Seit 12am. NY time ist nun wieder das PPT beschaeftigt und haut nach der mittagspause wieder auf den HUI mit den selben tricks wie gestern.
Die haben heute laenger geschlafen weil sie gestern ueberstunden machten. 
Darum fehlten sie am morgen, kann man ja verstehen. 
Sie wollen den Goldbugs das wochenende vermiesen.
Gut, dann halt naechste Woche, nach dem IMF meeting wo eh nichts rauskommt.
Have a nice weekend
XEX
Friday, April 15, 2005, 12:05:00 PM EST
Master of the Universe
Author: Jim Sinclair
Dear CIGA:
The one Federal Reserve Chairman who truly has acted as Master of the Economic Universe has Spoken.
In 1980 when this Gold Bull (as the Wall Street Journal called me at the time) took off his horns, Mr. Bleiberg, then editor of Barrons, wrote a piece calling me a pinhead because I characterized Chairman Volcker as a “class act.”
At a dinner two years later when my former partner was Superintendent of Banks for the State of New York, Chairman Volcker said, “Yes, you and Sinclair. I guess I really got the gold guys.” Our answer was quite simple. “Sorry, Mr. Chairman, but you did not get these gold guys. In fact, you did us a good turn because when we saw you coming we exited gold.”
Now Mr. Volcker is back repeating to you what I told you Mr. V had said somewhat privately many months ago. However, this time he has added an EXTREMELY important caveat.
I listened hard to Chairman Volcker without emotion and paid strict attention to every word in late 1979. I did not like in the least what I heard. However, I did not argue with it because it had been said and he had the power.
Gold soon fulfilled its price objective in a practical sense and fundamentally at $887.50. Gold had balanced the International Balance Sheet of the USA. That day and through the entire night Vincent and I sold all the gold we and our firm owned. Next morning gold opened down $150.
Will you listen to Chairman Volcker now or to the top callers, the star gazers and the agents of COT? Is financial TV your only access to knowledge?
What Chairman Volcker added when speaking of the need to put in place those POLICIES that have a historical record of turning the triple deficits towards surplus was a CRITCALLY IMPORTANT caveat.
“I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.”
The Chairman has spoken again saying to you EXACTLY the same words that form the foundation of my present position on the US dollar and Gold.
Sadly, I do not expect you, the gold advisors or many others to pay heed to the words of the best mind in finance.
Sadly, I expect you to continue throwing your gold insurance and good gold shares out.
Sadly, I expect the majority of you to be coned into being long the dollar and even short the Swiss and Canadian dollar.
I know those who know the future and they are not chartists or sooth sayers who might get it right once in a row.
Chairman Volcker is the intellectual powerhouse in finance.
Chairman Volcker has spoken but this time his invitation is to re-enter gold while shorting the dollar by owning other currencies of which my choice is the Swiss and Canadian.
This is the clear implication of this world if you have the ability to listen carefully, unemotionally and act accordingly regardless of whether the establishment considers you a pinhead.
Please, read the piece below, listen, drop your emotions and grasp your intellect.
washingtonpost.com
An Economy On Thin Ice
By Paul A. Volcker
Sunday, April 10, 2005; Page B07
The U.S. expansion appears on track. Europe and Japan may lack exuberance, but their economies are at least on the plus side. China and India - with close to 40 percent of the world's population -- have sustained growth at rates that not so long ago would have seemed, if not impossible, highly improbable.
Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks - call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.
We sit here absorbed in a debate about how to maintain Social Security - and, more important, Medicare - when the baby boomers retire. But right now, those same boomers are spending like there's no tomorrow. If we can believe the numbers, personal savings in the United States have practically disappeared.
To be sure, businesses have begun to rebuild their financial reserves. But in the space of a few years, the federal deficit has come to offset that source of national savings.
We are buying a lot of housing at rising prices, but home ownership has become a vehicle for borrowing as much as a source of financial security. As a nation we are consuming and investing about 6 percent more than we are producing.
What holds it all together is a massive and growing flow of capital from abroad, running to more than $2 billion every working day, and growing. There is no sense of strain. As a nation we don't consciously borrow or beg. We aren't even offering attractive interest rates, nor do we have to offer our creditors protection against the risk of a declining dollar.
Most of the time, it has been private capital that has freely flowed into our markets from abroad -- where better to invest in an uncertain world, the refrain has gone, than the United States?
More recently, we've become more dependent on foreign central banks, particularly in China and Japan and elsewhere in East Asia.
It's all quite comfortable for us. We fill our shops and our garages with goods from abroad, and the competition has been a powerful restraint on our internal prices. It's surely helped keep interest rates exceptionally low despite our vanishing savings and rapid growth.
And it's comfortable for our trading partners and for those supplying the capital. Some, such as China, depend heavily on our expanding domestic markets. And for the most part, the central banks of the emerging world have been willing to hold more and more dollars, which are, after all, the closest thing the world has to a truly international currency.
The difficulty is that this seemingly comfortable pattern can't go on indefinitely. I don't know of any country that has managed to consume and invest 6 percent more than it produces for long. The United States is absorbing about 80 percent of the net flow of international capital. And at some point, both central banks and private institutions will have their fill of dollars.
I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.
It's not that it is so difficult intellectually to set out a scenario for a "soft landing" and sustained growth. There is a wide area of agreement among establishment economists about a textbook pretty picture: China and other continental Asian economies should permit and encourage a substantial exchange rate appreciation against the dollar. Japan and Europe should work promptly and aggressively toward domestic stimulus and deal more effectively and speedily with structural obstacles to growth. And the United States, by some combination of measures, should forcibly increase its rate of internal saving, thereby reducing its import demand.
