-12T07:53:00.000-07:00

Hello World,

I am participating in a Panel Discussion on April 29th at Gainey Ranch Golf Club in Scottsdale, Arizona and want to invite you to attend.

Registration is in process, but time is running out to ensure your seat at this lively discussion. A delicious continental breakfast is included in the inexpensive registration fee.

Deflation? Recession? Hyper-Inflation? Stagnation? Inflation? -- A panel of leading experts will give you their bottom line opinions! Elliott Pollack, Fletcher Wilcox, and H. L. Quist will provide a lively discussion on the concerns of business owners/investors. Adequate time will be provided for audience questions.

Friday, April 29, 2011
8:30AM—9:00AM Continental Breakfast
9:00AM—11:00AM Round Table
Gainey Ranch Golf Club
7300 E. Gainey Club Drive
Scottsdale, Arizona 85258

RSVP by April 15th to ensure your seat.

Cost::$25.00
Checks made payable to:
H. L. Quist and
Mailed to: Kas Baird
c/o Grand Canyon Title
10607 N. Hayden Rd., F-102
Scottsdale, AZ 85260 by April 15th,
Or
Pay by credit card at the link below

https://www.paypal.com/cgi-bin/webscr?cmd=_s-xclick&hosted_button_id=SR58Y9JWQXZ9A

Be sure to indicate the number of persons attending by updating your information on the payment page.

Questions? email hlquist at djmwealth dot com

-- H. L. Quist

Free Preview of CMV Newsletter, April, 2011

2011-04-02T17:40:00.000-07:00

Hello World,

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for April, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

The comparative results for March, 2011 were as follows:

                                                              YTD
    The CMV Portfolio                 + 5.04%
    Dow Jones Industrial Avg.        + 6.41%
    S&P 500                                + 5.42%
    NASDAQ Composite             + 4.83%

Market Overview

Early in March, The Myth Buster (TMB) was interviewed on radio station WEKZ in Monroe, Wisconsin, about 20 miles from Madison, the recent center of America’s universe. Scott Peterson, the host of “The Morning Mess” asked TMB, “We’re so embroiled in this controversy, can you give us a sense of what is happening in our country? You’re good at seeing the big picture.”

In a macro sense what we are seeing is the result of a breakdown in our nation’s infrastructure – social, political and economic, which has been evolving for over 50 years. A confluence of the destruction of all of these sectors coming together at the same time has created a state of chaos. Since Wisconsin was my birthplace, the interview made TMB reflect on his childhood and in particular the role of our teachers and our educational system in the forties and the fifties.

Our teachers, in this bygone era, were the ultimate ‘gate keepers’. Most of them must have deemed it their responsibility and in fact their mission in life to not only educate their students but to mold them into good citizens who would become the future of America. Building character was one of the primary objectives of our teachers. Lying was admonished by instant peer humiliation – “liar, liar your pants are on fire.” Cheating and particular cheating on tests was cause for expulsion from school. As students we respected our teachers and all adults always responding, “Yes Sir” or “Yes Ma’am.” We may not have like the administration of their rule of law but we conformed to it. When our teachers reported our miscues of behavior and deficiencies to our parents, they, in most cases, supported our teachers and administrated their own form of punishment at home. The message to us was always clear and unambiguous. RIGHT was RIGHT and WRONG was WRONG. Grey was not an option.

Truant Officers constantly combed the ice cream parlors, soda shops, pool halls and theaters for miscreants who were playing hooky. TMB’s high school principal, a short but sturdy man and a graduate of West Point, was an authoritative figure who possessed a big stick but in my recollection, never had to use it. Our teachers, coaches, and administrators molded us into good citizens and most of them thrived upon the satisfaction that their mission was accomplished despite their financial sacrifice.

So, where are we now? A high percentage of high school students can neither read nor write. Students are murdering students, students are shooting teachers, teachers are having sex with their students and teachers are cheating on tests to secure more funding. Education, has hardly “progressed” in the past 50 years. When and why did it all go wrong? Since TMB has experienced and witnessed it all, he’ll offer this insight.

While interviewing a former high school coach for a history of the school, the coach said, “In the fifties, you kids tried to do everything we asked you to do. In the sixties, the kids questioned everything we asked them to do. In wasn’t enjoyable anymore and I quit teaching and coaching.” Our West Point principal was offered a position as head of a new high school which he refused in the late 50s saying, “My day is over – times are changing.” What was the “change” that these two educators saw as early as the late 50s and early 60s?

Students became “empowered.”

Remember “Black Board Jungle” and other films that made heros out of teens who challenged teacher and parental authority? And, when teachers pointed out that Johnny was having problems in school, the parents sided with their kids deflecting the blame on the ‘system’ that wasn’t flexible enough to meet their child’s special needs. The POWER was initially transferred from those that rightfully administered it to the students and parents who abused it and the educational system that served the nation so well for 200 years begun to crumble. Perhaps, in part, a response to this transfer of power in the sixties, was the National Education Association and The American Federation of Teachers, which have empowered themselves to the extent that the issue now is all about them – not the students.

As children of “The Greatest Generation” (those born in the late 1920s and 30s), we (including your author) contributed to not only the decline in our educational system but the End Of America As We Knew It (EOAAWKI). How? My generation did NOT insist that the system that fostered and molded us, must continue. We abandoned our heritage and each generation that has followed has denigrated and diminished it more. America now has reached the breaking point. We desperately need a catharsis – a cleansing and a rebuild of not only our educational system, but America’s entire infrastructure. That should be OUR mission and that is our hope.

PROFITS, PRICES & PROBLEMS

Corporate profits (now at historic highs) amongst the S&P 500 companies were about 8.2% during the last quarter of 2010 and the third consecutive quarter above 8% according to S&P data outlined in the March 26/27, 2011 edition of the Wall St. Journal. US corporations have bene running lean – minimizing payrolls and cost cutting, but according to many experts, that favorable environment will end when earnings are reported for Q1, 2011 at the end of March.

Why?

Decreasing margins due to increases in raw material and commodity prices as noted by CMV in March. Profit margins tend to be “mean-reverting” – meaning that when they’re at extreme levels as they are presently, they will revert to the mean. During the past 15 years the average profit margin is 6.1% so a reversion is due. For example, Nike just reported that gross margins have dropped 1.1% and the stock dropped 9.5% with their report. The S&P GSCI Commodity Index has jumped 14% this year alone which has pushed the Producer-Price Index (PPI – Wholesale price index) up 1.9% in February which is a “whopper.” As reported later in CMV, supply disruptions will only aggravate the situation.

Wholesale food prices alone rose a record 3.9% in February, the highest since 1974, which CMV has continually reminded its readers, was the beginning of the highest inflationary period in the US since the Civil War. Wholesale energy prices gained 3.3% during the same month reflecting the turmoil in the Middle East. Despite all these indicators pointing north, economists like Paul Ashworth at Capital Economics say, “With an unemployment rate that’s still near 9%, there isn’t going to be much domestically created inflationary pressure.” Some readers might find this statement comforting. CMV doesn’t.

Another area that’s off the inflation radar is the rapid rise in drug prices despite pressure on the drug companies to reduce them. In 2010, the average price increase was 6.9% according to Barclays Capital which followed an increase of 6.8% the year prior. Some popular drugs have increased double and triple this amount. Plavix is up 13.2%, Liptor 12.4%, Gleevec 20.9% and Benicar (for high blood pressure) an incredible 29.3%. Not to worry, Obamacare will resolve the problem.

Every week Barron’s interviews a prominent analyst or asset manager. CMV found Lawrence C. Strauss’ interview with Stephanie Pomboy, President of Macro Mavens, enlightening and timely. Pomboy is “dubious about the strength and durability fo the recovery...so, absent some kind of dramatic change in the consumer’s willingness to borrow or a dramatic increase in job creation, I just don’t see the ingredients for a durable recovery.” Stephanie goes on to say:

• “But it is almost laughable to think that the Fed can tighten in this environment.”
• “It is delicious in its irony that, in a way, the QE is really the driver of this commodity bubble...nevertheless, I see continued QE inflating this commodity bubble to a point that something breaks...I view commodity price-inflation as really a major margin squeeze for the corporate sector...”

Asked what trades make sense, Stephanie opined:

• “I would be long hard assets, including gold and Treasuries...”
• “I would play by selling or being underweight small-cap stocks.”
• “I would be looking to short the financials again. I think we’re going to have some mortgage mayhem.”

Stephanie supports CMV’s macro view. Inflation without real growth. She really nails the crux of the issue when she indites Fed monetary policy:

“The problem is that we serially try to inflate our way out of these problems, rather than taking the pain and letting the economy actually cleanse itself.”

Thanks, Stephanie. You’re a Doll!

THE MOST DANGEROUS MAN IN AMERICA – TAKES CENTER STAGE

The September, 2010 issue of CMV depicted George Soros as “The Most Dangerous Man in America.” You may have brushed off the warning just as 99% of the American population would, placing little import to his impact on you, your investments and your future. This “wizard behind the curtain” so described in The Myth Buster’s March 22nd Podcast, has taken stage center to reveal his plans to “Remake The Entire Global Economy” acceptable to, of course, George Soros.

Thanks to Dan Gainor, a Boone Pickens Fellow and Media Research Center’s Vice President for Business and Culture, whose article appeared on the Fox Forum, we have advance notice that Soros intends to re-organize the entire global economic system. On April 8th, a group that Soros has funded with $50 million will bring together about 200 academic, business, and government policy leaders to form a “multilateral system” where America is a subservient player. All the participants have one thing in common – they are all bought and paid for by George Soros.

