Up, up and away! Gold and crude oil are skyrocketing! The dollar is plunging!

[Ninong]

Recipe for a perfect storm:

1. Spend $2.4 trillion on an unnecessary war and borrow the money to wage it. That's the latest estimate from the non-partisan Congressional Budget Office for the cost of the war over the next 10 years. We have already spent $600 billion and committed to another $200 billion. All of this money will have to be repaid by our children and grandchildren.

2. Cut taxes while waging war and running up enormous budget deficits. Grandchildren will pay for it, plus lots and lots of interest.

3. Create lots of new jobs... overseas! Fail to create enough new, high-paying jobs at home to even keep up with population growth.

4. Have compliant Federal Reserve cut interest rates to spur economic growth to fund your tax cuts and your war in Iraq. Have SEC and Federal Reserve encourage financial institutions to create all sorts of new ways for people to buy more home than they can afford. Lend people 100% of the purchase price provided they agree to adjustable rate mortgages or, even worse, negative amortization mortgages that reset three to five years later. Tell them not to worry, their homes will go up in value and they will be able to refinance and take money out. Homes never go down in value. Everybody knows that. Unless they're more than 30 years old.

5. Have irresponsible Federal Reserve Chairman encourage people to take out adjustable rate mortgages when fixed rate mortgages are at 45-year lows and the Fed Funds Rate is at 1%.

6. Ignore the fact that you can't go on forever with enormous budget deficits and balance of trade deficits without it devaluing your currency.

7. When the over-heated housing market's unnatural expansion suddenly comes to a halt, have the Federal Reserve cut the Fed Funds Rate by 50bps to try to bail out all your banking buddies who lent money to people who really weren't qualified. Ignore the fact that all of that paper was bundled and resold, and resold, and resold, to the point where nobody knows what it's really worth now that the market has come to sudden halt. This merry-go-round came to a halt about three months ago when French banks refused to value the securities backed by U.S. mortgages. They said there was no way to determine a value and they were correct.

8. Merrill Lynch announced early in October that they expected to take a gigantic $5.5 billion write-down due to their exposure to the subprime mortgage market. This week they released their quarterly report and the write-down was actually $8.4 billion. That's an enormous loss. Their CEO will probably be fired over this within the next few days.

9. The Federal Reserve's Open Market Committee will meet again next Tuesday and Wednesday. They are widely expected to cut rates again. The only question is whether the cut will be 25bps or 50bps. They are doing this in hopes that they can prevent a real estate meltdown that will cause the nation's economy to enter a recession next year. It won't work. All it will do is weaken the dollar further, resulting in inflation. Everything that we buy from other countries will now cost us a lot more than it did a couple of years ago.

10. For the past several years, homeowners have been using the equity in their homes as an ATM machine. They simply refinanced every 18 months and took out money to buy new cars and take expensive vacations. They can't do that now because their homes are going down in value. That means that consumer spending was unnaturally inflated over the past few years and it will now start to slide. Consumer spending represents 70% of the nation's economy. When it falls, the economy goes into recession.

11. Feedback from the coming recession will result in even more people losing their homes. Credit started to tighten up about three months ago but it will get worse.

12. If we're lucky, it will be over with in three to four years. If we're unlucky, it could take 10-15 years. People who bought homes in south Florida or the San Francisco Bay Area in late 2005 and early 2006 may not break even for another five or six years, maybe longer. That was the market peak. Home prices are heading lower for the next two or three years at least.

There's not much that can be done at this point. The real estate bubble is bursting. You can't put the toothpaste back in the tube. The dot-com bubble burst in 2000. That's when the NASDAQ went above 5100. It fell all the way down to around 1200. That was a drop of about 75%. Some major companies fell even more. Cisco Systems fell 90%. It's still down about 60% from it's 2000 high. People who bought Cisco in 2000 may not break even until 2015, if they're lucky.

Will unwinding the real estate bubble be more painful than unwinding the dot-com bubble? Yes, it probably will be more painful.

P.S. -- A month ago the Bush Administration was projecting that 500,000 homes might go into foreclosure in the mortgage meltdown. Now they're projecting 2,000,000 homes could go into foreclosure.


__________________________________________________

"Is our children learning?" -- George W. Bush, Jan. 11, 2000.

"Childrens do learn when standards are high and results are measured." -- George W. Bush, Sept. 26, 2007.

[Ninong]

Five-year gold chart



Back in October 2002, when Bush was preparing to invade Iraq, gold was $315.10/oz. It closed yesterday at $783.50/oz.