But can we, with any degree of confidence today, look forward to any one of these policies being put in place any time soon, much less a combination of all?
The answer is no. So I think we are skating on increasingly thin ice. On the present trajectory, the deficits and imbalances will increase. At some point, the sense of confidence in capital markets that today so benignly supports the flow of funds to the United States and the growing world economy could fade. Then some event, or combination of events, could come along to disturb markets, with damaging volatility in both exchange markets and interest rates. We had a taste of that in the stagflation of the 1970s -- a volatile and depressed dollar, inflationary pressures, a sudden increase in interest rates and a couple of big recessions.
The clear lesson I draw is that there is a high premium on doing what we can to minimize the risks and to ensure that there is time for orderly adjustment. I'm not suggesting anything unorthodox or arcane. What is required is a willingness to act now -- and next year, and the following year, and to act even when, on the surface, everything seems so placid and favorable.
What I am talking about really boils down to the oldest lesson of economic policy: a strong sense of monetary and fiscal discipline. This is not a time for ideological intransigence and partisan posturing on the budget at the expense of the deficit rising still higher. Surely we would all be better off if other countries did their part. But their failures must not deflect us from what we can do, in our own self-interest.
A wise observer of the economic scene once commented that "what can be left to later, usually is -- and then, alas, it's too late." I don't want to let that stand as the epitaph of what has been an unparalleled period of success for the American economy and of enormous potential for the world at large.
The writer was chairman of the Federal Reserve from 1979 to 1987. This article is adapted from a speech in February at an economic summit sponsored by the Stanford Institute for Economic Policy Research.
@ eldo
was kostet benzin in SA?
kannste mir mal 500 liter schicken? per express
Gold Futures CoT
Adam Hamilton
Archives
April 16, 2005
With gold, silver, and gold stocks all in typical technical bottoming patterns, sentiment among precious-metals investors is understandably rotten. When prices feel low people feel bad. It is always this way near major interim bottoms.
While I receive countless e-mails laden with despair during times like these, one this week did a fantastic job of summing up how so many investors are feeling today. This gentleman, talking about gold stocks in particular, wrote to me
"I am so tired of losing money on these stocks, it seems like we've been in a bear market for the last 2 years with occasional rallies that seem to get weaker. How can guys like you figure that these stocks are going to someday do well? When do I just give up? I'm at the end of my rope with everything related to Wall Street. It makes me sick and seems impossible to make money. I'm so frustrated I don't know what else to say."
It is not difficult to detect emotional extremes in others, but it is hard to remain detached enough to see into our own hearts. One of the greatest struggles in any speculator's journey is the constant war to overcome one's own destructive emotions of greed and fear, euphoria and despair.
In my own evolution as a speculator, the most effective way I have found to keep myself on an even keel and strive for total emotional neutrality is to focus on the hard data. While our personal feelings about the markets are capricious and often misleading, the underlying data is absolute. It provides a solid intellectual reference point at which to anchor to weather out the storms of sentiment that periodically batter the markets.
April 15 – Gold $424.30 up $1.10 – Silver $7 down 4 cents
What Our Planet Knows That Theirs Does Not!
"There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution."
Aldous Huxley's lecture to The California Medical School in San Francisco in 1961
What you see happening in the markets, or reported on in MIDAS as far as what The Gold Cartel is doing, is extremely significant IMO, … EXTREMELY. From last evening’s commentary:
"What you see here is The Gold Cartel ripping off the specs and keeping gold in check to prevent the derivatives bomb from going off. The creeps sell as gold approaches $429 and buy back when gold approaches $420 because of the strength in the cash market. The crooks were in there buying today when gold took out $423, as the funds were dumping heavily."…
"The Orwellians are running out of ammo and deceitful tricks. Their huffing and puffing has little force behind it anymore. The Gold Cartel was covering shorts like mad on today's bashing they are running so scared."
The Gold Cartel stopped gold cold at $429 on Wednesday to keep the price in lockdown mode and to make sure gold volatility remained low. However, when they had a chance to bury the price yesterday, they were in there scooping up all the cheap gold they could, as the funds sold. This is the fastest cabal turnaround time from major capping to major buying ever. They used to move like this over a period of months, then many weeks, then a week, now within two days. This tells me they are running SCARED and don’t want to be overly short for too long, for one. Secondly, they have to increasingly compete with cash market buyers. If they don’t cover quickly on breaks, they might not get to take in profits from their orchestrated, anti-trust violating price capping maneuvers.
I suggest to you this telegraphs the game at these price levels is nearing an end. They don’t have the physical gold to keep their fraud going much longer at these prices. They must allow gold to rally to ration their dwindling supply and slow down the physical buying. The bum’s big hope for supply is IMF gold, which will be discussed this weekend at the G-7 meeting. Just the talk of those sales has kept a number of buyers on the sidelines. Should those hopes be dashed for all practical purposes, look for gold to take off and blow through $430. (It ought to anyway; however, we know what we are up against.)
Still, The Gold Cartel is not running for the hills yet. With the euro up .90 to 129.42, the dollar down nearly .50 to 80.49, and the stock market collapsing this afternoon, the cabal took gold from up over $2 to down slightly on the Comex session before it recovered. Talk about absurd? Gold should have rocketed up $5 on those market developments. This is why I cannot insult the mainstream gold world enough on their silence about this blatant market manipulation and hideous fraud.