It isn’t difficult to find global support for such a grandiose scheme when this man has given more than $7 billion to “open society foundations” and funded 1200 organizations such as MoveOn.org, the Center for American Progress and other far-left America and capitalist-hating organizations, according to Gainor. Soros was also the largest contributor and most singularly responsible person for the elevation of a totally unknown Senator from Illinois to the Presidency – beholden to his benefactor. NEVER underestimate Soros’ power and determination. He gloats at the chaos he has created – deliberately.

Speakers and supporters of Soros at this conference will be:

• Paul Volker, former chairman of the Federal Reserve Board,
• Economist Jeffrey Sachs, a recent recipient of $50 million for his UN Millennium Project which advocates significant tax increases on US citizens to pay for leftist policies.
• Joseph E. Stiglitz, a former senior VP and economist of the World Bank and Nobel Prize Winner in Economics who is opposed to ‘free markets.”
• Rob Johnson, a former managing director of Soros Fund Management who, during the fiscal crisis in the US, called for the resignation of all the top executives of all the major banks.

In Soros’ mind re-organizing the world order will also involve the United Nations and of course, increasing the US financial responsibility there and at the same time diminishing our influence. If there was ever an opportunity to check out of the UN and cancel their lease in NYC, now is the time.

How could this “takeover” effect all of us? Some of CMV’s observations:

1. America’s power and sovereignty will be undermined thus accelerating the dumming-down of our country. (Go to Soros’ Open Society website and read his objectives.)

2. A new global currency scheme would terminate the US dollar as the world’s reserve currency and would result in a massive devaluation of the USD.

3. A re-making of US capitalism in the form of centrally-managed international capitalism, (A marriage of Capitalism and Communism which, three years ago, The Myth Buster coined as “COPITUALISM”)

4. Despite the support of numerous corporate elites, most true entrepreneurs embodying the American spirit, should revolt at the prospect that their opportunities to work hard and succeed will be undermined for the benefit of a society dependent on government.

5. The prospect of a “turf war” between the Soros group and the present Banksters and Masters of The Universe on Wall St. looms large. CMV has consistently taken the position that the inevitable global monetary crisis would be utilized to precipitate the New World Order. The remaining question will be, who is IN and who is OUT? Is the recent action taken by the FDIC against the former top executives of Washington Mutual and their wives for illegally moving cash and houses to shield the assets from legal claims a portent of things to come? Who of us wouldn’t champion that action? That’s precisely why Soros will get support.

Soros and his followers are advocates for Social Justice through the re-distribution of wealth. His “open society” envisions a world where 95% of the population are Proles (proletariat) and the elite 5% Inner-Party have all the wealth and power. Revisit George Orwell’s 1984. Corruption is everywhere and the corrupt are in control.

March Madness – Washington-Style

The Obama Administration has a new plan to cure the 22.5% of all mortgage holders who find themselves underwater or have negative equity in their homes. It’s madness. But, why not, it’s March.

The plan is to force the nation’s banks, namely Bank of America, Wells Fargo, and JP Morgan Chase, et al, to cough-up a fine of $20 billion that would be re-distributed to prospective voters who are underwater, prior to the November 2012 elections. This “settlement” is for the banks “unfair and deceptive business practices” that would also open the door for additional litigation by the homeowners at a later date. The Attorney Generals of each state has the Administrations’s settlement proposal on their desks. This proposal plus HAMP and all the other loan modification programs have only succeeded in giving “homeowners the false hope that they can stay in homes they can’t afford, delay foreclosures that are probably inevitable and prevent prices from finding a bottom” according to an OPINION piece in the WSJ.

What is possibly more noteworthy here (more MADNESS) is that this settlement is the brain-child of Elizabeth Warren, the Harvard Professor who is now the head of the new Consumer Financial Bureau, that intends to dictate the allocation of credit to the nation’s banks. As a vivid example of how this administration bends the law to suit its’ own agenda, the Frank-Dodd Act required that this new agency be approved by Congress. When it became clear that Congress would deny its’ approval, President Obama gave Ms. Warren the unprecedented position to report directly to him and Treasury Secretary Tim Geithner to not only start the agency but receive funding without consent and without a budget! In case you haven’t received the message, Madness prevails and the rule of law is near terminal.

The President and his gang of leftists have taken the position that any modification of Social Security in order to reduce the deficit is off the table in budget talks. You can anticipate that anyone who questions that stance will be demonized. Unknown to Americans it was reported on March 22, 2011, in the Arizona Republic that the Social Security Disability Fund (SSDI) will run out of cash in a couple of years. Here’s one reason why.

Puerto Rico has emerged as one of the easiest places in the US to qualify for disability benefits. In 2010, 63% of all applicants there won approval of their claims – four points higher than New Jersey and Wyoming. 9 out of the top 10 zip codes for disabled workers receiving benefits can be traced to Puerto Rico. Total disability recipients have ballooned from 6.6 million in 2000 to 10.2 million in 2010. What we undoubtedly have here is a massive abuse of the system and corruption within the federal employees who administer it. The Obama Administration announced that it was sending a team to Puerto Rico to investigate the matter. It’s reassuring to know that our taxes are judiciously appropriated. What the ‘beneficiaries” – yes, that’s what they’re called – don’t realize is that the fixed monthly payments will continue each month but within a couple of years they won’t buy anything.

Is China On The Verge Of Collapse?

In a recent must see video on “Dateline” narrated by Gillen Tulloch who resides in Hong Kong, he exposes China’s “Ghost Cities” that will absolutely dumbfound the viewer. More importantly to CMV, what does this revelation mean to the global economy?

Tulloch, with film crew aboard, toured 10 newly constructed cities that, for the most part, are uninhabited. Imagine, if you can, a modern city of shopping malls, high rise office buildings and apartments that are vacant! Tulloch reports that there are an estimated 64 million vacant apartments/condos in 16 of these “Ghost Cities” that were built to accommodate millions of people. Only one problem. The Chinese can’t afford to live there. He says this represents the greatest real estate bubble the world as ever known.

The average high-rise condo costs roughly $70,000 to $100,000. Buyers must pay 50% down and pay off the balance over 3 years. (Now that the US is fazing out Fannie and Freddie we could export their expertise to China.) Tulloch interviewed one homeowner who, living in ghetto-like conditions in the shadow of the high rises, makes $900/month and would never be able to afford the luxury of the condo. Demand for the units is virtually non-existent.

The viewer is also able to preview the South China Mall which was billed as the world’s largest, anticipating 70,000 shoppers per day. Visible in an interview is one sole toy shop owner who revealed that he made one sale that day but most days he never has a customer. The interview ended abruptly as the police forced Tulloch and his film crew to leave the mall.

What does this all mean in the global scheme of things?

1. These 16 massive projects created an incredible development boom that employed perhaps hundreds of thousands of workers who now are mostly unemployed. A sea of discontent is rising in China which could challenge the autocracy.

2. These projects greatly distorted China’s GDP numbers and raises the question, who were the developers? Who is responsible for the construction loans? How are the banks recognizing these loans? Sources indicate that the Chinese banks (owned by the government) utilize “creative bookkeeping” and their published numbers will never reflect financial reality. And China is trying to become a member of the Bankster’s New World Order?

3. The global perception is that China’s economy is booming and that the threat of double-digit inflation and rising interest rates and increased banking reserves are being initiated to slow the economy when the possibility exists that the threat may be a colossal collapse of their centrally-managed economy. This event, if it should occur, would be a game changer. (Remember the Soviet Union in 1998?)

Japan, of course, has different challenges of it’s own but the fallout from the earthquake has created unexpected disruption in the global supply chain. Japan produces 60% of the world’s computer chips. Cypress Semiconductor can’t finish its’ product line with the limited output from Japan. Its’ stock (CY) dropped 25% after the earthquake). General Electric and Boeing are also faced with a shortage of parts made in Japan. Even Toyotas manufactured here in the US require certain parts that can’t be shipped from their home country. Toyota also has been impacted by its’ inability to get rare earth elements from China for its hybrids.

At this point in the Re-Flation Cycle, the US has experienced a Fed induced Asset Inflation Boom and as reported last month the advent of Price Inflation. Add to this mix the prospect of a supply disruption and a supply-demand imbalance, the traditional text book definition of inflation becomes an onerous reality.

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.
Subscription box in in the left side bar here on the blog.
"GREED" and "PROFIT" are now available for you iPad users.
You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.
Financial Questions? Contact hlquist at djmwealth dot com

--H. L. Quist

H. L. Quist - Round Table - "Face Off On The Future"

2011-03-31T12:33:00.000-07:00

Hello World,

I am participating in a Panel Discussion on April 29th at Gainey Ranch Golf Club in Scottsdale, Arizona and want to invite you to attend.

Deflation? Recession? Hyper-Inflation? Stagnation? Inflation? -- A panel of leading experts will give you their bottom line opinions! Elliott Pollack, Fletcher Wilcox, and H. L. Quist will provide a lively discussion on the concerns of Real Estate professionals and homeowners/investors. Adequate time will be provided for audience questions.

Friday, April 29, 2011
8:30AM—9:00AM Continental Breakfast
9:00AM—11:00AM Round Table
Gainey Ranch Golf Club
7300 E. Gainey Club Drive
Scottsdale, Arizona 85258

RSVP by April 15th to ensure your seat.