One-year crude oil chart


Note that crude oil dipped as low as $50/bbl in February. It has risen 84% in the past 9 months! That's because the market expects a disruption in the supply of oil from the Middle East.

Oil was around $30/bbl five years ago when the Bush Administration promised us that invading Iraq would be a piece of cake, it would cost less than $50 billion, it would take less than 6 months, most of our troops would be back home by the fall of 2003, the reconstruction would be paid for with Iraq's oil revenues, we would be greeted as liberators, Iraq's oil production would be increased, resulting in a reduction in the price of oil to $20/bbl and spurring economic growth in the U.S. They also guaranteed us that we would find WMDs.

To quote White House senior economic adviser, Laurence Lindsey, “The key issue is oil, and a regime change in Iraq would facilitate an increase in world oil," which would drive down oil prices, giving the U.S. economy an added boost.

The Cheney-Bush Gang: wrong about everything ever! And they can't even shoot straight, literally. Speaking of which, Darth Cheney is leaving on a hunting trip this weekend. I hope he stays sober this time. I think it's in Pennsylvania somewhere. Stay indoors! It's in upstate New York: Clove Valley Rod & Gun Club in LaGrangeville in Dutchess County. "The club advertises a selection of pheasants, ducks and a Hungarian partridge commonly known as a Hun." Is this one of those places where the birds are caged???

[Ninong]

The Cheney-Bush Gang: wrong about everything ever! And they can't even shoot straight, literally. Speaking of which, Darth Cheney is leaving on a hunting trip this weekend. I think it's in Pennsylvania somewhere. Stay indoors! It's in upstate New York: Clove Valley Rod & Gun Club in LaGrangeville in Dutchess County. "The club advertises a selection of pheasants, ducks and a Hungarian partridge commonly known as a Hun." Is this one of those places where the birds are caged???

The answer, dear readers, is YES!

Deputy Leader Dick shoots trapped birds!

POUGHKEEPSIE, N.Y., Oct. 2. -- The Clove Valley Rod and Gun Club, whose membership is made up largely of prominent New Yorkers, fear prosecution for shooting live ducks from traps, in violation of a State law which condemns the practice as inhuman.

Turns out this is a favorite pastime of Darth Cheney. That's where he was immediately following 9/11 when everybody thought he was in a secure, undisclosed location worrying about the security of our nation.

A motorcade escorting Vice President Dick Cheney turns off of West Clove Mountain Road in Union Vale after leaving the Clove Valley Rod & Gun Club on Monday, Oct. 29, 2001.

Current article here.

I love this comment someone posted to that article:

I hope all of you Liberals get stuck in traffic over the weekend...and I hope you're stuck in it for hours and hours!

Posted: Fri Oct 26, 2007 12:21 am

[Ninong]

This is just the beginning of the real estate crash. It's just getting started. It really hasn't built up any steam yet. That will come next year.


From today's SF Chronicle:

Foreclosures Hit Record
Banks repossessed 3,242 Bay Area homes in the third quarter -- a 622% increase over last year. Chronicle


Foreclosures in Bay Area, statewide hit record highs in 3rd quarter
A brutal third quarter. Chronicle Graphic

[Ninong]

Recipe for a perfect storm:

8. Merrill Lynch announced early in October that they expected to take a gigantic $5.5 billion write-down due to their exposure to the subprime mortgage market. This week they released their quarterly report and the write-down was actually $8.4 billion. That's an enormous loss. Their CEO will probably be fired over this within the next few days.

Merrill Lynch Chairman Stan O'Neal has agreed to resign after the board told him they would fire him if he didn't resign.

He's out. It will be announced tomorrow. He's leaving with at least $159 million in compensation in addition to the $160 million he received during the past five years as chairman of the board. He did incredible damage to Merrill Lynch in just five years! (P.S. added Oct. 30 -- It's finally official -- O'Neal is out!)

We shouldn't overlook the loss in market cap Merrill Lynch and other financial institutions have experienced over the past few months. The $8.4 billion write-down pales in comparison to the $28 billion Merrill Lynch's shareholders have lost in the value of their stock over the past five months. Citigroup's shareholders have lost a whopping $68 billion in value since June! (P.S. added 11/26/07 -- As of today, when Citigroup closed at $29.80, you can change that $68 billion loss in value to a whopping $129 billion loss!!!!!)

From Rupert Murdoch's Times of London.