By the close gold drifted back up when the DOW rallied 50 off its lows. How perverse! Who knows how low gold might have been taken when the stock market dropped like a stone late in the day. Volatility has picked up noticeably in every US financial market except gold. US interest rates, the dollar, the stock market have begun trading like pinball machines. Not gold. It just stays in a tight trading range, where it has been for a month.
The dollar hit the skids today and US interest rates plummeted – and of course the US stock market was battered. Now you know why they jacked up the dollar the past couple of weeks. The Orwellians needed some kind of cushion for what lied ahead and they got it by taking the dollar higher – which made no sense at the time unless you know what GATA knows.
What we have developing here is the perfect storm (as Jim Puplava of http://www.financialsense.com likes to call it) developing day after day. It should send gold to the moon and will as soon as The Gold Cartel blows up. It could happen at any time. I won’t jinx it by saying the volcanic price explosion is imminent.
Here is a real plus. The Comex gold stocks dropped 150,000 ounces (1500 contracts) or the most since June of 2004. This bears watching.
Almost no one out there is short-term bullish. The lack of understanding of what this gold market is really all about is astounding. The mainstream gold world is the biggest bunch of stupids ever assembled. Either that or they are the most disingenuous liars ever to be found in one industry. The gold farce/fraud could not be more blatant. YOU and I are paying the price for this gross negligence. More below.
Silver just goes up and down on this and that. Part of the same disgraceful price manipulation scheme.
I still say gold and silver are going to blow sky high. The sooner the better.
The John Brimelow Report
JB: A call to Warren Buffet?
Friday, April 15, 2005
Indian ex-duty premiums: AM $4.36, PM $4.49, with world gold at $422.95 and $423.35. Considering all the Indian reporting cities together, premiums were ample for legal imports. A respectable performance, considering the rupee weakened sharply on foreign liquidation of Indian shares. The Bombay Index was down 3.39%.
Confronted with world gold $4 lower than the previous close, TOCOM managed a very faint sign of interest. Volume rose 35% to the equivalent of 15,198 Comex, and open interest edged up the equivalent of 445 NY lots to equal 91,938 Comex. Mitsubishi’s data implies the public added 193 Comex to their long. The active contract closed down 8 yen and world gold went out 95c below the end in NY. (NY yesterday is said to have traded 68,143 contracts. Open interest fell 2,842 lots to 277,397.)
The Shanghai Gold Exchange was unswayed by President Bush’s call yesterday for a revaluation of the Yuan. Premiums over world gold jumped over $1 to the $4.21 - $4.55 range, which is quite high. Clearly local traders do not expect any change in the exchange rate.
Yesterday, in the words of HSBC
"Gold prices lurched lower…as the rally in the dollar and the weight of long liquidation in other commodities finally took its toll."
The toll was forcibly exacted by quite a large scale fund raid: actual volume was 24% above the estimate, and half of it was apparently done in the first couple of hours.
ScotiaMocatta’s account is
"Selling during European trading hours carried over into the New York session, bringing about fresh buying from physical traders with the lower prices. Gold spent the early part of the day trading between 425.00 and 426.00 with funds on the offer and New York dealers and physical traders on the bid. However, the fund selling finally proved to be too much putting resting stop loss orders into play…."
The UBS version is
"In New York yesterday, gold opened on the highs at $425.70 / 426.10 and attracted heavy speculative selling as the euro and gold equities came under pressure. Support at $424 was broken and the metal traded to a low of $421.75 / 422.25 to test the 200-day moving average."
Significantly, Dealer and short covering as well as the usual physical buying appeared on the lows:
UBS:
"We saw good scale down buying from a combination of short-covering and physical demand and this, together with the bounce in the euro saw gold close around $424/oz,"
ScotiaMocatta:
"The metal fell to the session low of 421.70/422.20 where dealers stepped in on the buy side. Bargain hunting then helped lift the price back near 424.00…"
This suggests that at least some professional traders do not choose to contest the Middle Eastern/Indian demand in the low $420s.
Seeing the stories yesterday of Warren Buffet allegedly cutting his dollar short positions brought back memories of the Phibro/Salomon silver position, suddenly taken on Easter Monday 1994, shocking the market, and then mysteriously liquidated. There was a story (which I believe to be true) that Buffet, then influential at the firm, ordered it sold on the grounds it was attracting hostile attention from Washington. Possibly the AIG/General Re situation is more of a problem than most assume.
JB
Two notes on JB’s always superb input:
The open interest reduction was a result of The Gold Cartel covering and in line with my earlier comments.
Buffett’s firm was Salomon Bros. Jimmy DePiazza of Phibro, a Salomon subsidiary, had the silver market cornered. Salomon was going through a bond scandal because of a huge guru bond trader named Meriwether. The government suggested Phibro dump their silver position or Salomon would have US agents all over their operation and books for years to come. Buffett caved.
CARTEL CAPITULATION WATCH
GOLD
During this week I see metals struggling to fight the
dollar's rise and one can therefore do some day
trading. Sell if gold rises dollar six and buy if it
falls dollar eight. I still do not recommend holding
buying positions in gold for a period of about two
months. It is clear that gold will trade in a range of
dollar twenty one for the next few weeks from Friday's
closing.
This week range will be $428.80 to $415.20.
Concern - The dollar's rise will still be an important
factor for gold and it may take a few more weeks to
break this relation.