Cost::$25.00
Checks made payable to:
H. L. Quist and
Mailed to: Kas Baird
c/o Grand Canyon Title
10607 N. Hayden Rd., F-102
Scottsdale, AZ 85260 by April 15th,
Or
Pay by credit card at the link below

https://www.paypal.com/cgi-bin/webscr?cmd=_s-xclick&hosted_button_id=SR58Y9JWQXZ9A

Be sure to indicate the number of persons attending by updating your information on the payment page.

-- H. L. Quist

Where Is The Hope For America?

2011-03-25T14:26:00.000-07:00

Hello World,

We just posted a new video - see the side bar, or go to Youtube to view and also watch previous video posts.

Is this the end of the Western-Centric Fiat Money system, and America as we knew it?

To contact me with your financial questions, email to hlquist at djmwealth dot com.

-- H. L. Quist

CMV - URGENT - Special Bulletin

2011-03-15T11:35:00.000-07:00

Hello World,

H. L. Quist has just issued an URGENT - SPECIAL BULLETIN to his CMV subscribers. Blog followers may be interested in this information.

Contact at the end.

March 15, 2011

H. L. Quist’s
Contrarian Market View
Newsletter

URGENT – SPECIAL BULLETIN

The fallout from the ongoing disaster in Japan has caused a flight to the safety of cash in the global financial markets. CMV's recommendation to SELL all US equities, (except FAIRX), all Uranium stocks and Bonds at the open on Monday March, 14 was timely.

The sell-off at this point has included all natural resources including oil, precious metals and rare earths. Gold sold off as much as $44/oz early March 15 and as of this moment has rallied back $15/oz to $1395/oz. CMV believes that gold and silver should rally once the panic subsides therefore all names are HOLD. CMV also believes that once a rational assessment of the fundamentals takes place the debtor nations; Japan, the European Union, and the US will be forced to monetize massive amounts of their own debt to head off a deflationary contraction in their economies. The result could be highly inflationary and lead eventually to a "crack-up-boom".

HOLD your present positions in Sectors 4,5,6, 7 and 8. Wait for the panic to subside. ADD or BUY on weakness.

Financial Questions:
hlquist at djmwealth dot com

Free Preview of CMV Newsletter, March, 2011

2011-03-02T13:26:00.000-08:00

Hello World,

Don't miss podcasts by The Myth Buster. Bookmark the podcast site http://www.hlquist.libsyn.com/.

Below is a preview of the CMV (Contrarian Market View) Newsletter for March, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

The comparative results for February, 2011 were as follows:

                       YTD
    The CMV Portfolio                       +5.99%
    Dow Jones Industrial Avg.       +5.60%
    S&P 500                                      +5.53%
    NASDAQ Composite +4.88%

Market Overview

Your Future Isn’t What It Used To Be!

For those of you gentlemen who graduated from college in the fifties and the early sixties, your future was as predictable as it was promising. A good job paid $12,000/year, your first home could have been purchased for under $20,000, your spouse was busy and enjoyed the chores of being a mother and a housewife and life was like you envisioned it to be. The maximum base for Social Security was $4,800 and your portion of the tax for your future benefits were $150/year. Medicare wasn’t enacted until 1966 and your contribution to the cost of health care for seniors was barely noticeable on your tax return. Your pension was paid by your employer and your family health insurance was $10/month. You had a savings and a college fund into which you saved $100/month and at an assumed yield of 6% would pay for both of your kids education in the late 70s.

What happened that changed the American Dream into a nightmare in less than 40 years?

The two key factors were:

1. The Genetic Revolution, and
2. The Exponential Growth of Debt

A child born in 1900 was expected to live 47 years. When Social Security came into existence in the 1930s, life expectancy was under 60 years. Today a female is expected to live to age 83 and a male 80. Researchers from the Human Genome Project and other sources could extend life to 120 years within the foreseeable future. A population with a much longer life span, designer drugs to mitigate disease in advance of its onset, the ability to replace worn out body parts and a more healthy life style has dramatically changed the life expectancy of America, but has also created an insurmountable problem.

The Us Federal, State And Municipal Governments
Can Not Pay The Entitlements Americans Expect to Receive.

In 2002, a study requested by the then Secretary of Treasury, Paul O’Neill, estimated that the “fiscal gap” – the difference in present value between the government’s receipts and future expenditures, was $45 trillion. In less than 10 years, it is estimated that the number has almost doubled to $76 trillion! Congress and the “beneficiaries” have failed to address the issue and kicked the can down the road. We’re now at the road’s dead end. The “Day of Rage” is scheduled for March 12 to protest the inevitable reduction of employment and entitlements of union workers. Lost in all of this discussion and debate is how we got to this point but that has become irrelevant. Do we become Europe where protest can stop all commerce or will Civil Discourse lead to a solution? The Nation and our economy and our lifestyle hangs in the balance.

The Exponential Growth Of Debt began in the 1960s when Lyndon Baines Johnson (LBJ) conceived that “The Great Society” and the Vietnam War (Guns & Butter) could be waged at the same time, while unknown to Americans, the Europeans were exchanging their fiat US dollars for our gold bullion, that has never been accounted for. Richard Nixon compounded the problem as he declared that he was now a Keynesian and was motivated to fight an unexpected rise in inflation with wage and price controls. Jimmy Carter committing to “get the economy going” after the recession triggered by the oil embargo, imposed his will on a compliant Federal Reserve that resulted in a 13% increase in the CPI for three consecutive years at the end of the 70s. The debt bubble that has grown so ominous and continues to inflate, found its helium during these 15 years (1964 to 1979) (and will now burst in a “crack-up boom” within the next few years).

Fast forward to 2002.

The Greenspan Plan, a deliberate strategy to get the US homeowner to utilize their homes as an ATM to increase consumer spending, morphed into a “Doomsday Machine” (so named by Steve Eiseman) fueled by rapacious GREED. Wall Street’s Masters of the Universe, the Banksters and Predatory Lenders, all supported by the compliance and complicity of Congress, combined to convince the American homeowner that they could be “debt free” and enjoy the bounty of their newly discovered wealth. Had these “Masters” set out to deliberately destroy America’s economy and its middle class they couldn’t have devised a more effective scheme than sub-prime debt. To compound the inescapable problem, our misguided leadership has created trillions of dollars of new debt to service the old which will bankrupt its’ citizens, its’ cities, its’ states and ultimately the federal government itself. Where are these “Masters” who created this nightmare? Comfortably retired with guaranteed pensions above the fray and have no concern for retribution or remorse.

Your future isn’t what it used to be. Debt has devoured our citizens and our government. This bubble will too burst and with it, the once incomparable American Dream. What’s coming is:

EOAAWKI
(End Of America As We Knew It)

The United States of America is no longer united in purpose. A catharsis must occur in order to cleanse our country and our economy of the avariciousness that has consumed us. We must rediscover the Golden Era of the America we knew fifty years ago. That is our HOPE and that should be our resolve. The following countries collapsed and have now recovered:

Russia 1999 (A failure of the Central Planning)
Argentina 2001 (A “crack-up boom” occurred)
Iceland 2009 (A sub-prime debt collapse - “inside-job”)

The Inflation Jeannie
Begins To Party

How To Profit From The Coming Inflationary Boom: And Avoid The Next Crash was published in July, 2009, not long after the near-fatal collapse of the stock, commodity and real estate markets. For H. L. Quist to even suggest that there was inflation on the horizon when all assets (except bonds) and consumer prices had collapsed in a deflationary spiral, bordered on the absurd.

CMV has well-documented the asset inflation in both the equity and commodity markets during the past year and our subscribers and clients have profited handsomely in 2010. Those who purchased the book in 2009 and followed the author’s advice got a jump start on precious metals, uranium and other hard assets. Phase II of this Inflation Cycle – PRICE INFLATION, has clearly manifested itself in the first quarter of 2011. “Jeannie” has not only emerged from the confines of her bottle, she’s making her presence known on everything she touches.

Escalating steel prices in the US (and globally) are impacting companies that buy and process steel. Basic flat-rolled steel prices have increased six times since November, 2010, resulting in total increases of 20% to 30%. Caterpillar, Inc., the world’s largest maker of construction and mining equipment expects higher sales volume despite having to increase prices on all of its’ products. Appliance maker Whirlpool Corp. says they’re feeling the pinch also and have announced price increases of 8% to 10%.

Companies that must contend with higher commodity prices such as cotton (which reached $2.00/lb in February) are taking pro-active measures to preserve profit margins. John Anton, founder of Anton Sports in Tempe, Arizona, wary of T-shirt suppliers who raised prices four times in six months, borrowed $300,000 on his home-equity line of credit and bought more than a years supply of T-shirts. Anton was quoted as saying, “...I can borrow at 2.45% and if cotton is going up between 10% and 12% why wouldn’t I do this?” He added that cotton prices rose 92% last year and 22% this year-to-date. If Mr. Anton had read CMV he may have done this a year ago, and bought twice the amount of inventory. It’s amazing how slow some businessmen are to react to obvious trends. Obviously some couldn’t due to lack of financing, but that situation is rapidly changing.

The picture has been clear for almost a year. The cost of raw materials is rising at a faster pace than revenue. While stock market gurus were forecasting S&P 500 earnings of $100/share for 2011, costs already were squeezing the bottom line. Procter & Gamble with as broad a line of consumer products as any company in the world, Ford Motor, and Kraft Foods are amongst dozens of companies that reported lower profit margins for the fourth quarter of 2010. This trend will increase in 2011 in CMV’s opinion and will eventually lead to a correction in the stock market.