P.S. -- Right now (11:40 p.m. CDT), gold is at $793.50/oz and crude oil is at $93.05/bbl. Both could be due for a correction soon. Maybe. I think gold will run into resistance at $800 and crude oil at $95. If crude oil rises above $100 without something major happening in the Middle East, I would be surprised. This rapid rise in both over the past few weeks is because Bush telegraphed his intentions to bomb Iran and/or start World War 3. If things suddenly calm down, both oil and gold will fall.

[Ninong]

This is really crazy!

Five years ago the Australian dollar was worth US$0.55 and today it's up to US$0.92. That's a rise of 67% against our dollar thanks to Bushie's $2.4 trillion adventure in Iraq. It's bad enough the Canadian dollar is now worth more than the greenback but now it looks like the Australian dollar will pass us up soon.

Just a few months ago -- March 2007 -- the Canadian dollar was worth US$0.85 and today it's up to US$1.05!!! That's a rise of 24% in the past 7 months!

Right now the British pound is over $2.06 and the euro is over $1.44. The dollar is plunging and there's not much the Fed can do about it because right now they're in an interest cutting mode to try to stem the credit crunch debacle brought on by the subprime mortgage meltdown. Everyone expects another rate cut (probably 25bps) this coming Wednesday, which is why the dollar is still falling. And the falling dollar is causing both gold and oil to rise.

I don't know if these guys really realize what's going on here. The stock market is merrily rising as if there's not a care in sight. This is all going to come to an end sometime soon, probably not until next year but certainly before the end of next year. I doubt that the Bush Administration will be able to delay the recession beyond 2008. The real estate crisis is just getting started. It should be really obvious in another six months and that's when people will start to panic.

In the meantime, eat, drink and be merry. Just don't buy any bank stocks.

[Ninong]

The answer, dear readers, is YES!

Deputy Leader Dick shoots trapped birds!

POUGHKEEPSIE, N.Y., Oct. 2. -- The Clove Valley Rod and Gun Club, whose membership is made up largely of prominent New Yorkers, fear prosecution for shooting live ducks from traps, in violation of a State law which condemns the practice as inhuman.

Turns out this is a favorite pastime of Darth Cheney. That's where he was immediately following 9/11 when everybody thought he was in a secure, undisclosed location worrying about the security of our nation.

A motorcade escorting Vice President Dick Cheney turns off of West Clove Mountain Road in Union Vale after leaving the Clove Valley Rod & Gun Club on Monday, Oct. 29, 2001.

Current article here.

I love this comment someone posted to that article:

I hope all of you Liberals get stuck in traffic over the weekend...and I hope you're stuck in it for hours and hours!

Posted: Fri Oct 26, 2007 12:21 am

Farm-bred pheasants were released on the preserve 24 hours before Cheney arrived, making them easy targets for the hunting party!

"The way they hunt, I'm not fond of," said Linda Smith, 52, who runs a local preschool. "It's not what I would call a real sportsmanlike activity."

Our fearless great white hunter, Deputy Leader Dick, didn't shoot any 78-year-old Republican lawyers in the face this time, just a bunch of tame pheasants! What a creep this guy is!!! He loves to send other people's kids to fight wars that he himself was scared to death to be involved in when he was that age. All he was interested in was getting drunk and being arrested for DUI.

Some enterprising New York Daily News reporter went snooping around that exclusive private club and took a photo of the Confederate battle flag, the Stars and Bars, hanging from above a door inside a garage or something. Then they alerted Rev. Al Sharpton so that he could pretend to be outraged or something. When nobody gets shot in the face, you have to improvise.

Here's the article with the photo of the Stars and Bars hanging over somebody's door. That's probably where they keep the lawnmowers or something.

Excerpt:

Cheney spokeswoman Lee Anne McBride said Cheney did not know anything about the controversy.

"The VP did not see the flag and neither did anyone on staff," said McBride.

The veep earlier left traffic snarled - but little ill will - as he rolled into the bucolic shooting club with a 15-car convoy.

Helicopters buzzed overhead and cops blocked off roads around the spectacular 2,500-acre preserve, where Cheney visited once before in 2001.

[Ninong]

Wheeeeeee.... going down?

As expected, the Feds cut 25bps today from both the Fed Funds Rate and the Discount Rate. The dollar plunged and gold and oil skyrocketed, as expected.

Right now spot gold is at $797.20/oz and crude oil is at $94.87/bbl.

The Aussie dollar is now worth US$0.94, the Canadian dollar is worth US$1.06, the euro is $1.45 and sterling is $2.08. Where is the bottom???

