MSM PORE on the Real Estate Market

OK Folks the MSM’s PORE (PSY-OPS Reporting and Editorializing) is now kicking in high gear with this article.  In other words the PTB (Powers That BE) have decided that it is now time to move the ”Sheeple” back into Real Estate, so that the FED’s Member Banks can clear their Balance Sheets of Toxic assets and move on to the next game, i.e. the coming EXPLOSION in the world’s Stock Markets! 

AND, what follows is the ultimate example of what we have witnessed over the last fifty years.  Namely, articles in the MSM that are - in our opinion - very clearly well-planned, choreographed and thought out and structured WAY ahead of time to create the desired economic decisions amongst the great unwashed masses of the “Sheeple,” so that they are suitably primed to buy Real Estate in 2013 and 2014 JUST before the second wave of the Super Tsunami "Kondratieff" Long-Wave does totally swamp all real Estate in 2014 to 2015! 

  (These original projections of ours were extended over five times: we were forced to do so by the continual extension of the FED's ZIRP - by the Panicked Banking Authorities.  Therefore, we were forced to extend the projected timing of the ultimate Mother of All Crashes out to roughly the summer 2016!)

We predicted last year that Real Estate would bottom in late 2012 to early 2013.  At the same time we predicted that it would NOT be the place to commit investment capital, because Real Estate will NEVER recover the insane Pricing Metrics of the Halcyon days of 2002 to 05 until roughly 2037 to 2045!

Furthermore, we stated that while Real Estate would begin to recover in early 2013 that it would only be in ABSOLUTE TERMS and NOT in INFLATION ADJUSTED TERMS!

Our original estimates of these coming horrific attractions had to be extended from late 2013 to Winter 2014/Summer 2015 to match the time-frames now ordained by the FED’s radically insane stretching out of their ZIRP and their replacement of the all too-obvious QE’s with their “Twisted Sister” Campaigns, see our recent Blogs on these totally bizarre Yield Curve Machinations that will result in macro-economic altering dislocations of capital flows!

WARNING FOR ALL:

Furthermore, we have stated quite clearly that ALL Real ESTATE would suffer a second and even greater cataclysmic collapse with the onslaught of the second wave of "Kondratieff" in 2014 to 2015 and then continue collapsing on into the early 2020’s, when the Third Wave of the SUPER-TSUNAMI “Kondratieff” Long-Wave breaks over all the earth and finishes the job.  

And it is now all too clear that the cataclysmic collapse of 2014 to 2015 will begin when interest rates quite literally explode as the BIGGEST BUBBLE OF ALL EXPLODES with the BURSTING OF THE BOND BUBBLE, which is now being inflated to extreme and quite mortally toxic levels with the FED’s totally insane ZIRP (Zero Interest Rate Policy)!

Are you and your company ready for these coming Macro-economic attractions?

Hoboken Homes Gone in 60 Minutes Signal U.S. Recovery: Mortgages

Bloomberg: By Prashant Gopal and Brian Louis - May 25, 2012 4:22 PM ET

For the latest sign of a U.S. housing rebound, Toll Brothers (TOL) Inc. Chief Executive Officer Douglas Yearley (1) points to Hoboken, New Jersey: A couple torn between two condos last month at the sales office for its Hudson Tea complex decided to think about it over lunch. When they returned an hour later, both units were gone.

“People feel like now is the time to buy and they aren’t isolated to one building in Hoboken,” Yearley said in a May 23 conference call with analysts after the Horsham, Pennsylvania- based luxury homebuilder reported that quarterly orders for new homes surged 47 percent. “Confidence is up. The interest rates are there and they’ve been waiting so long to move on with their lives that they came out this spring.”

U.S. homebuilders are reporting their most-improved spring selling season (2) in seven years as record low mortgage rates, job gains, and shrinking inventories are drawing buyers to sales offices that have been quiet since the property market collapse. …

Off the Fence

While demand for existing homes has been on the rise in recent months, the improvement in new home sales signals that the growing appetite for residential real estate goes beyond foreclosures and other distressed sales targeted by investors. Traditional homebuyers, including those who have to sell another property to upgrade, are coming off the fence, Stan Humphries, Zillow Inc.’s chief economist said.

…In Hoboken, Toll Brothers increased prices six times (3) since it began selling apartments last spring in the 157-unit 1450 Washington at Hudson Tea, where prices now range from $450,000 to $1 million, said Todd Dumaresq, marketing manager for Toll’s City Living division. The company has sold 108 units in the building and is now selling about 12 homes a month, he said.

Overlook Hudson River

….Rising apartment rents also are driving Americans who have good credit and enough money for a down payment back into the housing market…

‘Broader-Based Recovery’

“There are signs that this is a broader-based recovery,” Humphries said.(1)  “It is really driven by affordability and buyers feeling more confident about the housing market.”

