From The Bad To The Really Sinister
By The Mogambo Guru
10/07/08 "The Daily Reckoning. " --08/07/08 - The first half of the year
is
over, and now all those brokerage accounts and retirement accounts will be
sending out statements to hapless account holders, and it is bad news in
spades. This is why (I assume) the Plunge Protection Team (composed of the
US Federal Reserve, the Treasury and bank insiders) tried to drive the
stock
markets up on Monday, June 30 - to make those account statements look not
quite as bad, and, hopefully, prevent people from dumping all of their
stock
and bond holdings in a desperate attempt to save something before the
whole
idiotic, fiat-currency, unlimited-fractional-banking thing just collapses.
Perhaps this drop in the market averages (as demand overwhelms supply) is
what prompted John Williams at shadowstats.com to write, "Overhanging the
markets for a number of years has been the question as to when the major
holders of excess US dollars in the global financial system might look to
dump those holdings. An op****tunity for that dumping is at hand."
The reason is that "Most central banks know that their unwanted dollar
hoards are going to generate long-term losses, but the oil markets have
opened up an op****tunity to mitigate some of those losses. For the rest of
the world, dollar dumping now would reduce inflation risks outside the
United States."
This means that "Over the longer term, US equities, bonds and the
greenback
should suffer terribly, while gold and silver prices should boom."
And it is not just him and me that are so gloomy, but a new study from the
Bank for International Settlements (BIS) noted that a plunge in the dollar
"may happen", as the dollar has slid 14% against the euro in the past
year,
handing foreign investors in US dollar assets "big losses measured in
dollars, and still bigger ones measured in their own currency", and which
is
making people so nervous that "a sudden rush for the exits cannot be ruled
out completely."
Bob Janjuah, analyst at the Royal Bank of Scotland, has also advised
clients
that "A very nasty period is soon to be upon us - be prepared," which goes
along with that bank's warning that inflation has paralyzed the world's
central banks, and that of a full-fledged crash in global stock and credit
markets over the next three months looks more and more likely.
And the stupid banks (always the cause of all of economic troubles) are
suffering from their own stupidity, and Bill Buckler of The-Privateer.com
newsletter notes that "US banks have suffered US$391 billion of losses and
write-downs from mortgage-related securities since the start of 2007,
according to the data compiled by Bloomberg. US banks could lose another
$300 billion on real estate loans during the year ahead."
What makes this $691 billion loss so special is that "such losses could
jeopardize balance sheets because the US banking system had only $1,350
billion of equity capital". Hahaha! They've lost two-thirds of the banks
capital! Hahaha! Morons!
Since all things are connected to all things, he says, "The sum of it all
is
that the entire US banking and financial system is so threadbare, fragile
and short of capital that a collapse or crash in one place could knock the
underpinnings out from under several other US financial sectors which
would
take even more down with them. A systemic crash - at any time - is today a
distinct possibility."
This is all in addition to the fact that morons who have kept investing in
the American stock market are suffering losses, proving once again that
the
majority of investors must lose money over the long term. Spengler at
atimes.com notes that when he says, "American equity markets show no real
capital gains since 1997. That is, an American who bought the equivalent
of
the Standard & Poor's 500 Index at $954 in January 1997 and sold today at
$1,278 would have exactly the same number of inflation-adjusted dollars."
Mr
Spengler concludes, "My advice to individual investors? Invest in some
popcorn, because the next six months will be something to watch." (See How
to stop the Great Crash of '08, Asia Times Online, July 1, 2008.)
Jim Sinclair of jsmineset.com is more humorously laconic when he says,
"You
can be sure something really stupid is about to happen."
He might have been referring to me, but I am usually stupid to start with,
and so why would he just be mentioning it now? So, I think he means
something more sinister. Much more sinister. And ugly.
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The
Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on
those who desperately deserve it.
Copyright 2008, The Daily Reckoning
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