Others Do See the Future Clearly

 (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!)

I have a friend who sent me an article by Bill Fleckenstein some weeks ago that I posted to this Blog - on 5/21 - with full credit to Mr. Fleckenstein.  I had never heard of Bill before that article was sent to me and I have never even been to his site, i.e I simply have no time.

Today that same friend sent this article and it is SO ABSOLUTELY CHOCK full of good-sense driven, fundamentally sane and prescient observations that I just have to post this one too!

Now, one most essentially important comment and question - right here:

When QE3 (or what ever the FED would like to call their stupidly insane Yield-Curve Twisting machinations) is finally set in motion, it will result in the Stupid Banksters being relieved of a whole lot more of their BbBDBB (Bad Bets of the Bad Debts of the Bad Bansksters)* of probably around roughly $300,000,000,000, or so.

What do you think they will do with that new Electronic Funny Money from the FMMM (FED’s Magic Money Machine)* ?

A.     Lend to the average cash-strapped American at low rates of interest (say, 3% to 4%) since the Banksters costs are ZIP under the FED’s insane ZIRP?

B.     Lend to small American businesses and start-ups (again say, at 3% to 4%) to help alleviate the unemployment and horrific suffering in this country of 40,000,000 out of work Americans?

C.      Vastly rewrite insanely structured principal and interest of under-water mortgages for the average American? 

D.  IMMEDIATELY buy futures and call options on the Stock Markets and Commodities Markets, and then - a few days later -  Invest Long in the Stock Markets and Commodities Markets, as they have done every time that the FED has bought up their garbage debt with our money over the past five years?

I vote for D, Folks! 

In fact, I KNOW that’s it D, Folks!

And that is why the “Great Deception of 2012” (that we have been predicting for over ten months) is just about to be kicked off as all the Bad Banksters put all of that BRAND NEW money to work FOR THEMSELVES, just as they did in 2009 and 2010 and 2011 and early 2012!

*for a full list  of Polestar’s Handy-Dandy acronyms, go to the bottom of our Home Page,

Bill Fleckenstein

The stimulus ship sets sail

The pressure is building on central banks worldwide to do the one thing they think works: print money. Expect to see QE3 bond-buying from the Fed, and similar moves in Europe, very soon.

By Bill_Fleckenstein 20 hours ago

By now everyone reading this knows that this week's nonfarm payroll report was a huge bust, with just 69,000 jobs created, versus expectations of 150,000. In addition, the report's innards were all weak. That extended the string of weak data that we have been seeing, and there is more to come.

As I have been saying for some time now, the seasonal adjustments didn't adequately capture the warm weather this winter, and therefore made the data appear better than they actually were. (There's no point in going into a lot of detail here, as I went on an extended rant on this topic, and others closely related to it, about a month ago in "Investors, it's time to face the truth.")

Caught red-handed

So many people have so little understanding of the economy, and even less so of this post-bubble period, that expectations of economic strength have gotten way out of hand, including those regarding what the Fed might do, and what that would mean to the dollar and everything else. Now, in the wake of the payroll report, positions have to change in many markets.

To complicate matters, China is slowing rather rapidly. When you add that to the slowdown in Europe and the U.S., as well as knock-on effects and a dash of financial crises, one of investors' first kneejerk reactions is to buy bonds. And in fact, increased demand saw our 10-year bond trade a week ago to a yield of around 1.45%.

When you consider that at the height of the financial crisis in 2008, the rate touched only 2.1%, you can see that such a low yield is complete lunacy. Still, I don't want to be short bonds until I see what the bond market looks like after Europe weakens and people realize how weak our economy is as well. I never dreamed that bonds could get to this level, but once they get stupid, they can pretty much trade anywhere, as we have seen in so many other markets.

The dog days of reckoning

Turning to the money-printing department, here's where we stand so far this week: The likely easers, namely the European Central Bank and the Bank of England, chose to do nothing. Australia, which is actually doing relatively well, cut rates two days ago. On Wednesday night, the People's Bank of China cut rates for the first time since 2008. That move was not really a surprise, but it nonetheless revealed a change in character.

As for the masters of the world's greatest money-printing machine (i.e., the U.S. Federal Reserve, although the ECB is no slouch in this department despite all its tough talk), we now have several signs of more printing ahead. There's a Jon Hilsenrath Wall Street Journal story from Wednesday; Fed vice chair Janet Yellen's dovish remarks to the Boston Economic Club Wednesday night; and Fed chairman Ben Bernanke's Congressional testimony Thursday, in which he basically said Fed governors would be discussing the next round of quantitative easing (i.e., QE3) at the upcoming meeting of the Federal Open Market Committee -- although no decision on that has been made, including what form it might take.

Obviously, the ECB needs to do more. Anyone who has paid any attention understands that there are bank runs as well as illiquidity and insolvency issues in the European banking system, with Spain being the country people are most focused on at the moment. And of course, governments there are swimming in debt, and folks actually care about that. (I make that distinction because Japan, the United Kimgdom and the United States are all awash in debt as well, but for the moment, the world is not upset about those countries' debt levels.)

In any case, I believe that before June is over, the ECB will have found a way to come up with more stimulus, the Fed will begin QE3, and I would imagine the Bank of England will find some way to get into the mix as well.

If so, I would expect the usual kneejerk reactions in various markets, with stocks moving up, and I will be particularly interested to see if bonds finally start to show some post-stimulus weakness. If we don't get said stimulus, equity markets here and in Europe will have a heart attack, and then we will soon get some emergency stimulus. Given how the world's central bankers play the game, as long as they are allowed to use the printing press, I just don't see that there is any reason to believe that they will stop.

Return on investment beats the return on ignorance

Turning to my favorite money-printing antidote, gold, I would like to discuss a related topic, namely mining shares. It has become the object of almost weekly scorn in most major newspapers, particularly The Wall Street Journal, which of course was so bullish during the stock bubble of the late 1990s that it referred to the "New Economy" as a proper noun. Recently one of its (presumably young) authors, Liam Denning, has written a couple of negative articles on miners, and one of his favorite themes (as outlined in his latest article) appears to be that the big miners have "outspent their cash flow over the past decade in efforts to expand." That leads him to conclude that it makes perfect sense that the miners "all lag behind the gold price in that period."

This just goes to show you how little anyone has to know to be a financial writer. In the early parts of that period, there wasn't much cash flow, since companies were losing money. As prices rose, miners decided to increase production and, in the case of Goldcorp (GG) (one of the companies he notes, whose stock I own), its production will have doubled in the next couple of years. It takes a lot of money (and time) to bring on so many mines, which then have long lives. The litmus test is therefore not taking some arbitrary period and measuring cash flow during that time. It is to evaluate whether the cash will have been spent wisely in the coming years as production doubles (in the case of Goldcorp). It may turn out that the money was spent incredibly wisely or not. We will have to see.

That is not to say that mining companies have not made mistakes. A lot of them have made plenty. But if you are going to write an article, it might be worthwhile to get the facts right. The slipshod manner in which all things negative seem to be passed off as knowledge in the metals sector reminds me, on the flipside, of how all things were spun positively for stocks during the tech bubble, and for real estate during its bubble. Sloppy journalism oftentimes equates with the mood of the day, even though it is usually wrong.

At the time of publication, Bill Fleckenstein owned gold and stock in the following copmpany: Goldcorp.

< Back to Bill Fleckenstein