SILVER
This week, silver will remain stable but it may be
very volatile on Tuesday and Wednesday with prices
likely to fluctuate on both sides around the range of
fifty cents so trade carefully.
I advise that you only do some day trading. If it
rises more than 18 cents, then one can sell and if it
falls by the same amount one can buy.
One very interesting point will be that - Silver will
disconnect from the gold relationship in the next ten
days. .
@ Eldorado
Sieht recht bedrohlich aus
In nur 3 Jahren fast verdoppelt
Gehe nicht davon aus, dass die Aktionäre und Kleinsparer dieser BIG 5 Banken wissen was diese für gefährliche Risiken eingehen.
Wenn eine dieser 5 Banken ihren Verpflichtungen nicht mehr nachkommen kann, bedeutet dies eventuell das ENDE aller dieser BIG 5
The Big 5
Ich hoffe die ersticken an diesen derivatives,um so frueher, desto besser ! Ich warte schon seit 8 Jahren darauf, aber die haben noch luft und mehr waffen zur reserve. Unterstuetzt werden sie von Snow und Greenspan,die haben eine super dollar druckmaschine und die medien zur hand die jeden weiss machen kann das alles ok ist.
Thanks, for the charts 
XEX
Forecast: The Next Ten Years
by John Mauldin
April 16, 2005
European Uncertainty
Sinking Globalization
Smoot-Hawley is Alive in the Senate
Stratfor Decade Forecast
The China Meltdown Syndrome
The Russian Orthodox Church Leads the Way
The Collapse of the European Political Union
La Jolla and Houston
This week we look at how politics and geopolitical events can affect our investments. We look at a decade-long forecast from one of my favorite information services: Stratfor.com. I change my view on the euro, talk about a possible Chinese recession and look at uncomfortable analogies between 1900 and today. There's a lot of ground to cover so we will jump right in.
I have had the relative value of currencies on my mind every day for the past two weeks. I have been in London, where the pound sterling is at a staggeringly high level, almost two dollars to the pound. Prices in London have always been high, even when the dollar was at its peak. Now they border on the absurd, at least to someone used to the economical confines of Texas. Admittedly I was in a high rent district (Mayfair), but a simple round-trip subway ride was $8. From my viewpoint, it seemed that the price of everything was almost double and sometimes triple what it is for me locally in Texas. There are no cheap drunks in London. Expensive drunks, maybe, but no cheap ones (and no decent steaks).
London is a very civilized place, and quite fun to visit. I enjoyed meeting with clients and business associates, but it was hard to get used to the prices. And the sad thing is that it is likely to get worse over time before it gets better.
While I was there, I watched the polls from France. Last fall, it looks like 70% of the French voters would approve the new to European constitution. If the vote were held today it would fail, and the polls continue to get worse. This has the elite of Europe in quite an uproar. It also looks like the Netherlands could vote no even before the British get a chance to object.
European voters are being asked to accept an 800 page constitution that almost no one has read and which would create a powerful new bureaucracy in Brussels, as if Europe doesn't have enough bureaucracy as it is. The left in France is worried that the welfare state could be changed and the right is worried that even more regulations and nonsense could come down from Brussels. There are both right to worry.
Will a "no" vote be the end of the European Monetary Union? No. Will the euro go away? No. Will it to force the Euro-politicians to become more realistic about the pressures facing Europe, especially demographic and economic issues? Yes.
But it will also create a great deal of uncertainty. And the one thing we know about uncertainty is that the markets don't like it. I have been bullish on the euro for over three years, almost from its bottom. In the medium-term (five years) I am still bullish. But right now, I am simply nervous. I think I want to find other ways to bet against a falling US dollar. Looking around the world my eyes rest on Asia as the next region to see its currency's rise against the dollar. I would expect the euro to rise as well, but now there is a cloud of uncertainty, so I suggest we sit on the sidelines until we can be more confident about the euro.
For several years, I have been recommending that investors who want to play the currency can do so by investing in FDIC insured accounts and CDs at Everbank. You can purchase a CD in almost any currency you can think of it. I know that many of you have bought euro-denominated CDs. What I would suggest you do, is that when the maturity on your CDs come up, that you roll it over into their new Asian Tiger Index CD. This is what my good friend Chuck Butler recently wrote:
"I am very happy to announce that Everbank World Markets is now offering a new 'Asian Tiger Index CD'... We're going to originate a CD that will be made up of the currencies from Japan, Thailand, Singapore, and New Zealand. Ok, we don't need a geography lesson... We have added New Zealand, because it is 'Pan-Asian,' it exports mainly go to Asian countries, and it pays the interest! If you're interested, call the desk (1-800-926-4922) for the details... The interest rate will be 2% for both a 3 and 6 month CD... I've done this because I continue to believe the next big leg down in the dollar will have to come from the Asian currencies that, to date, have not participated, in a big way, in the dollar's weakness... And where are the majority of our IOU's held? Asia... So... If the global imbalances created by the dollar and these weak Asian currencies are going to receive any correcting, the Asian currencies must rally VS the dollar." Ask for Chuck and tell him I sent you. (I should note that Everbank is a sponsor of my publisher.)