Update: Posted 7 p.m. CDT. Right now spot gold is at $798.30 and crude oil is $95.50.

[Ninong]

Crude oil just topped $96/bbl a few minutes ago!

I hate to imagine what's coming if the price of oil keeps climbing and the dollar keeps falling. Add in the real estate crash and the credit crunch and it's a recipe for a major recession.

But not to worry, the stock market actually went up today. How myopic!

[Ninong]

But not to worry, the stock market actually went up today. How myopic!

That was yesterday, this is today: The Dow fell 362.14 (2.6%), NASDAQ fell 64.29 (2.25%) and the S&P500 fell 40.94 (2.64%).

The lemmings have seen the light and are now stampeding in the other direction, at least for now.

[Ninong]

Spot gold is at $805.20/oz right now!

Crude oil is hovering around $95.00/bbl. Sterling is now $2.09 and the Canadian dollar is now US$1.07. I guess the Canadians who live close to the border will be heading south to do their grocery shopping.

The stock market was down earlier this morning but it's trying to rally right now. They desperately want to believe that things will get better and that the real estate crash will be a soft landing. Time will tell. I hope they're right but I think the odds are against them. I think things will get a lot worse before they get better.

P.S. -- Spot gold traded as high as $808.50 and closed the week at $806.00. December gold closed at $808.50 after trading as high as $810.70.

[Ninong]

O Canada!



The Canadian dollar in U.S. dollars, 2007 year-to-date. The Canadian dollar has gained 26% against the U.S. dollar since mid-March. They export oil; we don't. They balance their federal budget; we don't.

[Ninong]

Merrill Lynch Chairman Stan O'Neal has agreed to resign after the board told him they would fire him if he didn't resign.

He's out. It will be announced tomorrow. He's leaving with at least $159 million in compensation in addition to the $160 million he received during the past five years as chairman of the board. He did incredible damage to Merrill Lynch in just five years! (P.S. added Oct. 30 -- It's finally official -- O'Neal is out!)

We shouldn't overlook the loss in market cap Merrill Lynch and other financial institutions have experienced over the past few months. The $8.4 billion write-down pales in comparison to the $28 billion Merrill Lynch's shareholders have lost in the value of their stock over the past five months. Citigroup's shareholders have lost a whopping $68 billion in value since June!

Citigroup's CEO may be the next to go!

Citigroup's board called an emergency meeting for this weekend. They may be getting ready to announce additional asset writedowns in addition to the $6.5 billion they announced just a couple of weeks ago and it is expected that CEO Chuck Prince will resign Sunday. The $6.5 billion they have already taken in writedowns is nowhere near enough. They will probably announce another $4 billion in writedowns soon.

Meanwhile, it's never over till it's over and there are rumors that the SEC is now investigating Merrill Lynch. Their CEO resigned last week following an $8.4 billion writedown. Merrill will probably announce at least another $4 billion in writedowns soon. These are enormous losses.

This is only the beginning. These guys still don't know what their ultimate losses will be and many banks haven't even begun to address this issue because they have no way to value the junk they're holding.

P.S. -- Citigroup and Bank of America were both downgraded yesterday. Bank of America is not in as bad shape as Merrill and Citigroup but they will probably announce at least another $2 billion in writedowns in addition to what they have already taken.

Like I said earlier, stay away from bank stocks!

[Ninong]

Holy Crap! Citigroup is taking another $8-$11 BILLION in write-downs on top of the $6.5 billion they just took a few weeks ago!!!

As expected, they canned their CEO:

NEW YORK, Nov 4 (Reuters) - Charles Prince has resigned as chairman and chief executive of Citigroup Inc, which plans to take an additional $8 billion to $11 billion of write-downs for credit and other losses, the Wall Street Journal said on Sunday.

Here.

P.S. -- In the San Francisco Bay Area, the Cal State 9 Credit Union, which has been in operation for 60 years and has more than 29,000 members and $388 million in assets, just announced that they suffered $55 million in loan losses this past quarter on top of the $17 million in losses the previous quarter. Most of the losses are on real estate loans. They were taken over by the Feds Friday. Here.

[Ninong]

Citigroup admits it has no clue!

NEW YORK (Reuters) - Citigroup Inc's problems deepened on Monday as it was unable to assure investors a potential $11 billion write-down for subprime mortgages won't grow, and its nearly pristine credit rating was downgraded.

Here.

P.S. -- The largest U.S bank wrote off $6.5 billion last month, now they're talking about writing off another $8-$11 billion but they admit that the write-downs will probably continue because they have no idea whatsoever what their exposure is to the subprime mortgage mess.