Dennis and Sally Webert were renting when they decided to buy a home in PulteGroup Inc. (PHM)’s Trailside at Huning Ranch development south of Albuquerque, New Mexico for $140,000, prompted by a special promotion. “We’ve been eyeballing these homes for several years,” Dennis Webert said. “The timing was just right.” (3)

About 5,000 potential buyers showed up for the opening of nine model homes last weekend at The Bridges, (3) a community in Delray Beach, Florida built by GL Homes, said sales agent Robert Macias, 54. The company used eight golf carts to shuttle customers from their cars and sold 18 homes over the weekend and another handful this week, he said.

The company, which sells homes in the community for about $500,000 to $1.5 million, has raised prices about 5 percent since preconstruction sales began in February, East Coast Division President Marcie DePlaza said.

50 In a Room

“There were times when you’d walk into one of the models and there would be 50 people in a room,” (3) Macias said. “This is not like the boom because they were buying here because they want to live here, not because they want to make an investment.” …

Fragile Recovery

Homebuyers are choosing to pay a premium for a new home because foreclosures often require repair, and short sales, where the property is sold for less than the amount owed, can take too long to complete, Hunter said.

The jump in demand is encouraging, though the recovery in housing is fragile and faces economic headwinds, including Europe’s sovereign debt crisis and possible U.S. government budget cuts next year. While unemployment has dropped to 8.1 percent from 10 percent in October 2009, it’s still above the 10-year average of 6.6 percent. (4)

The pace of new home sales last month was less than half the average of the past 10 years, according to Commerce Department data. While property prices fell 3.5 percent in February, the smallest 12-month drop since February 2011, it extended the decline since the 2006 peak to 35 percent.

Home sales are also limited by tight lending standards, as lenders require higher down payments and credit scores.

‘Sure Feels Good’

Toll Brothers has the advantage of selling to wealthier buyers with better access to cash and debt. Potential acquirers also have better access to jumbo mortgages, including an “18- month lock option,(2)  which we haven’t had since Moby Dick was a guppy,” Donald Salmon, who runs Toll Brothers’ mortgage company said during the May 23 conference call.

“While domestic and global headline risk remains a concern that could potentially undermine buyer confidence, with mortgage rates at historic lows and inventory supplies dropping in many markets, we are feeling better than we have at any time in the past five years,” Robert Toll, executive chairman of the builder, said during the call. “We would like to say we’re back, but we need a little more confirmation. Nonetheless, it sure feels good compared to the desert we’ve just crossed.”

Publicly-traded homebuilders are taking market share from private firms because they have better access to financing (2) and are able to buy land and build in the best locations, said Foley of Barclays. Toll Brothers rose 0.9 percent to $28.20 at 4:15 p.m. in New York, the highest since June 2007. The company has gained 38 percent this year, compared with the 37 percent advance of the 11-member Standard & Poor’s 1500 Homebuilding index.

(1)The correct questions that all readers should ask is what did Mr Yearely and Mr. Humphries and Mr. Toll see and say in 2005 and 2006 and 2007 and 2008 BEFORE the crash, and what did they see and say about the prospects for a recovery in the Spring of 2009 and 2010 and 2011?  We know.  Can you guess?

(2) This polling of the so-called experts is reminiscent of nothing but pure out and out hype intended to benefit a VERY special class of recipients of the largess of the FED via the insane ZIRP, which largess is used to induce the “Sheeple” to make the exact wrong decision yet again and buy Real Estate at too high prices - just before the second wave of the Super Tsunami “Kondratieff” Long-Wave does implode all Real Estate markets for the next twenty five to forty years!

(3) In PORE terms this information is called ‘bait.’ The very nature of this is intended to ignite the greed of the masses and to instill fear into them that they will miss the next big move in Real Estate.  Fear and Greed are the pillars of the FLEGS and are only outgunned by Stupidity, as the “Sheeple” who read this MSM PORE will be motivated to move back into Real Estate NOW, to be slaughtered yet again in 2014 to 2015! 

Fishermen know this type of activity as “Chumming” the waters, and the MSM is most expert at “Chumming” of the masses, after having honed their skills for the last hundred years or so!

(4) We have covered ad nauseum why these numbers are totally fictional!

'Twisted Sister' is Really QE 3 & QE 4

The following article is the type of article that does contain many hints of what’s afoot and why.  We have numbered the hints numerically.  If you want to know what they portend, ask us at polestarcomm@verizon.net. 

Namely, the FED is very obviously and very desperately committed to continue the financial rehabilitation of their Member Bank’s Balance Sheets and providing limitless ‘life support’ for the Real Estate sector by a strict ZIRP straight across the ‘Yield Curve,’ which action is simply unheard of since the necessities and constraints imposed on the markets during the WW II era.

As we covered in our last Quarterly Update, ‘Operation Twisted Sister’ is  a De facto QE 3 and QE 4 and QE 5 and etc., etc.   And, insane twisting of the 'Yield Curve' will only continue the extreme financial abuses and economic dislocations and missallocated capital of this now extremely fragile economy, and there is now only one possible long-term outcome of this insanity, i.e. massive inflation.

Are you and your company prepared for the inevitable shocks of truly rampant and run-away inflation?