Sinking Globalization
Niall Ferguson is Professor of History at Harvard University. He recently authored an essay which appeared in Foreign Affairs (Volume 84, No. 2) entitled "Sinking Globalization." (There is no free link but you can subscribe if you like at http://www.foreignaffairs.org/.) I would like to recommend this essay to you, and quote a few paragraphs as a way to introduce today's main topic:
"From around 1870 until World War I, the world economy thrived in ways that look familiar today. The mobility of commodities, capital, and labor reached record levels; the sea lanes and telegraphs across the Atlantic had never been busier, as capital and migrants traveled west and raw materials and manufactures traveled east. In relation to output, exports of both merchandise and capital reached volumes not seen again until the 1980s. Total immigration from Europe between 1880 and 1910 was in excess of 25 million. People spoke euphorically of 'the annihilation of distance.'"
Then came World War I, eventually the Great Depression and an even larger WWII. Dr. Ferguson compares the last great period of globalization with today and wonders if we are being complacent.
"The last age of globalization resembled the current one in numerous ways. It was characterized by relatively free trade, limited restrictions on migration, and hardly any regulation of capital flows. Inflation was low. A wave of technological innovation was revolutionizing the communications and energy sectors; the world first discovered the joys of the telephone, the radio, the internal combustion engine, and paved roads. The US economy was the biggest of the world, and the development of its massive internal market had become the principal source of business innovation. China was opening up, raising all kinds of expectations in the West, and Russia was growing rapidly.
"... the end of globalization after 1914 was not unforeseeable. There was no shortage of voices prophesying Armageddon into prewar decades. Many popular writers earned a living by predicting a cataclysmic European war... Yet most investors were completely caught off guard when the crisis came. Not until the last week of July 1914 was there a desperate dash for liquidity; it happened so suddenly and on such a large-scale that the world's major stock markets, New York's included, closed down for the rest of the year."
There were five factors which helped precipitate the global explosion of World War I. The British Empire was over-extended; there was a significant rivalry between the great powers; unstable alliances (think NATO, he says); a rogue regime sponsoring terror; and, "the rise of the revolutionary terrorist organization hostile to capitalism turned an international crisis into a backlash against the global free-market."
Ferguson notes the parallels between the former period and today. I can think of a number of significant differences. For one, there are no nations with the military power to rival the United States, and there will not be for a long time. The rise of free markets and free people is a calming factor. That does not mean the world is without problems. We all know, as Ferguson points out, that a nuclear device planted by Al Qaeda in London or civil war in Saudi Arabia would disrupt the world order significantly. We could spend the next three or four pages listing possible doomsday scenarios, however unlikely.
However, it is not Al Qaeda, Saudi coups, the US trade deficit or a crisis over Taiwan that worries me. I am far more concerned about politicians creating an economic trade war which would destabilize the global economy. For new readers, my long-term view is that we are in what I call the Muddle Through Decade. I expect a series of recessions over the next ten years to provide the impetus to deal with the US trade deficit, consumer debt levels and rebalance global trade into a more sustainable model. It will also be a period of slower than usual growth, thus "Muddle Through."
This is not gloom and doom. It is a simple recognition that the current trends cannot continue and we will have to get back to a more stable economic situation. In the past it always required multiple recessions to be the motivating factor for people to get their house in order. I see no reason why that should change in the future. Most of us with a few gray hairs have lived through numerous recessions and while it may have forced a few uncomfortable changes, our generations are no worse for the wear.
The one thing which could derail my rather benign scenario is a trade war. A real trade war, in my opinion, would lead us to a global depression which would take us decades from which to recover. Sadly there are significant forces in both the United States and Europe which would like to see a rise of protectionism, tariffs and trade wars. These politicians pander to voters who would like to see the status quo maintained. "Protect my job, welfare, benefits and lifestyle," they cry.
However, one of the things that we can confidently predict in a world of accelerating change is that the status quo will not be maintained. The status quo will be increasingly under assault from all directions, not the least of which is the demographic imperatives of an aging developed world. The developed world (the US, but especially Europe and Japan) simply cannot afford to maintain their welfare states over the coming decades. Yet that is precisely what the voters will ask them to do.
Politicians will never admit that the problem is with the systems they have created and which are essentially bankrupt. The voters don't want to hear that their benefits are at risk. They will blame others and pursue policies which will have negative economic consequences. This will of course make the situation worse, but it will be too late.
Smoot-Hawley is Alive in the Senate
Such a scenario does not have to happen. Calmer, wiser heads should prevail, as most sane people realize that a trade war would devastate the world. Yet there are times I get nervous and last week provided just one of those examples.
Senator Charles "Smoot-Hawley" Schumer of New York is sponsoring a bill which would slap across-the-board tariffs on imports of Chinese goods unless China agrees to revalue its currency. The Senate failed to kill the legislation last Wednesday on a vote of 67-33. Never mind that such legislation would be a huge tax on the American consumer, would signal to the world that free trade is no longer the policy of the United States, and would have an almost immediate affect of raising interest rates, causing a drop in housing values and a recession. By the latter, I mean that if the Chinese were not buying our US debt interest rates would rise.
Pardon me a moment of cynicism, but I don't think there are 67 senators who are that economically illiterate (perhaps 40 or so, with Schumer being chief among them!). What I do think is that they see this as a free opportunity to pander to the voters in their states. They know that the President Bush would veto such a bill so they vote for the bill with the comforting knowledge that they will never have to deal with the consequences. They get to have their cake and get to eat it too.
We see the same sentiments echoed in Europe. In next Monday's Outside the Box we will read an essay from those very smart guys at GaveKal Research discussing the dismantling of the European Growth and Stability Pact last week. They note "In Brussels, we saw a French president [Chirac] give echo to the more protectionist thesis of the greens, the reds and other fruitcakes. We saw a French president blame Europe for 'dumping social, dumping fiscal, dumping ecologique'."
