Transgressions-Gold Only Choice
by Roger Wiegand
political administration has followed the
left-wing liberal domestic and foreign agenda to
the letter. Domestic policies include higher
taxes, more welfare, encouragement of union
power, destruction of capital markets, driving
out wealth and investment, and tossing a cascade
waterfall of handouts to band aide an economic
malaise. The new foreign agenda is to renounce a
previous stance of patriot hawkishness, embrace
enemies with timidity, and put forth unabashed
appeasement that would do Neville Chamberlain
proud. Gold remains the only choice.
This new blueprint for destruction of the United
States will produce a debt burden taking decades
to repay, encourage unemployment, and kill the
golden goose of capitalism. Worst of all, these
policies encourage our enemies to push, prod,
test and perhaps attack. It appears a whole new
gang of international criminals are and will be
descending upon our South American neighbors. We
do not wish to forecast trouble, but would be
very surprised if some of the really bad stuff
Europe and the Middle East has experienced does
not land on our shores this summer. God forbid.
In the Middle East, there are so many messes it
would take 50 pages of details to explain them
all. The Iraq war being the worst has moved to
Afghanistan and more robustly into Pakistan
where higher dangers of nuclear war rears its
ugly head. Hundreds of thousands of innocent
Pakistan refugees are caught in the middle of
fighting and violence. Unless the Pakistan
military has the temerity to instigate ferocious
attacks against their enemies and erase them for
good, this goes on for years. We think they lack
the will to do this. And, the escalation of
Middle Eastern tensions continues to grow.
The second hotter spot is a potential conflict
between Israel and Iran. It is now clear our
president will not help Israel. This has been a
long standing US policy but is now obviously
discarded. After the meeting between Obama and
Israel’s new prime minister, Netanyahu, Israel
could begin to prepare for all-out war in the
Middle East. It is clear to their leaders they
must attack Iran’s nuclear facilities, or risk
annihilation. This confrontation could probably
be prevented if our president would stand-up and
be counted with a firm ally stance. Instead, he
will continue to follow his normal political
posture of waffling and no-decisions. This is no
time for greenhorns and inexperience in the
White House. But, sadly, that is what we get.
Iran’s missile tests were another warning.
While the president is stoutly for welfare and
all of its attendant trappings, the tough
decisions are left to dangle as he has
demonstrated so convincingly during his tenure
in the Illinois legislature. History says that
people lacking the nerve to stand-up and be
counted will be crushed. That is our new fate
for the next two years, as a minimum, until the
next election when voter dissatisfaction could
go nuts. Watch 2010 voting.
The Die Is Cast In Bronze-Plan For War And
Extreme Economic Hardship
Our 2003 forecast said Ford Motor Company would
go bankrupt. We hold to this forecast but its
obvious GM and Chrysler beat them to it. Also
per our predictions, GM has announced they might
leave Detroit probably citing affordability of
their monster headquarters building. The real
reasons are to exit the USA’s failed auto
market, and dump all health care and pensions on
the US taxpayers. We think they move to Germany
using Opel as the new GM base for a corporate
headquarters and European operations. Buick
stays in China and very few US plants and
facilities remain. The US car market is dead for
a decade. And, the United States as a world
class manufacturer is down the drain. The steady
off-shoring of American manufacturing for cheap
labor has gutted the US’s ability to provide for
itself in many key markets. We think this comes
back to haunt.
“General Motors is considering moving its
headquarters from Detroit, selling-off U.S.
plants and even renegotiating parts of its
restructuring plan with its major union, the new
chief executive said Monday. A move by GM to
leave Detroit would represent another blow for
the economy of a region already reeling from the
bankruptcy of Chrysler and a sharp downturn in
auto manufacturing. GM purchased its
glass-towered headquarters building known as
Detroit's Renaissance Center in 1996 for $625
million. GM's current restructuring plan, which
is supported by the U.S. autos task force is
headed by former investment banker Steve Rattner,
would cut about 21,000 more U.S. factory jobs.”-
Reuters & CNBC
US autos are literally crashing as Chrysler
buyers stay away in droves due to the company’s
bankruptcy, lack of dealer credit and no
confidence in the job market. Would you buy a
car from a manufacturer in bankruptcy owned and
operated by the UAW and US Government?