If you have not considered these things, maybe you should, and a good place to assess the future dangers is at www.polestarcomm.com.

Fed May Prefer Another Twist to Adding Assets

Bloomberg; By Joshua Zumbrun - May 18, 2012 10:05 AM ET

“Federal Reserve policy makers may find another round of Operation Twist is preferable to an outright asset-purchase program if the economy shows further signs of weakness or risks increase.

Chairman Ben S. Bernanke on April 25 said he was prepared to take further action to aid the economy if necessary, even as he signaled that he didn’t see an immediate need to add stimulus with inflation near the Fed’s goal and unemployment falling. …The following

“If there were scope to do another twist of some type it would be prudent to consider it, especially in the scenario where things are worse (1) and the Fed feels like it needs to move,” said Nathan Sheets, Global Head of International Economics at Citigroup Inc. in New York. Until August, Sheets was the Fed’s top international economist.

Economists such as Sheets and Credit Suisse Securities’ Dana Saporta say the Fed’s $400 billion program to extend the maturity of bonds has been just as effective as earlier programs to expand its balance sheet, known as quantitative easing. That may make another version of the maturity extension, which is dubbed Operation Twist and is set to expire in June, preferable because it doesn’t risk the same political backlash.(2)

“From a purely economic standpoint it doesn’t matter that much” which option the Fed chooses, Sheets said. “From a public-relations standpoint it might have consequences.”

Government Debt

With Operation Twist, the Fed has sought to lower borrowing costs through purchases of longer-term government debt. Those purchases were offset by sales of shorter-term debt(3), keeping the total size of the Fed’s balance sheet unchanged. The sales didn’t raise short-term yields because the Fed has pledged to keep interest rates near zero at least through late 2014 (4).

… Republicans, including House Speaker John Boehner of Ohio, sent Bernanke a letter saying it risked accelerating inflation, weakening the dollar and fueling asset bubbles.

Consumer Prices

Consumer prices as measured by the personal consumption expenditures index, the gauge preferred by the Fed, rose 2.1 percent in March (5) from a year earlier, close to the central bank’s 2 percent inflation goal.

…American employers added 115,000 jobs in April (6), the fewest in six months, according to a Labor Department report released the week after the Fed meeting. …”

20,000 lb Gorilla is really 34,000 lb Monster GOrilla

Well Folks, I suggested on the 4^th of this very month that everyone should be reading www.washingtonsblog.com to stay abreast of what the MSM is hiding from us all.  And, Boy Oh Boy, was I ever right, because. . .

I just learned from reading www.washingtonsblog.com THAT the 20,000 lb Gorilla in the Bad Banker's Closet that I wrote about last fall and on the 2nd of this month is really a 34,000 lb Mega-Monster GORILLA since the total derivatives (phony UNFUNDED FUNNY MONEY insurance) market is really closer to $1,200,000,000,000,000 if NOT more.  In fact, if Mr. Wilmott, quoted below, is right the real number is over $1,200,000,000,000,000!

Now remember folks, that $1,200,000,000,000,000 is the amount that is being INSURED by the aggregate community of  financial institutions that have taken in premiums on the repayment of $1,200,000,000,000,000, IF any losses do occur to the buyers of these insanely written 'Financial Weapons of Mass Destruction' as Warren Buffet called them.  

And, George Soros famously said back in 2003:
  
“The more I’ve heard about them, the more I’ve realized they’re truly toxic,” Mr. Soros said Friday, according to Reuters. Later, he added: “It’s like buying life insurance on someone else’s life, and owning a license to kill.”

And, the net affect - of the shockingly destructive systemic implosion of this pile of badly written and totally UNFUNDED insurance – on the world’s economies is quite simply incalculable!  

Does anyone out there vaguely comprehend why AIG Insurance went under and what it cost this country and the world?  We do FULLY comprehend the AIG disaster, and that is precisely why we are trying to warn as many as will listen or will read!

For, when this monster breaks out of his all too small cage it will prove to be just one of the contributing factors to the SECOND wave of the Super Tsunami “Kondratieff” Long-Wave breaking over all the financial markets of the earth in the Winter of 2014!

Are you and your company ready for the next economic “Black Swan” event that will be THREE times as severe as the Credit Crisis of 2007/08?

If not read our website and subscribe to our Market Reviews and Quarterly Updates, or your company will very likely be joining the list of companies that were swamped in 07/08 that we list on the bottom of our ‘Home’ page.

Top Derivatives Expert Estimates Size of the Global Derivatives Market at $1,200 Trillion Dollars … 20 Times Larger than the Global Economy

Posted on May 18, 2012 by WashingtonsBlog

How Large Is the Derivatives Market?

Everyone paying attention knows that the size of the derivatives market dwarfs the global economy.  But how big is it really?

For years, there have been rumors that there is over a quadrillion – one thousand trillion – dollars in notional value of outstanding derivatives.  But no one really knew.

Even though the Bank of International Settlements regularly publishes tables showing the amounts of different types of derivatives, some of the categories are ambiguous, and so it has been hard to get a good handle on what’s really out there.