The Inflation Jeannie hasn’t confined her flirtations to the US. China, Brazil, and emerging markets are concerned that inflation is getting out of control. In Brazil, the overnight lending rate will be increased from the present 11.25% . In early February, China raised its rate another .25 Bps for the third time this year. They’ve reduced their money supply growth from 30% to 19% but the GDP growth remains in excess of 10%. To compound the problem, drought has endangered 66% of China’s wheat crop putting a severe strain on global supply. At $8.74/bushel, wheat is up over 80% from a year ago. Eight months ago, CMV accurately warned that food prices would be a key trigger point for inflation.

Kelley Evans, writing for the WSJ (2/17/11) stated, “...the danger isn’t necessarily an inflationary outbreak-marked by a wage-price spiral–so much as a standard of living shock... The real risk is that the US faces a poverty cycle rather than an inflationary one.” CMV does not agree. The inflationary cycle without a wage spiral is already amongst us. The poverty cycle will follow after the “crack-up boom.” Kelly has it backwards.

Allan H. Meltzer, a professor of economics at Carnegie Mellon University’s Tepper School of Business and author of A History Of The Federal Reserve, stated in the February 5/6 edition of the WSJ that, “Inflation is on the horizon, and now is the time to head it off.” He says the Fed should make three changes now:

1. Increase the short-term interest rate it controls to 1% to demonstrate that it is aware of the inflation risk,

2. It should announce a specific, detailed plan how it proposes to reduce about $900 billion of the more than one trillion banks continue to hold in excess of their legally required reserves, and

3. It should end Q2, it’s latest round of T-Bond purchases.

Meltzer says that, “Throughout its modern history the Fed has made several of the same policy mistakes repeatedly...It concentrates on near-term events over which it has little influence and neglects the longer-term consequences of its’ operations...It does not have a credible long-term plan to reduce both current unemployment and future inflation so it works on one at a time.”

CMV’s most oft repeated line, “Another short-term fix that leads to a bigger problem.”

Real Estate - A Sign Of Life

A year ago, Elizabeth Warren, who was the head of the Congressional Panel overseeing the Troubled Asset Relief Program (TARP) predicted a “tidal wave of commercial (real estate) loan failures’. At the same time banks were ridiculed for their practice of “extend and pretend” or renewing commercial real estate loans with the pretense that the market would improve. Ms. Warren and the pundits are now exhibiting egg on face.

A sudden rise in apartment demand and rents has raised the prospect that Archstone, one of the high profile companies that became a symbol of the massive downturn in the real estate market, could be sold to investors in the largest ($5 billion) initial public offering ever. The company which owns about 200 apartment communities in the US and 230 in Europe, was the millstone of 3 large banks. The value of Archstone’s apartment buildings, which lost 33% of their value between 2007 and 2009, are now off only 8% from their record high.

J. P. Morgan Chase & Co., just revealed that it had made more construction loans in the first six weeks of 2011 than they did in all of 2010. In Atlantic City, the developer of the half-built Revel Casino Resort, just received $1.15 billion in financing for the project. Closer to home a 375-unit high-rise apartment complex in Tempe, Arizona that had been stalled for two years, received a $30 million loan. Demand for space and the rise in rents are the driver behind this sudden surge. Low bond yields are inviting investors to take on more risk for higher returns just as CMV forecast.

The appetite for risk is raising the “animal spirits” in the residential market also. The WSJ reported on a front page article on February 8th that cash buyers were lifting housing. In the Miami-Ft. Lauderdale area 50% of all transactions were cash. Here in Phoenix cash buyers represented 42% of all sales in 2010. A CMV client here in Phoenix reports that there has been an influx of Chinese buyers acquiring residential property for both investment and use. The demand for rental of single family homes is accelerating at an unexpected rate with a commensurate increase in the rental rate which has attracted more investors. There’s a sense here in Phoenix, at least, that the bottom is in.

As CMV has reported during the past year, a number of trial balloons have been floated by the Obama Administration to remediate the residential mortgage loan dilemma. As outlined in an article entitled “Mortgage Deal Takes Shape” in the February 24th edition of the WSJ, the Administration is pushing a proposal that would force America’s largest banks to pay for reductions in loan principal worth billions of dollars. You may recall that Bank of America recently paid Fannie Mae (FNM) $3 billion to repurchase toxic sub-prime loans sold to FNM by Countrywide Financial. FNM had originally asked Bof A to repurchase $42 billion in loans, plus a host of other banks totaling another $200 to $200 billion. In addition, some state attorneys general and federal agencies are pushing banks to pay civil fines of $20 billion to fund loan modifications for distressed homeowners.

In an additional proposal the Obama Administration outlined on February 2, 2011, its plans to shrink the government’s role in the upside down mortgage market including the phasing out of the “evil twins” Fannie and Freddie. Three proposals or options were introduced:

1. The private sector would provide the vast majority of the mortgage market. FNM and FRE would no longer exist and there would be no government backing of mortgages. The government’s role would be limited to FHA and possibly VA.

2. A private market with limited government backing of the mortgages.

3. New privately-owned companies would buy mortgages from banks and sell them as securities. The government would guarantee the debt and collect a fee for its backing.

Laurence Platt, a banking industry lawyer summed up the proposals thusly. “Goldilocks and the 3 options – one’s too hot, one’s too cold, one’ just right, but everyone disagrees which one is which.”

The “Inflation Boom” has finally trickled down to the real estate market. Seize the opportunity while it lasts.

Have The Banksters Lost Control Of The Bullion Markets?

CMV attended Cambridge House’s Resource Conference in Glendale, Arizona on February 18 and 19. For the past four years, we’ve gathered critical information on the markets from an array of knowledgeable speakers and have always discovered new names that invariably shine in the CMV portfolio. Here’s a quick summary of the key highlights.

As silver (Ag) was breaking out of a new 30-year high on February 18, David Franklin of Sprott Asset Management added a significant piece of anecdotal evidence defining the bullish case for Ag. Sprott has recently raised $700 million to buy silver bullion and placed its order for a portion (not defined) of it. After two and one half months and constant inquiries Sprott finally took delivery of part of their order. Sprott has concluded that there is an extreme global shortage of Ag and Franklin’s near-term target is $43/oz and he forecast that $50 would be a ‘lay up’. Other interesting comments were:

• The global financial system is broken.

• Nothing has been solved in the EU and the stress in the European banks is more severe than 2009. Ireland printed $50 billion in Euros unauthorized by the ECB to prevent a collapse of their economy.

• 25 Countries have acute food inflation and China has removed food from their CPI numbers (Stealing a page out of the US book on central planning.)

• There are 860 more banks that will fail in the US.

• China has recently acquired 759 tonnes of gold bullion and India 918 tonnes, which is 51% of the world supply. It hasn’t been disclosed who was the seller. (CMV speculated that China may have “swapped” a portion of their US bonds for US bullion.)

• Franklin’s top silver stock pick is Aurcana Corp (AUNFF) which closed February 18 at $.78/share. It opened on February 22 at $.92/share. AUNFF has been added to CMV’s Recommended List.

John Maudlin (Bullseye Investing) gave his usual “Maudlin” view of the global economy. He believes that the world is at the end of the “debt super cycle” and can’t continue to grow debt faster than GDP. John made the following salient points:

• Ireland won’t pay the ECB
• $4.5 trillion must be raised in 2012 to pay global debt
• By 2013 the bond markets will “revolt” and re-financing will end. The global economy will enter a period of a slow growth SLOG.
• It’s “never different this time”. The end is always the same.

John Kaiser (KaiserResearch.com) is one of the foremost authorities on Rare Earth Elements (REEs) in the world. In Kaiser’s opinion there will be a severe supply problem in REEs in the next 12 to 18 months. He estimates that by 2015, global demand will be 200,000 tonnes and China will produce half that amount. By limiting its export of REEs, China is forcing companies to have their products manufactured in China where their tow-tier pricing gives them an enormous advantage. For example, Lanthanum and Samarium Oxides are $70/kilo on the world market, but in China for internal use these elements are only $5/kilo! The World Trade Organization is reviewing the problem at the request of those companies that desperately need product. There are military weapons that can’t be manufactured without REEs and its conceivable that the production of hybrid automobiles could stop by summer for lack of REEs. Kaiser estimates that demand could push the price of Quest (QSURD) to $60/share.

Kaiser also raised the possibility that solar flares could create a geomagnetic storm that could disrupt or even destroy satellite communications. He said that the last storm, called the Carrington Event, occurred in 1859,which of course didn’t have the impact then as it would today. Any one who has a mega perspective should only look to the extreme weather changes that has created massive floods and drought in different regions of the world and has created food shortages and wonder, are we witnessing a “Black Swan” event?

One of the highlights of the seminar was to see and exchange updates with Bill Murphy and Chris Powell. These two brave men, literally risking their lives, formed the Gold Anti-Trust Action Committee (GATA) in 1999 to force the Federal Reserve and the bullion banks to release historical information on their activity in the gold and silver markets under the Freedom Of Information Act. For over 10 years they have been denied and stonewalled to get obtain information that the banksters were manipulating and controlling the price of bullion. By a stroke of good luck, or maybe by intent, a single memorandum slipped through the cracks that proved that the Fed was indeed involved in controlling the price of gold.

The memo was from a meeting of the Group of 10 (Central Bankers) in April of 1997, that ultimately led to the Washington Agreement that limited the sale of the Central Banks gold. On February 18, the day of the conference, the judge finally ruled in GATA’s favor for the first time. All GATA ever sought was the truth – full disclosure so that there was a level playing field. CMV is reminded of the scene in the movie “A Few Good Men” where Tom Cruise playing the prosecuting attorney asks Colonel Jessup, played by Jack Nicolson, to tell the truth. Jessup yells, “TRUTH? You can’t handle the truth!” The Fed and the Banksters must have been motivated by the fact that the public didn’t have to know the truth because we couldn’t handle it.