Stratfor Decade Forecast
Everyday I eagerly read an e-mail from Stratfor.com. Stratfor is described by Barron's as "a private quasi-CIA [which] has enjoyed an increasing vogue in recent years as a result of its heady forecast and many news breaks. It is a private intelligence and security consulting organization based in Austin, Texas with a global network of intelligence sources. They provide corporations, governments, financial institutions and individuals with geopolitical analyses and forecasts that assist them in managing risk and helping them to anticipate political economic and security issues vital to their interest. George Friedman runs the firm, and I consider his essays on the world political situation to be some of the more insightful I read anywhere. He is one smart gentleman.
While their services can be quite expensive, their daily e-mail is somewhat more affordable. I consider it a must-read. Every five years they produce a 10-year geopolitical forecast. In 1995 they predicted the meltdown of Asia, which happened in a 1997. They have been consistently right in their analysis of Russia and Europe. I could go on for pages about all the correct calls they have made, (along with a few misses, of course), but let's go ahead and look at a partial summary of what they predict for the next 10 years. The entire report is 45 pages, but we will cut it down to the main points in the next few pages. Quoting from their introduction:
"A decade forecast is the longest we attempt at this time, because anything greater than a 10-year forecast encounters history's tendency to have wild discontinuities. Even a 10-year forecast has discontinuities built in. A 10-year forecast in 1980 would have had to forecast the collapse of communism in Eastern Europe. A forecast in 1910 would have contained World War I.
"The art and science of forecasting requires that you recognize that the least likely outcome is simple extrapolation. You can draw straight lines for a year, but drawing them out for 10 years is dangerous. A decade forecast, therefore, is about predicting the unexpected. [emphasis mine] But it is precisely the wildly unanticipated that a decade of history throws up at you. Predicting in 1995 that the United States would invade Afghanistan in 2001 would have been enormously difficult. It would have been far easier to draw a straight line showing that the post-Cold War interregnum would be eternal.
"It follows from this that expecting the U.S.-jihadist war to continue to dominate the world in 2015 - 14 years after the war started - is fairly unrealistic. If the Islamic world remains the focus of the international system, it will be on very different terms than today. In fact, it is our view that the jihadist issue will not go away, but will subside over the next decade. Other - currently barely visible - issues are likely to dominate the international scene."
I should note that their forecast, while having some disconcerting elements, is nowhere near as pessimistic as the Ferguson essay mentioned above. Indeed, compared to that essay, it is quite reassuring. And they are at their most (relatively speaking) optimistic when looking at the United States.
They see the focus of the US going from the Middle East to East Asia. They expect the US to disengage from Iraq and the Middle East in general, as we essentially minimize the risk from the jihadist movement by the end of the period. Interestingly, they expect a decline in US foreign involvement in the years around 2010, followed by increased involvement in Asia. They see increasing coalitions uniting in an effort to resist American power, primarily in East Asia, which will require our attention
In summary on the economy: "It is our expectation, based on our Asian forecast, that pressure on the trade deficit will subside before the end of the decade. At the same time we continue to forecast productivity growths and smoothed demographic curves throughout this period. We expect two or more recessions during the coming decade - at least one of which will be triggered indirectly by Chinese problems. When China's own version of the Asian model falters, China's export sector will cease its current red-hot growth. This will gut Chinese exports to the United States, thereby removing China's need to heavily invest in American government debt.
"For the past two years, China has not only been a leading source of U.S. trade deficit, it also has been a leading purchaser of U.S. government debt to finance that deficit. The Chinese crunch and step-back from U.S. debt purchases will cause the U.S. dollar to plummet on international markets, most likely triggering a recession until the U.S. economy's inherent efficiencies allow it to regain its strength. We do not expect to see a return to 1990s growth rates. At the same time, we regard the American economy very positively indeed."
Maybe I like this because it sounds almost exactly like my Muddle Through scenario, but I think there is much to commend this.
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The Global Economy
Moving onto the global economy, they spend several pages noting the demographic problems of both Europe and Japan. Long-time readers know that I repeatedly refer to these problems, so I'll not go into detail here. But their conclusion bears noting:
"At the end of the day, the United States is set for a decade of high investment, and by extension, high productivity growth. Europe and Japan simply cannot replicate these developments - even if they were willing to restructure their economies from the ground up. Building such an environment requires a generational effort, not one that can be implemented in a "mere" decade. The replicability of economically healthy demographics in the United States does not mean it consistently will be the state of affairs.
"As workers retire, income shrivels and the torrent of money reverses. Instead of being large-scale net suppliers of investment capital, former workers become hoarders and spenders. The bulk of their financial assets are switched from high-growth stocks into low- to no-growth bonds and even cash so they cannot lose their shirts in the stock market crash of the moment. In short, aside from their spending - which usually decreases after retirement - retirees cease to participate in the national economy and capital formation. At that point, investment slows, credit becomes far more expensive and growth falls off.
"A reduced supply of capital means two things. First, the cost of doing any sort of financing - anything from getting a car loan to building a skyscraper - will increase, setting the stage for lessened consumption and, by extension, slower growth across all sectors of all economies. Second, less supply always increases volatility. Crunches are next to impossible in well- or over-supplied markets; lower supply means the swings from economic booms to busts will be far more rapid and far more disruptive overall.