For example, one blogger wrote last year:

Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion.

Smart guys like bond trader Jeffrey Gundlach said last year that we’ve got a quadrillion dollar derivative overhang, the government hasn’t done anything to fix the basic problems in our economy, and so we’ll have another crash.

But I’ve now found an estimate from a top derivatives expert who  confirms the claim.

Specifically, Paul Wilmott – who has written numerous books on the subject – estimated the number last year at $1.2 quadrillion:

The… derivatives market … is 20 times the size of the world economy.

***

According to one of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University (and whose speaking voice sounds eerily like John Lennon’s), $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. To put that in perspective, the world’s annual gross domestic product is between $50 trillion and $60 trillion.

A Clear and Present Danger to the World Economy

The size of the derivatives market is a huge threat to the world economy:

One of the biggest risks to the world’s financial health is the $1.2 quadrillion derivatives market. It’s complex, it’s unregulated, and it ought to be of concern to world leaders ….

***

How big is the risk to the world economy from these derivatives? According to Wilmott, it’s impossible to know unless you understand the details of the derivatives contracts. But since they’re unregulated and likely to remain so, it is hard to gauge the risk.

But Wilmott gives an example of an over-the-counter “customized” derivative that could be very risky indeed, and could also put its practitioners in a position of what he called “moral hazard.”

***

Another kind of market conduct that makes markets volatile is what Wilmott calls positive and negative feedback loops. These relatively bland-sounding terms mask some really scary behavior for investors who are not clued into it. Wilmott argues that a positive feedback loop contributed to the 22.6% crash in the Dow back in October 1987.

As we noted last year:

Bloomberg reported in May:

Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said …“Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

***

The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008.

Credit default swaps were largely responsible for bringing down Bear Stearns, AIG (and see this), WaMu and other mammoth corporations.

And unexpected changes in interest rates could cause a major bloodbath in interest rate derivatives.

And, no, there have not been any reforms or attempts to rein in derivatives, and the Dodd-Frank financial legislation was really just a p.r. stunt which didn’t really change anything.

But the big banks and their minions claim that the huge amounts of derivatives themselves is unimportant because these are only “notional” values, and – after netting – the notional values are deflated to much more modest numbers.

But as [Tyler] Durden – who has a solid background in derivatives – notes:

At this point the economist PhD readers will scream: “this is total BS – after all you have bilateral netting which eliminates net bank exposure almost entirely.” True: that is precisely what the OCC will say too. As the chart below shows, according to the chief regulator of the derivative space in Q2 netting benefits amounted to an almost record 90.8% of gross exposure, so while seemingly massive, those XXX trillion numbers are really quite, quite small… Right?

…Wrong. The problem with bilateral netting is that it is based on one massively flawed assumption, namely that in an orderly collapse all derivative contracts will be honored by the issuing bank (in this case the company that has sold the protection, and which the buyer of protection hopes will offset the protection it in turn has sold). The best example of how the flaw behind bilateral netting almost destroyed the system is AIG: the insurance company was hours away from making trillions of derivative contracts worthless if it were to implode, leaving all those who had bought protection from the firm worthless, a contingency only Goldman hedged by buying protection on AIG. And while the argument can further be extended that in bankruptcy a perfectly netted bankrupt entity would make someone else whole on claims they have written, this is not true, as the bankrupt estate will pursue 100 cent recovery on its claims even under Chapter 11, while claims the estate had written end up as General Unsecured Claims which as Lehman has demonstrated will collect 20 cents on the dollar if they are lucky.

The point of this detour being that if any of these four banks fails, the repercussions would be disastrous. And no, Frank Dodd’s bank “resolution” provision would do absolutely nothing to prevent an epic systemic collapse.

Some Do See the Truth about Gold

Every once in a while we see something that we wish we had written, and the following is one of those. 

We were not aware of Bill Fleckenstein until a friend sent this article to us over the weekend.  But I can say that I am rather sure Fleckenstein is one of those rare people who do overlook the ‘Trees’ and who do see the ‘Forest’ AND the ‘Landscape’ and is NOT blinded by the blowing winds and hot air of the Pundits and the ‘Talking Heads’ and the Government sponsored apologists. 

My conclusion on his economic perspicacity is caused by his following comment on all those who are seeing a rebound in this economic nightmare:

“…In addition -- I don't know this to be a fact -- but it does appear that there are a lot of people who are short metals because they think the U.S. economy is doing well. (It wouldn't surprise me if these are the same folks who didn't see the housing bubble.)…”

And, the FED's only response has been the spending of Trillions of OUR Dollars to buy the BbBDBB (Bad bets of the Bad Debts of the Bad Bankers) and take them onto their Balance Sheet, where they will fester and cause the explosion of inflation (via the electronic Funny Money given the banks for this junk) that is right now eating everyone alive, because 'sterilization' of the FED's purchased junk/toxic debt from the stupid bankers is a completely fabricated concept and bears no resemblance to the reality of what QE1 and QE2 and Operation Twist's real and immediate impact has been on the real Money Supply.