Bill Murphy testified last year before the Commodity Futures Trading Commission (CFTC), in New York City providing evidence of the collusion and price-fixing in the bullion markets. Upon leaving the hearing Bill was brutally attacked by an “unknown” assailant and badly injured. You’ve probably wondered why CMV has used the term “banksters” in referring to these “Masters Of The Universe.” Case in point.

The real question is: Now that the veil of secrecy has been lifted and the CFTC has ample evidence of price fixing, what are they going to do about it? What will J. P. Morgan Chase do about their massive short position in silver? And, most importantly, will gold and silver be allowed to reach their true market value – whatever price that may be?

Stay tuned and say a little prayer for your writer who has added his name to the bankster’s fecal scroll!

Badgers Behaving Badly

The Badger, a carnivorous, burrowing animal with short legs, but long claws on its’ front feet is a native of Wisconsin and is the state’s animal as well as the Madison, Wisconsin University’s mascot. Your writer, born in the frozen tundra of Wisconsin proudly proclaimed himself a badger until this innocuous and friendly creature took on the characteristics of its’ Australian cousin, the Wombat. Most everyone in American who can fog a mirror knows what is at stake in Wisconsin and other Midwest states. As Charles Krauthammer said February 26 in his Washington Post Column, “Republican governors are taking on unsustainable, fiscally ruinous pension and healthcare obligations while Democrats are full-throated in support of the public-employee unions crying, ‘hell no’.” The unions simply want to retain the right to increase their entitlements in the future regardless of the fiscal condition of their state. They could win the battle but lose the war as Wisconsin as well as numerous other states run out of money. Socialism ends when they run out of other people’s money.

In your writer’s view, what is more interesting is how these Badgers, who were (prior to the 60s) historically hard-working, salt-of-the-earth, conservative people, made the transformation to liberal, left-wing progressives? After Senator Joseph McCarthy (R-WI) took on the communists who had infested the US government in a highly charged and visible confrontation, the eastern liberal/progressive establishment targeted Wisconsin and most specifically the University of Wisconsin for “conversion.” By the end of the 50s and early 60s, the campus was endowed with professors from eastern colleges who were fully committed to change the hearts and minds of the student body and, they were successful far beyond expectations.

A cousin of mine who attended UW in the mid-60s told me, “As an eighteen year-old, I had no idea what was going on in the world until the Vietnam war riots happened. I woke up one day and I thought, hell, my teachers aren’t here to educate me, they’re here to indoctrinate me!” Fortunately, my cousin Steve escaped, but unfortunately the bastion of Midwest progressivism and Marxism remains rooted in Badger-land, but not Packer-land.

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.

Subscription box in in the left side bar here on the blog.
"GREED" and "PROFIT" are now available for you iPad users.
You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.
Financial Questions? Contact hlquist at djmwealth dot com

--H. L. Quist

Free Preview of CMV Newsletter, February, 2011

2011-02-08T12:43:00.000-08:00

Hello World,

Below is a preview of the CMV (Contrarian Market View) Newsletter for February, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

February, 2011

H. L. Quist’s
Contrarian Market View
Newsletter

Market Overview

In CMV’s opinion one of the most important determinates in the investment process is a Macro View – at what juncture are you in the economic cycle? As your author documented in two recent books, there have been 11 Boom and Bust Cycles since 1974 in the US and number 12, a Boom Forecast by H. L. Quist eighteen months ago, is well underway as evidenced by our results in 2010. Number 13, appropriately numbered, will be a catastrophic Bust that will signal the End Of America As We Knew It (EOAAWKI). Here’s a quick summary of CMV’s Macro Picture, past, present and future:

2002 - 2007 The Greenspan Plan BOOM

Historians in the future may mark September 11, 2001 as the beginning of the EOAAWKI. It certainly drove the final nail into the .com bubble’s and equity’s coffin which, by the end of 2002, gave cause to the Fed to develop a strategy to motivate the fearful and moribund consumer to spend. The Greenspan Plan that triggered cash-out financing set in motion an unparalleled spectrum of greed on Wall St. and Main Street that was destined to end badly. In a SPECIAL REPORT dated July, 2005, H. L. Quist forecast the crash but few listened. The Boom was actually over by late 2006, but mass denial kept the momentum going until 2008.

2008 - 2009 The Merchants of Debt Crisis BUST

The massive contraction and deflation of assets and jobs was as predictable as a sunset, but the nation was plagued by an incurable malady of vision called “fecalopia.” It took until January 26, 2011, 633 pages and a panel of 10 experts on the Financial Crisis Inquiry Commission to conclude that: “The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion, it will happen again.”

And, as you’ll soon learn IT WILL happen again. The US Treasury Department’s seizure of the “evil twins” Fannie and Freddie in August 2008 and the failure of Lehman Brothers in September, marked the bottom of this BUST cycle.

2010 - 2012 Helicopter Ben’s Reflation Plan BOOM

The Last Rodeo
Determined not to have the Second Great Depression on his watch Ben Bernanke unleashed an unprecedented monetary stimulus and asset purchase plan to save America and his job. Congress in its infinite wisdom and under the guise of “intellectual cover” of Keynesianism and directed by a new President motivated by ideological change and social justice, created an alphabet soup of stimulus programs that would rack up more than $3 trillion in additional Federal debt in two years with prospects for an equal amount by the end of 2012. The ASSET INFLATION BOOM began on March 9, 2009 for those few who had capital to invest and the courage to follow the “smart money.” Hedge fund managers like John Paulson, who personally made $4 billion shorting The Greenspan Plan made another $5 billion in bonds, gold, and commodities in 2010 and is looking for the next fertile opportunity which is ahead of him and all of you who follow CMV.

As 2011 begins, Bernanke’s Reflation Plan (QE2 included) and Congress’ fiscal largess have planted the seeds for price inflation and ultimately Hyper-Inflation. A testimony that the Inflation Jeannie has made her appearance is validated by Mr. Bernanke’s recent bold pronouncement, “I have 100% certainty that the Fed can control inflation.” With commodity prices soaring at the end of 2010, it was time to prick this speculative bubble to further demonstrate that “there is no inflation.” On cue, the Masters of the Universe on Wall St. took profits in gold and commodities and for a short period of time, it appeared that deflation of commodity prices was concrete evidence that there isn’t and won’t be inflation. As we’ve quickly discovered, denial is not a river in Egypt. The riots there and worldwide, are inflamed by poor economic conditions, shortage of rice, wheat and corn and increase in the prices of everything EXCEPT wages. And, to the penultimate politically correct deniers, a global Islamic Revolution has begun.

This INFLATION BOOM should continue in 2011 and into next year – certainly to the election. But, this is the LAST RODEO. The Fed will be out of silver bullets. In the end Bernanke, the Rodeo’s clown, will be the victim of the raging bull called inflation, he will lose his job and we’ll be left with the manure.

2013 - 2015 The Crack-Up Boom (EOAAWKI) BUST

The famous (but continually discredited) economist Ludvig Von Mises wrote about 50 years ago:   “The credit expansion is built on the sands of banknotes and deposits. It must collapse. If the credit expansion is not stopped in time, the boom turns into a crack-up boom: The flight into real values begins, and the whole monetary system founders. Continuous inflation (credit expansion) must finally end in the crack-up boom and the complete breakdown of the currency system.”

If a long-deceased Austrian economist doesn’t jangle your chain because he’s so out of touch in the modern world, listen to Richard Russell, who founded the DOW THEORY LETTERS many decades ago, when he said on January 25, 2011:   “QE Will Not End. That will surely mean an imploding US dollar and exploding inflation. This is scheduled to happen by the end of June, making this the most predictable financial calamity in history.”

Richard, CMV hopes you are wrong on your timing. We need this BOOM to continue for at least a year, make some serious money, and then, GET THE HECK OUT OF DODGE. Where is Hope?

A catharsis will occur and a cleansing and washout of trillions of dollars of debt will take place. America will have an opportunity to Rediscover itself just as it did after the Great Depression. That is our Hope and that is Challenge.

Barron’s Roundtable

Every six months Barron’s Magazine holds a roundtable discussion with a panel of 10 diverse market analysts to reveal their outlook for the period ahead and list their stock picks. Here are a few excerpts from the January session from three experts who share a similar view with CMV.

Marc Faber, Mgn. Director Marc Faber Ltd., Hong Kong (Also known as Dr. Doom).

Fred Hickey, Editor, The High-Tech Strategist, Nashua, NH (who like CMV likes both technology and gold)

Felix Zulauf, President Zulauf Asset Mgt, Zug, Switzerland (who CMV had dubbed the “Lug from Zug” - meaning - flatteringly, a true heavyweight)

Their overview of the global economy is:

Felix – “These are two worlds – the industrialized world and the emerging world. The industrialized world continues to live in a fiction: that it can afford its current life style by going further and further into debt. At some point the bond markets will riot against that...how emerging economies handle inflation will be the decisive factor for the industrialized world. If they decide to fight inflation with really restrictive monetary policies, we’re in trouble.”

Fred – “But we’re looking at 8% inflation in India and Russia and 5% in China. Will they be able to hold off much longer?”

Marc – “You are all wrong...I would let the market correct itself. The crisis in the US happened largely because of government intervention that began 25 years ago...I admire you all but you’re all dreamers. Rich people and resource producers are doing incredibly well. The ordinary people aren’t doing all that well...but this year the US has stabilized and is going to grow modestly.”