The way these mortgage-backed instruments were structured and packaged, there is no telling what's in them. No one was worried about the quality of the paper as long as home values were rising by double digits every year. Now, all of a sudden, homeowners are finding themselves owing $500,000 on a home that is worth no more than $400,000 and their monthly payments are going up because the below market teaser rates are expiring. They can't afford the new payments and they can't refinance because they have no equity. They're upside down.

Millions of homeowners are in this situation and it is now estimated that 2 million homes will be foreclosed in the next year or two. This will pull home values down and that will pull the economy down because people will be forced to live on their salaries and won't be able to use their home equity as an ATM machine.

[Ninong]

Gold and crude oil are setting new highs today!

Right now crude oil is above $96.50/bbl and spot gold hit $825.50 oz.

Back in 1980 when gold went crazy, it did hit somewhere around $850/oz intraday but I believe its highest close was somewhere in the 820's and I know if fell back below 800 within a day or two. So it's possible we could see an all-time closing high for gold today if it closes where it is right now.

Crude oil will probably reach $100/bbl soon.

Obviously, at these levels, both gold and oil are ripe for a pullback.

P.S. added 1 p.m. CT -- Crude oil topped $97/bbl a few minutes ago. Gold closed in NY at $820.70. It trades 23-1/2 hours a day, so it could go higher later today (which is already tomorrow in Asia) but it's New York close was $820.70. December gold traded as high as $828.00/oz.

[Ninong]

Wheeeeeeeeeeeee... Going Down!

The dollar is tanking!

The Canadian dollar is now worth US$1.09.

The euro is worth $1.46.

The British pound is worth $2.09.

Even the Australian dollar is now worth US$0.93.

P.S. -- Can you spell I-N-F-L-A-T-I-O-N? The Cheney-Bush Criminal Gang's reckless policies are finally overtaking us.

Hey, not to worry, the goofy stock market is actually going up today. Talk about a bunch of optimists! They must be hoping we can sell a bunch of stuff to the Canadians now that their dollar is so much stronger than ours?

Just don't go looking for genuine maple syrup right now. And if you have your heart set on a BMW or a Mercedes, you better not hold off much longer. Prices of European imports will skyrocket.

P.P.S. -- To put things in perspective, it wasn't that long ago that the Canadian dollar was worth only 85 cents! In fact, it was only a few months ago!!!

And I remember when the British pound was approaching parity with the dollar. It was down to $1.05. That was when the euro, which was issued at $1.17, was down to only 83 cents! But thank goodness that no-good, woman chasing Bill Clinton is out of the White House now because all of that happened when he was in office. Can you imagine balancing the federal budget and running up obscene $300 billion surpluses three years in a row? How un-Republican! And let's see, how many guys did we lose in Kosovo? Oh, yeah, now I remember -- zero! But Texas Governor George W. Bush was still ranting and raving about Clinton's war in Kosovo and demanding that he name a date to end the conflict. Bush said we had no business engaging in nation building. And Cheney said that an invasion of Iraq would be a terrible mistake and lead to a quagmire! Incidentally, Clinton's war in Kosovo lasted less than three months, unlike Bush's unending war in Iraq.

Of course, I also remember when the British pound was worth $5 but now I'm giving away my age. And I remember when it was called Great Britian because of something known as the British Empire. When I was a little kid, the map of the world was covered in pink for the British Empire! They were everywhere!

[Ninong]

Up, up and away!

Right this minute gold is $837/oz and crude oil is $98/bbl. At this rate, we could easily see $100/bbl oil before the end of the week.

[Ninong]

This is just plain sick!

Gold topped $846/oz about an hour ago. Right now it's $841/oz. Crude oil is $98.06/bbl.

The euro is $1.47

The Canadian dollar is US$1.10

The British pound is $2.11

The Aussie dollar is US$0.94

In spite of all this, the Dow went up 117.54 yesterday. I have no idea what they're smoking. They're delusional!

We're in a financial meltdown and Wall Street is still looking for a Santa Claus rally. These are probably the same people who still think Bush is doing a heckuva job. Any day now somebody will notice that the dollar is trash and they'll all start panic selling.

[schrocat]

Oh my.
Just got sent a wsj link...
Morgan Stanley is rumored to be posting a 4th q write-down of 4-6b?

Ouch.

So far every "leaked" amount reported has been 75% of the true amount.

I hope this isn't the case here.