The FED's unrestrained madness with their QE1 and QE2 and 'Operation Twisted Sister' will only end in one fashion, which we do cover in depth in our Market Review and Quarterly Updates.


Does anybody out there believe that the true inflation rate is ONLY 1 1/2 to 2 2/5's % per year? 

The truly sad thing is that all this confusion is caused by the PEC’s (Professional Economic Class) complete blindness to the secular waves first identified by Nicolas Kondratieff.  The "Kondratieff" does cause the type of 'Generational Depressions' now raging over ALL this earth as a result of ONLY the First Wave of the Super Tsunami “Kondratieff” Long-Wave!  

The fact that there are THREE waves of the "Kondratieff' - which we discovered over twenty years ago - was one of the elements that Kondratieff did not reveal before Stalin had him eliminated with a bullet to the back of the head.

So Folks, there are two more waves of the “Kondratieff” A’Comin, and each will be arithmetically greater than the first by a factor of three!

Are you and your company ready?

If not start reading all the pages of our dire warnings at www.polestarcomm@verizon.net.

And if you would like to know when waves TWO and THREE are most likely to swamp all the world's economies, then you had better subscribe to our Market Reviews and Quarterly Updates! 

Bill Fleckenstein

Gold's fortunes will soon reverse

As the gold sector nears record levels of negative sentiment, it presents renewed opportunity even as it plays on old fears. We can't know exactly when things will turn around, but we can get ready.

By Bill_Fleckenstein 21 hours ago

I would like to devote this week's column to the metals and miners in an attempt to put the recent nasty correction in perspective, as best as I am able.

First of all, I don't really think that the decline in gold prices or the miners' stocks reflects those markets "discounting" any particular event or outcome. That is, I don't think the decline is telling us that those markets are expecting some negative development in the future. Rather, there has been an overall lack of interest (demand), and the decline has fed on itself.

In addition -- I don't know this to be a fact -- but it does appear that there are a lot of people who are short metals because they think the U.S. economy is doing well. (It wouldn't surprise me if these are the same folks who didn't see the housing bubble.)

Meanwhile, sentiment has now become extremely lopsided: the Daily Sentiment Index has reached a record low. The Market Vane gold sentiment survey, at 51%, is back near the lows of 2008. The Hulbert Gold Newsletter Sentiment Index has been negative longer than just about any other stretch over the last decade.

According to the most recent data, the short interest in the gold ETF SPDR Gold Shares (GLD) has almost doubled (and it has likely increased since those data came out). Thus, we have now reached a point where psychology toward the gold complex is about as negative as it possibly can be.

Priced for defection

In addition, the open interest (i.e., the total number of contracts) in the gold futures market has declined drastically, although it has picked up in the last week as prices have plunged, indicating that there are new shorts (as well as new longs, since each short position must have a long counterparty).

Finally, the prices of gold mining stocks themselves have collapsed -- to absurd valuations, in some cases. Pan American Silver's (PAAS) market capitalization, for example, is so low you could buy the whole operation, sell off just the gold it recently acquired from its Minefinders acquisition and make a profit on your purchase, and you'd still own rest of the company (leveraged buyout artists, take note).

At the same time, weakening economic activity here and everywhere else, combined with European political and market instability, continue to increase the probability of more quantitative easing at the Federal Open Market Committee meeting in late June (with the European Central Bank not far behind).

What all of these extreme readings cannot do is stop stock prices from falling. In the present environment (on both the upside and the downside), when price momentum builds, it seems to feed on itself and gets carried to bizarre extremes. Once that process is under way, the only thing that can stop it is exhaustion. Only then can the asset in question turn around.

The big move coming

I don't know when this will happen for the metals and the miners. There have been a few times on the way down in the last couple of months when I thought that a reversal would lead to a move to the upside, but the action quickly indicated that this was not the case.

Nonetheless, at some point the stage will be set (if it isn't already) for an unbelievably explosive rally to the upside in metals. I think, given how stretched everything has become, that day is close, but that could mean a matter of weeks or it could be a few days. We can't know, nor do we need to. The point isn't to predict when, it is to recognize the moment when it occurs and have a plan about what to do.

Get ready to move

These violent moves don't just happen to gold and gold miners; they show up in other industries as well. But the metals complex may be more extreme because of the fact that gold isn't really analyzable and, thus, there is more of an emotional component to its price action. Nonetheless, a tremendous opportunity is setting up for those who can take advantage of it.

Prospectively, it's important to remember, because of the huge psychological component and price swings, that it is a good idea to have something you can trade so you have the flexibility to take advantage of moments in time such as these. That means at some point you have to sell something, either as they're going up or when they roll over and head back down.

In any case, I hope this discussion will help folks construct a game plan.

At the time of publication Bill Fleckenstein owned gold and precious-metals mining stocks, including Pan American Silver.

< Back to Bill Fleckenstein

Why Gold Is Going Higher Over Time

We first predicted last Fall in our Blogs - in the heat of Gold's run to $1,923 an oz - that Gold would NEVER reach $2,000 in late 2011 as predicted by the experts and that 2012 would be a BIG DOWN year for gold, and it certainly has so far - with another six to nine months to go in our opinion!