Largely unnoticed in the auto news is the demise
of dealers. An auto dealership surprisingly
employs more people than you would think. The
National Automobile Dealers Association says
3,000 dealers will close and that could only be
the beginning. They tell us each of those
dealers employs an average of 53 people so
159,000 jobs in this sector could be lost. The
Detroit News says that’s more than GM and
Chrysler’s (domestic) workforces combined. And,
this does not include 6-10 parts supplier jobs
for each manufacturing position. If 50,000 GM
and Chrysler employees are laid-off this could
mean 300,000 to 500,000 more auto parts
suppliers’ jobs are eliminated. This is
shaping-up to be an unbelievable disaster.
The cost to various local communities is
staggering. Taxes will not be incurred nor paid.
Those huge dealership lots would be a blight on
the suburban landscape encouraging crime,
stealing store metals and fixtures. Further,
those facilities would probably remain empty for
The U.K. has announced they plan to hike taxes
for the wealthy to 50% of income. With other
province and local taxes, the total take should
round out at a nice 75% of gross income. Anyone
with a brain and the ability to leave England
for greener more friendly pastures will do so.
That is beyond socialism. We think it is
The United States is next. New tax policy is to
tax anything that moves as 800 new tax employees
seek to grab more from overseas. Domestically,
the president will increase taxes everywhere in
a strain for more government income. This kills
the source of most tax funding; the dominant
The state’s are in much worse trouble as they
have to balance their budgets by law. Almost all
of the 50 states in our union have some problems
with many having disasters. California is toast
but will be re-funded with big Obama checks. My
state of Michigan is now seeing a shortfall for
fiscal 2009-2010 of $1.4 Billion. Naturally,
instead of cutting-back state expenditures, new
state employee raises are proposed and the
grabby-grab for more taxes to cover prevails.
One of our favorites, Rick Santelli of CNBC
asked, How about a federal government pay cut of
20% to match other comparable industry norms?
Sorry Rick; they get raises and the Sheeple get
All governments should have taken a clue from
the Teabaggers demonstrationsbut instead they
laughed and ridiculed them. What happens when
the Teabaggers have an empty bag? More and more
we see this while administrations across the
land are clueless. The ending will not be pretty
as taxpayers no longer pay as they cannot pay.
Watch for massive municipal bond defaults with
California leading states down the fiscal drain.
Consumers have been the engine of prosperity in
America but are tapped out. The savings rates by
consumers recently rose by 4% from next to
nothing. They are not spending but are now
saving out of fear. The big banks have been
recapitalized from TARP money but few are
lending. They need their capital to keep
loan-capital ratios intact. The silly Stress
Tests were nothing but a public relations ploy
to calm the herd. So far it’s working but
underneath this facade of “all is well” lurks
trillions in derivatives. Consumers have no
remaining credit. Even the upper class has
cut-back on spending. In tony Bloomfield Hills,
The Corporate Auto Address, a huge mansion of
22,000 square feet offered at $15mm is being
auctioned this week end with opening bids at
Smaller banks not participating in this reckless
lending are caught between the Big Boyz who got
loads of TARP cash and a skidding local or
regional lending market. They are solvent but
have no new business and cannot earn money or,
even maintain a neutral posture. As Great
Depression II grinds on more banks fail.
Commodity inflation signals have popped-up but
could wane on the short term cycle of “Sell in
May.” This cycle might have begun yesterday.
China is buying replenishment copper but in
reality their manufacturing continues to sink as
Western buyers are absent. China’s stimulus
money was formidable but has failed to expand as
expected with no buyers for Chinese exports.
Those expecting domestic Chinese buying to cover
losses are misguided. New reports from China
indicate markets and the economy is worse than
Precious metals, grain, and other food-related
commodities should continue to do well over the
longer cycle. Soybeans remain strong on
fundamentals and food prices continue to rise;
particularly in those categories related to
basic foods. We wonder how well the luxury
prepared frozen foods are doing. We know for
example, restaurants are suffering with the
exception of very inexpensive fast food stores.