"For the United States, the above description will manifest itself sometime around 2015, as the bulk of the U.S. baby boomers pass into retirement. For Japan, it begins here and now."
The China Meltdown Syndrome
Stratfor's most dramatic prediction is a meltdown in China. Essentially they see the current euphoria over China as a focus on Shanghai and the growth in the coastal areas and ignoring the problems deep within China. The staggering proportion of bad debt, enormous even in relation to official dollar reserves, represents a defining crisis for China. While they expect China to hold together through the 2008 Olympics, for a variety of reasons they see power devolving to the various states and region of China and away from Beijing. They predict massive social upheavals because of the difference between rich and poor, especially the relatively rich coastal areas which last year received a 87% of foreign direct investment as opposed only 3% given to the inner provinces, yet 25% of the people live in those inner provinces.
They do not see China going away, of course, but they do see Japan replacing her as the premier power in East Asia, with Taiwan aligning itself with Japan. Within the next few months, I will do another specially letter on China and will go into their concerns more carefully. Hopefully I will get some face time with George Friedman and ask him a question or two which will give us some insights.
The Russian Orthodox Church Leads the Way
Their view of Russia is just as disconcerting. They say Russia is collapsing and expect that to continue, but this will create an increasingly nationalist and anti-Western movement in Russia. They expect Russia to eventually reassert itself as a major international player with the traditional anti-Western course. They also believe that Russia may try to reintegrate part of its old union, perhaps forcibly.
And they provide this rather startling prediction: "On the whole, we expect a fundamental Russian crisis and prolonged fighting in various forms - including military conflict at times. A number of scenarios could play out, but in the end, Russia will become the nationalist, statist entity it was before the last 20 years of openness and marketization.
The question now is what the reversal will look like. The Communist Party is likely finished in Russia; it will not be the driving force. A new, anti-Western leading force will emerge from street protests and popular anger. Moreover, a completely new elite will probably form from this period of turmoil. The new elite will consist of national capital representatives, mostly from the production economic sector; patriotic intellectuals; officers in the military, security and intelligence; and popular resistance leaders.
"By 2015, the regime will probably be religion-oriented, with the Russian Orthodox Church taking a leading role, joined by moderates from other large religious traditions in Russia, such as Islam and Buddhism. A new regime will have to draw upon one resource or another for its strength; traditionally, Russian morality and human capability have been vital to the country's success. With the communist ideology in crisis and the market ideology inspiring relatively few Russians, moral strength can be drawn from revived religious values that argue for a strong Russia and a just society. Also, it will probably be a very conservative regime, resting on the foundation of a production economy, with low-paid workers, intellectuals and peasants as well as those dependent on social benefits."
Moving on to the Middle East, as noted above, they believe the US-jihadist war will end in the favor of the United States, and that US involvement will shift from military to political with the odd base left over here and there. They also see major leadership transitions in Egypt, Syria and Saudi Arabia.
"As the U.S.-jihadist war winds down, an intra-Islamic struggle in the Muslim world will begin to take shape. This conflict will pit Islamists against non-Islamists and will alter the nature of U.S. involvement in Muslim states from military action to political engagement, where Washington will - on a case-by case basis - negotiate with Islamist forces. This trend already is under way - most visibly in Iraq, where Washington has been working with the country's Islamist-leaning Shia first to oust Saddam Hussein's regime and then to effect a political reconstruction of the country - obviously in keeping with U.S. geostrategic objectives in the region.
"...The last four years also has led to the Muslim world's significant radicalization along religious lines. This has boosted several radical (non-militant) Islamist groups, which have been able to leverage societies' religious currents to advance themselves. Though they have remained secure from much of the destruction that has befallen their militant counterparts, the radicals - given their dogmatic predisposition - are unable to provide the masses with more than an outlet for protest.
"Here is where moderate Islamist groups increasingly will come into play, providing an expression for socioeconomic frustrations and a forum for identity politics. Moderate Islamist groups will make significant political gains in many Middle Eastern and Muslim states in the coming decade, as the establishments buckle under pressure from calls for change from within and without. That said, there are other non-Islamist political forces that will compete with the rise of moderate Islamists.
"This will bring about a struggle over the question of moderate Islam. Since the Sept. 11 attacks, there has been an upsurge in the global discourse involving moderate Muslims and moderate Islam. This issue is complicated not only by the U.S.-led West's attempts to seek out the moderates in the Islamic world but also by the diverse set of groups in Muslim states who claim to be the upholders of moderate Islam. What is curious in all of this is not the Western demand for moderation but the ample Muslim supply of moderation.
"There are at least four different types of Muslims who advance themselves as the adherents of moderate Islam. They are moderate Islamists, traditional Muslims, liberal Muslims and certain moderate Islamic regimes. An intense struggle will take place over ownership of moderate and authentic Islam in the course of the next decade."
The Collapse of the European Political Union
As relatively optimistic (if you can call predicting two recessions and a collapsing dollar optimistic) as Stratfor is on the US, they are not as sanguine on the prospects for Europe. They predict the political union will collapse, but the economic union will continue. Much of the economy of Europe will remain stagnant under heavy social costs and a rapidly aging demographic. They predict increased tensions over Muslim immigration with the potential for some states to limit immigration.
On the political front, they believe there is the potential for conflict with Russia as Russia tries to reassert its authority and direct control over some of the former Soviet states in the Baltics, Georgia and Ukraine. This will present a problem to Europe, as they will have essentially no way to counter Russian power.