However, in the midst of this contrived and manipulated correction exists a HUGE opportunity for all investors to save themselves from the incipient SUPER-INFLATIONARY wave that will precede the SECOND wave of the Super-Tsunami "Kondratieff" Long-Wave that will utterly destroy the US economy in 18 to 36 months (Most likely October 2014 to March 2015) and is now absolutely ordained - courtesy of the FED's TOTALLY INSANE ZIRP!

Everyone can witness this SUPER-INFLATIONARY wave gather steam in the coming months as they see the price of ALL foodstuffs, hardware items, garden items (especially fertilizer), ALL insurance, ALL transportation prices and costs of ALL entertainment quite literally EXPLODE; all the while masked by a US CD monthly inflation report of 1 1/2 to 2/ 1/2%, because the government BureaurcRATS do KNOW that the American 'Sheeple' have finally been dumbed down to a new level of total and complete psychologically sublimated submission to ALL the LIES fed to them daily on their FV's (Funny Visions)!!

In our opinion, all investors can only save themselves from this NOW quite certain economic DEBACLE by implementing one strategy RIGHT NOW, i.e. buying a great portfolio of Gold stocks that includes Producers (recently hammered) and great little Explorers.

Here is a very brief glimpse of the means and the methods by which Polestar Communications’ Econometric Models do discover and confirm the real 'Pulse of the Markets' and an example of how we construct our Econometric Models and why we believe them to be more accurately predictive than those constructed by the economic professionals. 

Namely, we look for nexus and inflection points that others have missed.

Read on:

We have determined over many years study that the FLEGS (Fear, Lust, Envy, Greed and Stupidity) factors are as much – if not more - a determining influence on price trends as the academically accepted elements of perceived utility, relative pricing, delivery or production constraints and availability of inputs and replacements or cost of inventory or competitive forces.  Therefore, we first look for the FLEGS in every analysis to discover the driving forces of any market.

The following article from the Gallup organization attempts to examine and explain the relationship between the public’s heightened interest in gold and their recently expressed preference for gold over other investments, which is proving very troublesome for the “Puppet Masters.”

However, the PEC’s (Professional Economist Class) have failed to realize that the continued rise in Gold and the public’s preference for gold may have nothing to do with the public’s perception of Gold's value versus other investments.

In fact, in our opinion the public’s new preference for gold is a DIRECT inverse reaction to something exposed in the two following articles from a NON– MSM source.

Namely, the American public is losing confidence in all institutions as the lies from all sides are becoming obvious to all, e.g. the US CD’s hilarious decades-long inflation numbers of 1 ½ to 2 ¼%!  As a result the public is motivated more and more by FEAR of the unknown, exacerbated by their growing awareness that the US Government agencies are telling outright lies.

In fact, let me put in a plug – right here – for www.WashingtonsBlog.com Website.  IMO – everybody should read it at least once a week to understand the truth behind the news reported by the MSM.

Remember - We predicted in November of last year that Gold would be flat to down in 2012, before exploding in 2013 and beyond as the FED'S ZIRP force-feeds inflation to break the Deflationary grip of the "Kondratieff," which   tactic is doomed to failure.  Therefore, this discussion is not about the next several months but is relevant to the next few years when gold will ultimately reach into the $5,000 to $7,000 per ounce range in 2015 to 2017 time-frame.  

Gold Still Americans' Top Pick Among Long-Term Investments

Percentage saying gold is best long-term investment down slightly since last summer

Gallup; by Lydia Saad; April 27, 2012

PRINCETON, NJ -- Gold leads four other types of investments in Americans' perceptions of which is "the best long-term investment," although the 28% choosing it today is down slightly from 34% in August. Traditional savings accounts or CDs have gained in support over this time, rising to tie stocks/mutual funds and real estate as the next-most-valued investments. Bonds rank a distant fifth.

…These results are similar to those found a year ago, but reflect a decline in support for savings accounts/CDs since 2009, when these peaked at 34%. Longer term, the perceived value of real estate fell sharply between 2002 and 2007, and subsequently dipped slightly further.

Confidence in stocks/mutual funds increased between 2002 and 2007, but then plummeted in 2008 and 2009 before partly recovering since then.

Bottom Line

Investing in gold has gained in popularity in recent years as low interest rates have made traditional savings instruments less attractive, and instability in the stock and real estate markets has undermined the mass appeal of those options. Meanwhile, the rising trajectory of the price of gold over the past several years apparently offers more of the returns and stability investors seek. Although gold prices dipped in the last quarter of 2011 after hitting an all-time high of $1,924 per ounce in September, and have yet to fully recover, more Americans continue to consider gold the best long-term investment among the major options available to consumers.

Now what follows from www.washingtonsblog.com is the real reason that we believe the "Sheeple" are turning to Gold, i.e. they mistrust the US Government.  And check out the second article, which reveals that the level of mistrust amongst Americans today of our own Government is greater than was expressed by our forbears of King George at the time of The American Revolution! 