On particular investments and sectors these three gentlemen had the following views:

Fred – “I’ve had 50% of my assets in gold for the past seven years. Institutional ownership of gold is ridiculously low. It is less than 1%.” Felix – “At its peak of $850 an ounce in 1980, gold represented 3% of the market capitalization of global equities, bonds and money market assets. Today it is 0.6%. The price has a long way to go...Those who had gold in Indonesia or Brazil or Russia where well off when the currencies collapsed.”

Marc – “The Dhaka Stock Exchange in Bangladesh dropped 16% in two days. They closed it down and now they have riots. I guarantee you that emerging economics aren’t going to tighten...The US market has almost doubled since March 6, 2009. Some emerging markets have gone up more than that. A correction is overdue...As we approach the 2012 election, the Fed is going to print like hell.”

Felix – “A lot of good news is in stock prices. The market will move sideways this year, but fluctuate widely. There is a lot of optimism around...I want to be long volatility...it brings us to my next idea: agricultural commodities...all these factors support the continuation of the bull cycle in agricultural commodities...”

“My next recommendation is in energy...there are 441 nuclear reactors operating in the world. They require 185 million ounces of uranium per year. (Actually its pounds: Ed). There are 331 proposals to build new reactors...annual production is 47,000 tons. (94 million pounds). It meets only 60% of demands...I prefer to invest in the commodity through Uranium Participation Corp - Symbol U - on the Toronto Stock Exchange” (up from $5.08/sh to $8.28 over 12 months).

Fred – “I won’t dwell on it (gold) except to say that gold has been in a 10 year bull market without the speculative phase. That phase is still ahead of us and I want to be there for it...I want to store gold outside the US because I am concerned about where this country is heading. Owning this helps me sleep at night.”

These views are from three of the sharpest minds in the business who reside in Europe, the US and Asia.. You may have reason to question CMV’s analysis and global view but not these experts.

The Debt (Has Hit The) Ceiling
The January 15/16, 2011 edition of the WSJ ran a feature article by Ben Levisohn on “How The Debt Ceiling Could Ding You” which is timely since the nation is rapidly approaching the $14.3 trillion limit established by Congress just last year. Levisohn points out that the last time the US faced a debt-ceiling crisis of this magnitude was in 1996. He says, “In just a month’s time, the yield on the 10-year Treasury rose nearly a full percentage point from 5.58% to 6.46%, as the political parties wrangled over how to fix the problem.” Given the Tea Party mandate the ‘wrangling’ will be much more vocal and demonstrative. One good reason to be short the longer-term treasuries as recommended by CMV.

What we can expect is a show-down at the OK Corral and the question will be who blinks (can’t say shoot anymore) first. David Greenlaw, Chief US fixed-income economist at Morgan Stanley says, “There’s a lot of maneuvering the Treasury can do to get to July or August” without an approval so we can expect a continued harangue for nearly six months. Remarkably, Congress has yet to settle on a budget for FY 2011 which ends September 31st. Given all the fiscal and monetary turmoil CMV also recommends diversifying bond holdings outside the US. Canadian bonds being one of the best. (See page 8.)

America’s College Debt Bubble

If the Masters of the Universe on Wall St., the lobbyist-influenced members of Congress, the Merchants of Debt (the bankers) and the Federal Reserve had strategically designed a plan to destroy the American economy and the country’s middle class, it couldn’t have designed a better scheme than overburdening its citizenry with mountains of debt. Now we learn that the wisdom and foresight of our leadership has also encumbered our college students with almost a trillion dollars of debt.

On December 15, 2010 CNBC ran a special documentary entitled “Price of Admission: America’s College Debt Crisis” hosted by Scott Cohn. He interviewed a young couple who had borrowed a total of $250,000 in order to obtain MA and BA degrees. The couple, who now have a child, are unemployed and face a payment of $1,700 a month for 25 years which will total one half a million dollars with interest. Most Americans are unaware of the fact that student loans cannot be discharged by bankruptcy which will burden these people for most of their lives.

SLM Corporation, commonly known as Sallie Mae (a government sponsored enterprise - GSE) like its cousins Freddie and Fannie, was formed in 1972 and is a publically traded company whose purpose is to originate, service and collect student loans. It had almost $200 billion in loans to about 10 million students and the loans are guaranteed by US taxpayers. Like its cousins Freddie and Fannie, Sallie had no risk of loan loss, made absurd profits and paid its executives handsomely. In fact, Albert Lord the former CEO, as pointed out by Cohn, built his own private golf course at the expense of students who figuratively carried his golf bag. In March, 2010 Sallie was stripped of her comfy lifestyle and the Federal government cut out the middle man. It should be noted that college costs over the past 20 years have been rising at the highest rate (439%) of any service in America. Twice the cost of medical care! The correlation between the cost of higher education and the advent of Sallie Mae’s presence can’t be refuted. A classic double whammy!

As ill-conceived and fundamentally flawed as Sallie Mae was the GSE can’t hold a candle to the for-profit education companies who gamed the system that has led to this invisible crisis. The highest profile for a for-profit enterprise is Apollo Group Inc.’s University of Phoenix, whose name is emblazoned on the Arizona Cardinals Football Stadium. The gross tuition revenues for this “diploma mill” were $3.8 billion in 2009 and 86% was from government aid. All told, the government subsidies total about $24 billion each year. Various allegations of misrepresentation, high-pressure sales techniques and outright fraud have resulted in fines and censures but the diploma mills continue to harvest the fertile fields of student loans milking the cash cows as they go.

Enter Steve Eisman, the hedge-fund manager of the “THE BIG SHORT” fame, who recently made his fortune shorting sub-prime debt. He also saw this education bubble and shorted Apollo Group, Inc., as well as most of the other for-profits. So appalled was he at the system that had to fail, Eisman demanded and was granted an opportunity to present his findings to testify before the Senate Health, Education, Labor & Pensions Committee last year.    He described the for-profit schools as “marketing machines masquerading as universities” and predicted “a new social disaster” as tens of billions in loans would eventually default leaving taxpayers with the bill because of the federal loan guarantees. Actually, as default rates are near 50% the number is closer to $500 billion.

So, what is the point here?

1. Parents and grandparents, who have young family members who are seeking a college education must have these facts before they commit their offspring to a near lifetime indenture particularly with parental loan guarantees. (If the student dies the parents are still liable.)

2. While investigating the financial abuse, we should also examine the quality of education. A recent survey by a think tank which interviewed 2500 senior college students found that 50% failed a rudimentary test on civics or basically how our country is governed. The Huffington Post reported that a university study of over 2,300 undergraduates, disturbingly, found that 45% of these college students showed no significant improvement in critical thinking, complex reasoning or writing at the end of their sophomore year.

3. Easy credit and mortgaging one’s future is the wrong message to send to our children. The students themselves spent a good portion of the government aid on a frivolous lifestyle only to discover later that the party was over when they signed the loan docs.

4. The day will come when trillions of homeowner debt, nearly a trillion of consumer and student debt will never be paid. It will be transferred to the American taxpayer whose diminished resources won’t foot the bills due. The most excruciating education in history is ahead of all of us.

The Inflation Jeannie Appears
How To Profit From The Coming Inflationary Boom was published in July, 2009. Forecasting then, amidst investor’s fears of deflation, that asset values would inflate or increase was quite a stretch. H. L. Quist wrote (p. 76):

“Going forward in 2009 will be difficult. In the early stages of recovery and as pricing power returns to US companies and interest rates remain at current levels, equities could rebound significantly.”

And, so they did. March 9, 2009 is considered to be the market low for most of the major indices and the S&P 500 has dramatically rebounded about 90% since then.

Specifically addressing precious metals and the commodity sector as a whole in “Profit”, Quist wrote (p. 60):

“From an investor’s viewpoint the early stages of an inflationary cycle presents a rare opportunity. At the juncture where FEAR dissipates and HOPE is restored, equities, real estate and commodities can be purchased below asset value. The first half of 2009 should provide that opportunity barring an unforseen catastrophe. The first “pop” off of these lows frequently contain some of the highest gains – and highest risk, of course.”

And, again that opportunity came to pass as the entire precious metals complex skyrocketed with gold advancing from $700/oz to $1422/oz at the end of 2010. Even more dramatic were commodities such as cotton from $.40/lb to $1.50; sugar from $.14/lb to $.27; oil from $38/bbl to $80 and copper from $1.50/lb to $4.00. The result? An opportunity seized and profits realized. The downside? The Inflation Jeannie has exited the confines of her bottle and has begun to party. As forecast by CMV, food price inflation is the first to manifest itself. That, affects everyone. We’ve never faced a situation in the US where we can’t find new acreage to plant!

In an op-ed piece that appeared in the WSJ on January 24, 2011 entitled “The Latest American Export: Inflation”, Ronald McKinnon, a Stanford University Professor, reminds the reader that, “hot money” outflows from the US in the years 1971 and 2003 helped create world-wide inflation. In the above two instances foreign central banks intervened heavily to buy dollars to prevent their currencies from appreciating which is exactly what China is doing at present. McKinnon goes on to say, “But by ignoring inflationary early warning signs on the dollar standards periphery, which in turn leads to rising domestic prices and asset bubbles, the Fed has made both the world and the American economies much less stable.” Asia, Latin America and Euroland are speaking in unison. America is exporting the “I” disease. Ultimately however, the US will import its export.