"The European Monetary Union (EMU), unlike the political union, will not fall apart in the coming decade. At present, there are more countries trying to join the EMU than are trying to leave it. Estonia, Lithuania and Slovenia will likely join in 2007, followed in 2009 by Latvia and Cyprus. Similar to the political union, the demise of the eurozone requires the departure of one major country - Germany. But Berlin, as the EU's largest economy, has more to gain from being in the eurozone than not being in the eurozone, simply because Germany is the undisputed leader and exemplar of the European economy."
"...Exogenous shifts make a European common position - on anything - much harder to achieve. A resurgent Russia forces Europe to choose what it hates more: U.S. troops on the ground, the costs of rearmament or Moscow calling the shots. Some countries would not mind U.S. troops, but for others, that would represent the complete destruction of national sovereignty. Islamist militant attacks force the Europeans to take action against immigration - but some states need Muslim immigrants to make up for declining populations. These difficulties add to the probability that the political union of the EU will break apart in the next decade."
It is best to stop here, as the letter is already getting long. If you are interested in getting the report and subscribing to Stratfor's basic service, you can go to http://www.stratfor.com/offers/050411-bmg/?ref=bmg001. For those who need to be in the know about what is going on in the world, and need a high level resource, I know of none better.
La Jolla and Houston
I am obviously back in Texas. It feels like summer, as they are playing baseball outside my office. The Texas Rangers are beating the Toronto Blue Jays 3-2 in the sixth, but there is still time for our pitching to collapse (sigh). The crowd is sparse, but it will pick up as the season moves along.
I fly to La Jolla to meet with clients and my partners at Altegris Investments next week, and then on to Houston the week after. With the exception of one weekend, I am home for the month of May, which after all the travel this month, I need a month to catch up.
I got to have dinner with good friend Bill Bonner last night in London. I gave him a copy of a book I was reading called "Younger Next Year." I highly recommend the book for every man over 45. There's not much (actually none) investment advice in the book, but there is a lot about how to stay healthy. The book also emphasizes the importance to your health of having good friends. While I'm working on the exercise part, I have the friendship part down. Based on the quality of my friends I should live to be a hundred. I told Bill to read the book and follow it so that we could both be a hundred together.
So here's to staying healthy as we go through the next 10 (and more) years. I plan to still be here writing and I hope you will still be here reading. Have a great weekend.
You're always and ever the optimist analyst,
Le Metropole Members,
G7 Fails to Reach Deal on Debt Relief
By Sumeet Desai -April 16
WASHINGTON (Reuters) - The Group of Seven economic powers
on Saturday failed once again to agree on how to free Africa from debt and poverty.
Aid agencies had wanted the rich countries to make good on
their pledge to help rid the world's poorest countries of
their crippling debt but ministers once again could not
decide on the best way to pay for this.
Their final statement after a Saturday meeting went no
further than thanking the International Monetary Fund for
a study on how its gold reserves could be used to help fund
100 percent debt relief and promising more discussion.
"There was complete silence from the G7 on the sale of IMF gold. 
Yet the IMF has clearly said the gold ""can be sold""
to help cancel poor countries' debt," said Jonathan Hepburn, policy adviser for Oxfam International.
"How many children have to die before these seven men in
suits develop a sense of urgency?"
In a report prepared for the G7 meeting in Washington, the
IMF said an overall sale of about 13 to 16 million ounces
of its 103.4 million ounces of bullion could be handled by
the market without significant difficulty...........(Asia is waiting for it)
YEAR OF AFRICA
Britain, the current holder of the G7 presidency, has
declared 2005 a make-or-break year for Africa and says
there is no chance of meeting a United Nations goal of
halving world poverty by 2015 without stumping up money
now.
Its finance minister Gordon Brown 
broke off from election campaigning at home to press his G7 colleagues to back
his gold sales plan.
But the United States is opposed.
Snow told the IMF policy committee on Saturday selling
gold stocks to pay for debt relief was the wrong approach.
"So whatever the merit of the argument might be, it's not
going to pass," Canadian Finance Minister Ralph Goodale told Reuters in an interview on Friday.
Nor does President Bush's administration back Brown's
other idea -- an International Finance Facility (IFF)
that would double cash for developing countries by
issuing bonds against rich countries' future aid budgets.
The G7 statement simply said ministers had discussed a
pilot of the scheme currently being run to raise money
for immunization of African children. 
France's proposal to levy a small tax on airline tickets,
say around one euro or one dollar per ticket, to pay for
aid, also failed to win support.
Ahead of the meeting, British Treasury officials played
down hopes of a deal but are conscious time is running
out before G8 leaders' summit in Gleneagles, Scotland,
in July.
"The politicians are cutting it very fine. 2005
Hot Inflation Meteorites
Big Picture As our cartoonist shows, below, planet earth is about to be bombarded by hot inflation meteorites. It's coming as a surprise/shock to mkts (especially bonds). But page 1 HSL cartoon on May 9, 2004, showed inflation was quietly launched in 2004 (unseen by outmoded & govt "adjusted" indices, like the CPI's in various nations). We forecast it would evolve into high-pitched inflation in 2005-06. Then, move into stagflation in perhaps 2006-7, then into recession -- perhaps in 2008-09. Precise dating isn't possible, but this is a long-range guided Biggy Big Picture as I see it. And the heating-up inflation stage is now becoming apparent in the US, UK, China, Oz, NZ & a few other places. It'll be broader & more extreme as we move into Q2.