 

Americans Don’t Believe Government Lies: “Forty-Eight Percent Say That Another Great Depression Is Likely To Occur In The Next Year … More Than Eight In Ten Americans Say That The Economy Is In Poor Shape”

Posted on June 8, 2011 by WashingtonsBlog

Federal Reserve chairman Ben Bernanke says that jobs and growth will pick up in the second half of the year.

But – according to over 5 million Google hits – Mr. Bernanke is not telling the truth.

President Obama says we’re not headed for a double-dip recession.

But CNN notes:

Forty-eight percent say that another Great Depression is likely to occur in the next year – the highest that figure has ever reached. The survey also indicates that just under half live in a household where someone has lost a job or are worried that unemployment may hit them in the near future.

***

According to the survey, more than eight in ten Americans say that the economy is in poor shape, a number that has stubbornly remained at that level since March.

(Before you take any solace in the fact that less than 50% believe we’ll have another depression, Gallup noted in April that more Americans think the country is in a Depression than think the economy is growing.)

How bad are things? And why aren’t they improving?

One more time … from the top.

Billion dollar fund managers agree: the government never fixed the underlying economic problems, so we’ll have another crash.

The housing slump is now officially worse than during the Great Depression, and still may get much worse.

Chronic unemployment is worse than during the Great Depression. And more people will be unemployed during this downturn than during the Great Depression. In addition – in contrast with the Great Depression – the loss of jobs now appears to be permanent.

For those lucky enough to have jobs, wages appear to have increased less over the past 10 years (when adjusted for inflation) than they did during a comparable 10-year period during the Great Depression.

As CNN Money points out, things are so bad that Wal-Mart’s CEO is worried that people won’t be able to afford their goods.

I wrote last December:

The following experts have – at some point during the last 2 years – said that the economic crisis could be worse than the Great Depression:

·         Fed Chairman Ben Bernanke

·         Former Fed Chairman Alan Greenspan (and see this and this)

·         Former Fed Chairman Paul Volcker

·         Economics scholar and former Federal Reserve Governor Frederic Mishkin

·         The head of the Bank of England Mervyn King

·         Nobel prize winning economist Joseph Stiglitz

·         Nobel prize winning economist Paul Krugman

·         Former Goldman Sachs chairman John Whitehead

·         Economics professors Barry Eichengreen and and Kevin H. O’Rourke (updated here)

·         Investment advisor, risk expert and “Black Swan” author Nassim Nicholas Taleb

·         Well-known PhD economist Marc Faber

·         Morgan Stanley’s UK equity strategist Graham Secker

·         Former chief credit officer at Fannie Mae Edward J. Pinto

·         Billionaire investor George Soros

·         Senior British minister Ed Balls

 

 

 

A Higher Percentage of Americans Believed in King George During the Revolutionary War than Believe in Congress Today

Posted on February 27, 2011 by WashingtonsBlog

Influential Harvard and Stanford law professor Lawrence Lessig noted in a must-watch speech last week that polls show that only 11% of the American people have confidence in Congress.

He notes that more people believed in King George at the time of the Revolutionary War than believe in congress today.

He’s right.

Historians have estimated that between 15 and 20% of the white population of the colonies were Loyalists

 

FED's ZIRP is the 20,000 lb Gorilla in the closet

I almost forgot to include this article from yesterday that is yet another example of the MSM reporting truth but in an extremely UNDERSTATED fashion.  They don’t want to scare the ‘Sheeple’ on the testy and risky subject of the REAL inflation rate - just yet.

The MSM will have plenty of time for that in late 2014 and early 2015, with the DOW at 16,500 to 18,000 and Caterpillar moving its plants to China and ALL cars leased because NOBODY can afford to buy them (we are almost there now) and your local newspaper at $2.50 for the weekly and $5.00 for the Sunday edition and gasoline at $12 a gallon and bacon at $16 a lb and bread at $8 a loaf and a nickel pack of gum at $2.50!

That’s when the truth will be so very, very obvious to even the Deaf, Dumb and Blind ‘Sheeple’ that it will then be the time to “Pull The Curtain“ on this ‘Monkey Show‘ of pure fantasy of a slow economic recovery (NOT!) and very little inflation ( A PURE LIE)!

Einhorn Says Fed Rate Stance ‘No Longer Useful,’ Risks Inflation

Bloomberg;  By Noah Buhayar - May 1, 2012 11:56 AM ET

“Hedge-fund manager David Einhorn said Federal Reserve policy intended to stimulate the economy and create jobs is “no longer useful” because it risks inflation.

Investors including Pacific Investment Management Co.’s Bill Gross have said Fed policy makers may be adding the risk of future economic disruption. The central bank has kept interest rates near zero since late 2008.

… “This enthusiasm is tempered by our continued concern about the structural sovereign-debt problems in Europe and Japan, a slowing Chinese economy, and high oil prices and general inflation connected to the Fed’s continued insistence on maintaining an emergency zero percent interest-rate policy  (This is the FED’s ZIRP), which we believe is no longer useful or effective,” Einhorn said on the call.