Argentina’s recent shortage of pesos exemplify how precarious the global currency picture is at present. Argentines were recently faced with a cash crunch – literally. Banks and ATMs ran out of pesos. Economists say that President Christina Kirchner’s intent is to sweep the country’s 25% inflation rate “under the rug” by refusing to print 200 and 500 pesos notes because issuing larger notes would alarm its citizens. CMV vividly remembers when most Latin America countries had to stamp several zeros on the old currency as inflation reached 10,000% in the mid-eighties.

Obviously there’s a confusing picture here. We need to distinguish between the various “flations” and determine what’s good and what’s bad.

ASSET INFLATION:
As indicated above the US has experienced the inflation of asset values in equities and commodities since the March 9, 2009 low. This is good, and has been profitable for those who follow CMV.

PRICE INFLATION:
The prices of goods and services are beginning to rise significantly as illustrated above including food prices. Imported labor-intensive goods from China – apparel, shoes, luggage, etc. will rise 10% to 20%. China has reached a key inflection point in its economy. A restive labor force has already seen an 18.5% increase in wages last year and prospects are they will continue to rise as food in China becomes more scarce and expensive. Price inflation is bad for US citizens who are struggling with reduced income and high levels of debt.

WAGE INFLATION:
For US citizens wage increases, if any, have been modest and as long as unemployment is above 9% will remain so. Low wages mask the true impact of price inflation as citizens will be squeezed by higher prices. The worst of both worlds The entire world is now experiencing rapidly accelerating inflation without rising wages.

THE CMV RECOMMENDATIONS
February 1, 2011

The comparative results for January, 2011 were as follows:

                                                      YTD           52 Wks
    The CMV Portfolio              -1.57%                            +38.69%
    Dow Jones Industrial Avg.       +2.72%       +16.25%
    S&P 500                                                +2.26%                          +18.08%
    NASDAQ Composite                          +1.78%                           +24.36%

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--H. L. Quist

Free Preview of CMV For January, 2011

2011-01-03T06:27:00.000-08:00

Hello World,

The CMV Recommended List grew 45.17% in 2010!!!

The comparative results for 2010 were as follows:

The CMV Portfolio +45.17%

Dow Jones Industrial Avg. +10.95%

S&P 500 +12.80%

NASDAQ Composite +17.36%

Below is a preview of the CMV (Contrarian Market View) Newsletter for January, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

January, 2011

H. L. Quist’s

Contrarian Market View

Newsletter

* * * *

REMINDER

Free Presentation and Luncheon Courtesy of

Golden Peaks Resources (GDPEF).

(Shareholders Only)

Reservations are Required.

Respond to: H.L Quist at 602 840-4117

or hlquist@djmwealth.com

January 14, 2011

The Sanctuary

11:30 a.m. - 2 p.m.

* * * *

Market Overview

Absent the following events that could have a material impact and alter or change our outlook for 2011, CMV offers its’ Contrarian forecast for 2011. These “X” factors are:

1. A Cyber attack on Wall St., the banking industry or government that would significantly impair commerce and confidence in our government ability to curtail this type of activity.

2. A series of terrorist attacks on highly visible and innocent targets that would instill fear in the populace.

3. A breakout of hostilities in the Korean Peninsula or the Mid-East.

Assuming none of these above events occur, here is CMV’s best guesstimate of major events that will influence your business, your investments and your family in 2011.

1. The Economy and Financial Markets Will Surprise to the Upside.

Barron’s Magazine polled 10 prominent strategists and investment managers who collectively see the S&P 500 finishing 10% higher than this year’s close at 1258 or 12.80%. Despite the Fed’s Reflation Plan to prop up asset prices while maintaining interest rates at historical lows they all agree that inflation will not be a problem. David Kelly at JP Morgan Funds forecasts the highest S&P earnings at $98/sh for 2011 and the 10 year T-Note at 4.25% by the end of 2011. When questioned as to what sector will best perform in the year ahead, 5 out of the 10 picked technology as the number one performer. Remarkably, none of the 10 experts chose precious metals in their four or five favorite sectors. One could assume that they missed the numero uno sector (gold funds) which have out-performed all sectors for the past 10 years. CMV’s position is that S&P earnings are going to be tempered by higher raw material costs and the 10 year T-Note could be a full 100 BPS or more above the consensus of 4.00% despite Bernanke’s attempt to “cap” it. Inflation by the end of 2011 will be the most off-repeated word in the English language but remains foreign to Wall St..

Despite the fact that the US economy will not reach the Nirvana of robust earnings, low interest rates and no inflation as forecast by these experts, the economy and the markets will surprise to the upside and you should be fully invested after mid-January. An added impetus will be provided by the major banks who will aggressively increase their business lending in 2011 contrary to prominent pundits.

2. The Us Dollar Loses Luster.

CMV described in the December issue that China and Russia had organized the Shanghi Co-Operation Organisation (SCO) which garnered very little notice in the US media. In mid-November China allowed its’ currency, the yuan, to be bought and sold outside the mainland for the first time. This is a critical step moving to full convertibility of the yuan and Americans are oblivious of the impact this will have on the international financial landscape and the value of the USD. The goal of China and Russia and other states that are coming on board SCO, is to circumvent the USD in international trade and allow countries to settle transactions in currencies other than the USD. The dollar has been the world’s reserve currency for over 60 years and 2011 will mark the beginning of the end of the dollar’s role. When China severs the yuan’s link to the USD, the value of our currency will sink like a rock in a swimming pool and the prices of imported goods will skyrocket.

3. The “Shock and Awe” Real Estate Loan Program.

The Obama Administration is actively in negotiations with Fannie Mae (FNM), Freddie Mac (FRE), and the Federal Housing Administration (FHA) to develop a new government program that would be aimed at reducing loan balances where borrowers owe more than their homes are worth. FNM and FRE which own or guarantee about half of the all the mortgages in the US, would transfer the reduced loans to the FHA and of course, losses will be absorbed by you guess who! In addition FNM and FRE and other lenders plan to recoup somewhere between $200 and $400 billion from banks who sold them the toxic subprime loans. CMV expects FNM and FRE to be “restructured” ostensibly using the bank proceeds. CMV sees this imitative as a “game changer” and will stop the bleeding in the residential real estate market in 2011 if the plan comes together. The plan will be adopted by the US Treasury and the Obama Administration without review of Congress and the cost heaped on you and I, the taxpayers.

4. The Bond Bubble To An Asset Bubble.

The Federal Reserve Board Chairman’s goal is to create asset inflation by driving investors from near zero return bonds to higher risk appreciating assets — stocks, commodities and eventually real estate. In CMV’s opinion, Mr. Bernanke will succeed in the near term. There is an almost inestimable amount of trillions in government, corporate and municipal bonds that are, and will be ever-increasingly, diverted to risk assets. Viola! Asset inflation. We have Mr. Bernanke’s “100% certainty that the Fed can control inflation.” CMV believes that the Chairman will fail on this promise. Unfortunately, with Federal deficits running in excess of a trillion per year, the US Treasury issuing new debt and re-funding old debt at about $4.3 trillion per year, interest rates will rise, reminiscent of the late 70s. In late 2011 and into 2012 CMV believes that US bond investors will conclude that they will never be paid back with anywhere near close to the same purchasing power and the Fed will find itself in a series of accelerating QE programs which will inevitably lead to Hyper-Inflation. CMV doesn’t know what the time frame may be but in the end trillions of dollar denominated debt will disappear and never be repaid. More on pages 3 and 4.

5. City and State Governments Will Default.

Meredith Whitney, the Wall St. analyst who accurately forecast the sub-prime debt crisis well in advance, recently said that there will be “fifty to one hundred sizable Muny defaults amounting to hundreds of billions of dollars in the next 12 months.” In addition, some analysts are also including the states of Illinois, New York and California as candidates for default. Many defaults would have occurred in 2010 had it not been for $140 billion in Build America Bonds that these governments used to pay interest on old debt, salaries to employees and pension payments to retirees. The BABs are scheduled to end on December 31, 2010.

On December 27, however, Republican Congressman John Mica said, “I can almost guarantee” that the program for subsidized bonds will be funded next year. Ignoring the Tea Party’s mandate, Mica is playing to Wall St. which made $700 million in the past 2 years on fees off of BABs! Proving once again that the system is corrupt and will fail.

Austerity measures could be met with denial, anger and rioting. It’s human nature for US citizens to take the position that ‘It can’t happen here” and refuse to accept the possibility that we’re no different than Euroland, Latin America or even third world countries. Civil unrest could be the primary event of 2011 and 2012. George Soros, who CMV revealed as “the most dangerous man in America” basks in the glory of the chaos he’s created in his quest to kill the capitalistic system and profit from its demise.

Ben’s Inflation Bubble

It is difficult for the average person to grasp the meaning of the term and the presence of “inflation” for a number of reasons:

-- We’re constantly reminded by the talking (Wall St.) heads on CNBC that “there is no inflation” because it undermines their purpose of a “Goldilocks” economy..

-- The Bureau of Labor Statistics has modified the methodology that produces the Consumer Price Index (CPI) to the extent that the index is worthless. Removing food prices from the core index at a time when these prices are exploding is a perfect example how government deceives its citizens while it steals from them.

-- Economists tell us that we can’t have price inflation during periods of high unemployment, low money velocity and low GDP growth whereas it has suddenly appeared when those conditions exist.

-- People don’t equate Fed monetary policy and fiscal stimulus with asset and price inflation which is the direct result of current policy. Inflation is first and foremost a monetary phenomenon.

Let’s look at some specifics:

Corn is closing in on $6.00/bushel — up 50% since June.