McDonald’s is fine as are a few others who can
deliver in that price category. Diners have
down-scaled and are cooking at home.
Housing has actually bottomed and is finding new
buying in the worst of the worst markets like
Detroit. For example in the up-scale village of
Gross Pointe east of Detroit, it was reported by
The Detroit News, that a 24 year-old landscaper
was able to buy a little bungalow for $92,000
from the previous owner who paid $165,000 only 4
years ago. In my beaten down local market, they
are about $30,000 cheaper for a similar product.
A decent Michigan home can be purchased for the
price of a new car. Yet uncontrolled utility
bills are up 35%.
Unemployment nationally is now a true 20%+ but
is reported at 8.9%. In Michigan, the official
report says it’s near 12% but reality is 25%.
Within 2-3 years at the height of our economic
problems, we think the US will unofficially post
33% jobless with Michigan near or above 40%;
both exceeding the 1930’s Great Depression
number of 25%.
New social problems abound. Tent cities have
sprung-up in parks and other places across
America. The hungry are multiplying by the
hundreds of thousands as officials cannot
understand the depth of these troubles, or have
a real plan to contend with them. There is
money, food and resources available but
governments cannot deliver and are not organized
to distribute to the needy. We will all pay the
price in pandemic malnutrition and starvation,
particularly among the retired elderly and very
young. Food related crimes will skyrocket.
People must eat. Milk, butter and cheese will be
34% higher later this year.
On the brighter side in Michigan, the
agriculture community is working harder and
planting more. California will lose roughly
1/3rd of its massive vegetable crop in a
no-planting situation as irrigation water was
cut-off. In Michigan, food related employment is
500,000 and 65,000 of those are directly related
to farm work or food processing in factories.
The last sales report from the Agriculture
Department reported 2006 revenue of $4 billion
for Michigan. This is mostly from beans,
blueberries, cherries, cucumbers, pumpkins,
pickles, apples, asparagus, sugar beets and milk
cow products. There is also some corn. Michigan
also has some excellent vineyards.
Newest growth industries are national government
make-work jobs and crime.
Those without work and no education in
particular, are turning to many forms of crime.
Sadly, many folks doing this are participating
out of emergency need and were not formerly
criminals. Meanwhile, overcrowding in jails in
several states causes politicians to free
prisoners early as they lack funds and resources
to contain them in jails. Add this group to the
newly desperate and we expect a massive and
continuous crime wave for years.
This is not a hard recession. This is A Greater
Depression II Disaster
Those pundits, analysts and over-paid bureaurats
are constantly telling us a new economic base is
established and we will rebound to old new highs
in late 2009-2010. In our view, they don’t get
it. We forecast a bottom before the next major
war in 2012. If you count and compare the 1930’s
six dead cat bounces to today’s situation, we
are in bounce number two; soon to end with the
Sell in May cycle.
Should this be true, we’ve four more
bottom-to-top-to-bottom cycles to endure taking
many years. I don’t see any recovery for ten
years. Further, with the over-indebted nations
competing for crumbs as domestic and
international violence escalates, how much
longer do you think the cycle extends? No one
knows for sure but the old paradigms and “good
old days” are gone for good. Deal with it by
purchasing, investing and trading gold and
We are nearing a peak in precious metals shares
that generally follow the primary stock indexes.
When the current stock market peaking descends
into Sell in May, PM shares will follow. With
each cycle we think they might sell less with
higher lows. This will be decided by how far
down the S&P selling might go. We expect 800 to
850 with 800 S&P’s more probable.
Do not get tangled up in daily noise. Keep
studying the larger view and buy precious metals
after each profit-taking correction.
Personally, I can see unbelievable opportunities
to trade that we would never see again for many
years. Turn these problems into opportunities.
Those on the right side of the trade might get
rich. Those on the other side are just victims.