Fed policymakers, led by Chairman Ben S. Bernanke, reiterated their view April 25 that conditions may warrant “exceptionally low levels” for rates through at least late 2014. The central bank has kept its target federal funds rate between zero and 0.25 percent since December 2008.

… California-based Pimco’s website today that Fed policies including debt purchases will cause “gradually higher rates of inflation.”

The “acceleration of credit via central bank policies will likely produce a positive rate of real economic growth this year for most developed countries, but the structural distortions brought about by zero-bound interest rates will limit the growth,” Gross wrote.

Knowing The Truth Will Save Your A__!

As I have noted before:

Every once in a great while the MSM gets it right and reports the truth.  The following is a prime example.  I need add NOTHING to this very fine and accurate piece of journalism.

Are you and your company ready for the Financial Debacle of the century that will follow the “Great Deception of 2012” when all the ‘Sheeple’ will have finally been persuaded to put their last bits of money into the world’s stock markets and then be entirely fleeced - once again - with the Greatest Stock Market Crash ever in the Winter of 2014 from the roughly 16,500 level on the DOW?

Incidentally, I am just about to reset our projected insane target level on the DOW to 18,000.  I think that will be MADE necessary by the fact that the "Powers That BE" (PTB) are having a VERY difficult time moving the 'Sheeple' back into Stocks.  And the 'Sheeple' must be 'All In' (just like Real Estate in 2006) the insanely overpriced PAPER of the stock markets before the PTB can 'PULL the Curtain" on this 'Monkey Show,' just as they did three times in the late 60's and 72 and 1987 and 2001!

Doubt us?  

Well, just watch the rhetoric rise to fever pitch by the 'talking heads' and 'professional pitchmen' of the Devil on the country's FV's (Funny Visions) over this coming year and you WILL see our prediction come entirely true! 

ON that I will take bets from anybody at very nearly any odds!

Finally, the "Age of Austerity" just briefly mentioned in this article is upon our doorstep, as I did cover in  some detail on our website Home pages and New Normal pages and Econometrics pages at www.polestarcomm.com and in MUCH greater details in our Market Review of 2011 and our Quarterly Reviews since then and in a cursory fashion in these Blogs.

IMO - you and your company should be preparing NOW for these things, otherwise, your company is sure to join the long list of those companies (some are listed at the bottom of our home page) that were destroyed in the FIRST wave of the Super-Tsunami "Kondratieff" Long-Wave that did strike this country and the entire world in 2007 and 2008.

And remember, the SECOND wave of the Super-Tsunami "Kondratieff" Long-Wave will be three times as horrific and financially catastrophic as the first wave, which increased intensity is merely a factor of wave harmonics, but will be credited to the $700,000,000,000,000 Derivatives Issue by the 'talking heads'  and 'professional pundits' of the Devil in late 2014 and 2015.

Yale’s Shiller: World in a 'Late Great Depression'

www.moneynews.com; Monday, 30 Apr 2012 07:50 AM; By Forrest Jones

“ The global economy is mired in a "late Great Depression" despite central bank stimulus policies, says Yale economist and author Robert Shiller.

"Our whole economy has been affected by variations in confidence. Central banks are sort of trusted, but the actions they have often affect people’s confidence by appearance rather than substance. We’re not in the most trusting mood now,” Shiller tells CNBC.

The Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England have propped up their respective economies via liquidity injections known as quantitative easing, tools designed to spur recovery but dubbed by critics as printing money out of thin air.

He says the world is in a “new age of austerity.”

Critics say such monetary tools don't improve fundamental economic problems of too much debt and too little growth, although Shiller points out that the jury is still out whether fiscal measures taken to tackle those problems such as budget cuts and tax hikes in Europe especially are having a desired effect.

"Quantitative easing is not as prominent a policy as austerity ... the effect of austerity is not crystal clear because it depends how people react to it," says Shiller, who accurately called the tech bust of the early 2000s and the housing bust later that decade.

"It might help, but I don’t know if it's going to overwhelm the general mood of austerity, which is affecting the housing market."

….  "Fifty years ago, there wasn’t this talk of housing as an investment. It was a zeitgeist of the early 2000s, and it has gradually gone."

The housing sector appears to be bouncing along a bottom….

… Housing prices will drop by a further 20 percent as the downturn gripping the United States deepens, leading economist Gary Shilling says.

Writing in the Christian Science Monitor, Shilling said more and more people are looking to rent as homeownership becomes increasingly rare.

“Housing activity remains depressed, with the only life coming from the multifamily component, which is being driven by the zeal for rental apartments as homeownership falls,” he wrote.

“Homeowners are losing their abodes to foreclosures; many can’t meet stringent mortgage lending standards; some worry about homeownership responsibilities in the face of job uncertainty; and many people have no desire to buy an asset that continues to fall in price.

“I am looking for a further 20 percent slide in housing prices.”

Read more: Yale’s Shiller: World in a 'Late Great Depression'