Spring wheat is $12/bushel — up 20% from a year ago.

Feeder cattle is $124.75/100 wt — up 25% from a year ago.

Coffee is $2.25/lb — up 7.5% in a week.

Sugar is $32.5/lb — up 12% in a week.

Cotton is $1.50/lb — up over 100% in a year.

To fully appreciate the cause and effect that’s going unnoticed in virtually all areas of the US (except farming country) is the incredible boom in farm land prices. According to the WSJ (December 9, 2010) two tracts of farmland in O’Brien County in Iowa sold recently for $9,700/acre. The article says that “land fever is running rampant” in the mid-west. John Deere & Co. Says that net farm cash income will rise 31% this year and it’s the most profitable agricultural year in US history! CMV can’t think of any group of hard-working Americans who deserve it more but consumers won’t agree. Do Not blame it on our farmers!

Land prices are a factor of higher crop prices but what’s driving crop prices? Some experts claim there’s a global food shortage particularly in China but there’s also the inescapable fact that our exports are priced in USD and our currency is melting as fast as a snowball in Phoenix in July. Washington is ecstatic that exports are soaring but now you know why the reign of the USD is going to end — and much sooner than experts figure.

Here’s another aspect of this emerging picture that isn’t obvious. Americans, since 2008, have been buying groceries and goods on a “just in time” basis or a few items at a time. When it becomes apparent to homemakers that prices are escalating they’ll buy in larger quantity. Bingo — demand impacts supply — prices increase and panic buying could ensue. Consumers will be shocked by the increases in food prices in 2011.

Another sign of the times. Copper has popped to $4.25/pound. It has been reported that one US source is hoarding close to a billion dollars of copper by warehousing the metal at the London Metal Exchange! China is utilizing the same technique hoarding uranium, rare earths and gold. The Chinese have this whole future scenario figured out and are trading dollars now for goods needed later. In addition to massive price increases, could we see a trade war? We’re on the cusp — The Future isn’t what it used to be!

Ben Bernanke’s objective through QE2 is to create asset inflation and at the same time (with 100% certainty) control wage and price inflation. Will he follow in the footsteps of his mentor, Alan Greenspan, who set out to inflate real property prices but failed to intercede to curtail the mania that followed? Or, will he turn off the QE spigot and raise the Fed funds rate? In CMV’s opinion, the Fed Chairman doesn’t make that decision — the banksters and politicians who “anointed” him make that decision. Bernanke is simply a hired gun. By the end of 2011 the economy will be running on all cylinders and the banksters and the President won’t want it to stop. The result? Ben’s Bubble — the Fed’s FIFTH since the seventies. Asset bubbles create profits. Investors take profits and pay taxes. It’s like the 1990s all over again. The same market frenzy during the .com bubble created a budget surplus and made Bill Clinton the teflon man. BO wants to replicate his success.

As CMV has reiterated numerous times — this new bubble is the “Last Rodeo.” Our creditors will lose confidence in our fiscal and monetary management and will refuse to lend to the world’s largest debtor nation..Our citizens will also lose confidence in the purchasing power of their currency. The result? HYPERINFLATION. Ben will lose his job and the privately controlled Federal Reserve Bank of the United States will be dissolved. When? It’s just a matter of time.

The 2011 (Good) Surprise

In September 2010, CMV saw a change underway in the economy that most economists, market analysts and observers missed. While most experts were focused on the “double dip” and a decelerating economy ahead, CMV saw stealth evidence that the US economy was about to surprise on the upside in the fourth quarter. Here are some observations that validate CMV’s forecast for a sharp economic rebound in 2011.

-- The Nation’s GDP rose at a 2.6% rate in the third quarter of 2010 and the consensus projection was a 2.4% growth for the fourth quarter. CMV saw a massive increase in exports amongst other signs that would result in a much higher GDP growth in Q4. The port of Los Angeles’ activity was nearly at 2007 levels. Barron’s had boldly forecast a 4% GDP increase and CMV saw an increase of 4.5%. As of this writing economists are scrambling to revise their estimates upward for Q4 and the year 2011.

-- The cost of money was never cheaper and corporate balance sheets were never stronger at the end of Q3. Private Equity firms and Wall St. can’t resist “free money” plus the obvious flow of funds exiting bonds that would be a catalyst for a dramatic turnaround in the stock market and corporate investment. Wal-Mart and Coca Cola borrowed massive amounts of capital through the sale of bonds at an absurd yield of a fraction over T-Notes. CMV rests its case. Bernanke’s QE2 announcement in August was frosting on the cake. The “Fix” was in.

-- The election results, in CMV’s opinion, had much more of a significant economic impact than most may have been willing to admit. A huge cloud of “uncertainty” was lifted from the shoulders of those businessmen and women who make the decisions on corporate expansion, capital investment and hiring that ultimately would reverse the unemployment picture. An increase in new jobs in Q1 2011 will lead to a further increase in 2011 GDP. CMV cautioned however that unemployment would not drop to (what has been considered normal) 5 to 6% The “new normal” will be more like 8% but that will still spur the economy in 2011.

-- As late as the end of November the National Retail Foundation and retail pundits were projecting a modest increase in Christmas sales. CMV, the true Contrarian, saw a much different picture. Consumers were saving at a 5% to 6% rate during the entire year of 2010, credit card outstanding consumer debt was finally declining and “frugal fatigue” would result in a robust Christmas season. As of this writing sales are estimated at $451 billion, or up nearly 4% over 2009 and very close to 2007 highs. The surprise of course, was Internet sales up about 15% to $36 billion and a new phenomenon appeared which foretells problems for the sector. Best Buy reported a dramatic drop in sales. Why? A potential buyer walks into Best Buy shopping for a wide-screen TV with all the bells and whistles and gets the full demo and info from the sales clerk. He then pulls out his cell phone, locates a site that directs him to an Internet vendor that offers exactly the same model for 20% less. Before the ex-potential customer leaves the store he buys the TV on-line. Retail sales may be up on the aggregate but there is a massive marketing shift and re-apportioning of the pie. Another certainty, sales taxes are coming on all on-line transactions — but prices will still remain cheaper.

For those experts who maintained steadfastly that consumer spending would not increase when there’s high unemployment, don’t know how to assess a change in public sentiment. CMV takes the position that American’s should be accumulating as much cash and investing every available dollar in order to prepare for the Great Reckoning which is a virtual 100% certainty. We just don’t know WHEN.

Your writer was on a panel with two other pundits over a year ago. One was the Treasurer of the State of Arizona and the other a stock market broker and analyst. Both of these experts maintained that there wouldn’t be an upside economic reversal (the likes we’re about to see) because so much money was lost and consumers and investors were so psychologically damaged they would refrain from taking any risk. Since March, 2009 the S&P 500 has produced a return of 81.6% through November 2010. High beta stocks not including the resource sector are up a hard-to-believe 213.3% according to Barron’s! As a testament to investor’s appetite for risk, margin debt is now $269 billion which is the highest since the over-leveraged market prior to the September 2008 crash. These panelists like a majority of Americans, missed the “bus to Omaha.”

CMV can understand our State Treasurer’s negative outlook. Every day he had to deal with a mounting deficit and borrow $2 billion to keep the lights on at the Capitol. CMV fully recognizes that the fiscal situation at all levels, federal, state, and city, is unsustainable and can not continue. The choice that leadership at all levels has taken is to INFLATE the problem away which is now underway. Like an Alka-seltzer, its’ a ‘Fizz’ or, temporary relief. Assets will appreciate, tax revenues will increase and an euphoria of relief will change sentiment and all will appear that all is well again. CMV’s value to you is that amidst all the gloom we saw the bloom despite the fact that the petals will again wilt and fall. NOW is the time to make serious money. By the time that the herd decides to join the game it will be too late. The party will be over.

Randall Forsyth writing in Barron’s on December 17, 2010, articulated exactly what CMV has told you ad nauseam:

“...the Federal Reserve’s adoption of QE2 may turn out to be mere footnotes to the bigger story. 2010 could be the watershed marking the beginning of the end of the dollar-based, Western-centric monetary system...”

Check Out My New Youtube Video!

2010-12-18T09:10:00.000-08:00

Hello World,

I posted a new youtube video on Bernanke's Blunder - see side bar here on the blog.

. . .

My podcasts are now available at my new hosting service at:

http://www.hlquist.libsyn.com/

Make sure to change your favorites link to the above site, or find me on iTunes at:

http://itunes.apple.com/us/podcast/the-myth-buster/id407018026

All of the prior podcast shows are archived at both sites for your convenience - and all free!

-- H. L. Quist

Viewer comment:

Heya

Your vids are awesome I was just looking thru ur channel. You shud try get noticed more
and get the views up -- copied from youtube viewer.

Special Seminar Coming Up - Make Reservations Today

2010-12-02T09:42:00.000-08:00

Hello World,

H L Quist will be speaking at the Southwestern School of of Real Estate next Wednesday at 8:30am.

This event will be an important review of economic events that occurred in 2010 and Mr. Quist's forecasts for 2011. In his view there are strong indications that an economic recovery has already begun and all markets will surprise on the upside next year.

Seating is limited and you must call for a reservation. There is a $10 fee for all attendees.

WHERE: Scottsdale Camelback Resort(Not Camelback Inn)

6302 E Camelback, Scottsdale, Az.

TIME: Wed. Dec. 8, 2010 8:30am

RESERVATIONS: Burt Sweetow 480 656-0017

To purchase books in print or ebook versions including iPad click here.

To ask a financial-related question send to:

hlquist at djmwealth dot com