February 2008


hi fellow Jersey patriots and some ex Jersey peeps.
 
The next step in the Freedom Movement begins in NJ. Murray Sabrin is running on the Republican ticket for NJ Senate. Murray’s platform is similar to Ron Paul’s. Limited government, free markets, less taxation, sound money, protection of civil liberties and a non-interventionist foreign policy. If you want the government off your back and out of your wallet and end useless regulation and free up the markets to ensure true prosperity, then please donate today and support Sabrin for Senate.
 
Please check him out at www.murraysabrin.com  he was recently endorsed by Ron Paul.
 
Murray will be speaking today(2/29/08) at Wall St at 4pm in Bowling Green Park.
 
cheers

Last night i attended my monthly working capital market group meeting headed by nations top economists and investors. Peter Schiff is a popular attendee as example. Here we discuss monetary and fiscal policy, capital markers, debt markets, bond markets, commodities and occasional mention of real-estate (mostly me).

 This group has long been bearish on the markets and very bearish almost gloom and doom on the global economy. We study and debate charts…charts…and more charts. Ive learned more about statistics and math in four months than all four years at college.

Ive mentioned this group in some post below and after last night the economic outlook went from bad to worse. This is being played out today in the news with the Fed finally admitting worsening economic trends. Ill go over some of the highlights of last nights meeting.

We are entering a perfect storm for a crash, last night we pointed out all the signals that point to a 1929 crash…..and they are ALL there.  In some instances we are in worse shape than 1929. Only variable that cant be seen on its effect is globalisation that did not exist in 1929.

We pointed out five demons that are to cause this crash.  1. National Debt: 9 trillion today, $70 trillion due in 20 years. This alone will keep us in a economic downturn for a decade. 2. Falling dollar: due to over spending, over borrowing and too much inflation (money supply). This is vital since a low dollar will not attract people or nations to buy our debt. This will cause interests rates to spike and taxes to go up. 3. Inflation: low interest rates and too much liquidity has caused too much mal investment and poor business decisions. Basically this easy money has created businesses that a true free market would purged. 4: Taxes: Americans now pay nearly 50% of the fruits of their labor to the government on all levels. Supreme Court Judge Marshall once said, “The power to tax, is the power to destroy”. 5. Over Regulation: this was just mentioned, but never got into details.

Above represents the macro picture of problems, now lets look at the micro level. The stock markets are starting to form their iron crosses and have entered a bear market and a long term sell-off trend.  Dow and NASDAQ are down 20%+ and S&P is close behind. We have officially entered a bear market and its only the beginning, we have another 30-40% correction built in. Companies will begin to report lower earnings and losses by 2nd quarter 2008. We are still only in the beginning of the sub-prime mess…it will get worse. There is already another bubble ready to burst…the credit card market.  Watch 2009 to see alot of pain and suffering with credit cards.

Alot of this is in relationship to liquidity. THERE IS NONE. BANKS ARE BROKE.  Each week, by law, banks are required to report there reserve ratios to the Fed and Congress. This ratio is derived by taking cash on hand and borrowed reserves. For decades banks borrowed from each other on the over night counter (fed funds rate) to cover there reserve limits. Banks stopped doing this late last year…why??? Then the federal reserve lowered their discount rate and created a “private auction”. The reason banks no longer lend between each other is simply because they have NO CASH to lend. The reserve ratio by law needs to be above 1.0.  In times of a recession where you hope banks inject liquidity, this ratio can go as low as .6 well….the last reported numbers from banks in december had them in negative territory. Then all of a sudden they all stopped reporting this mandatory weekly ratio…its the law for any charted bank. THE LAW! Past two months…..nothing! and no outrage from the Fed or Congress. Why??? because if you knew banks had no cash, nothing, nada, flat broke…what would you do?  There would be a bank holiday…run on the bank. 1929 all over again.

Taking this into consideration, falling dollar and intense national debt. the government and the Fed are nearly powerless to avert the coming crash…they created it. The Fed cant lower rates much more, they will, but there will be a limit. Lower too much and the dollar will crash. Dollar loses too much value, all our creditors around the world will dump dollars and we will have hyper inflation..20%+. We cant keep borrowing money to pay the bills, especially with low interest rates….they will have to rise sharply. Imagine credit cards at 30%, car loans at 20% and mortgages at 15%…we borrow $9 trillion, we have to pay it back some day….some how. The market is ALWAYS stronger than the Fed and government, no matter how much they get involved in our economy…which is why they should not be involved period! The market is going to send us all a strong message in late 2008, early 2009. We have lived beyond our means with guns and butter, so we will be destined to live below our means from then on.

Not that the Fed and government has already screwed us….there are talks that the US Government and the Fed will take a unprecedented step of buying a broad range of assets, including stocks and other equities. This is being discussed because everyone knows the Fed and Washington are scared, they know we are “f*****”! This policy is nothing more than the largest buyout in history, it will involve more than a trillion dollars and a huge devaluation of the dollar. Ok, so good bye any savings you have and a tax burden of unmeasurable value. (dont forget that $70 trillion coming in 20 years). We will become surfs to the state. We and future generations will have to work longer, harder for less. It may even be the end of such a empire….one only needs to look at history of great empires…the road to Rome.

So…what does one do? first get out of the stock market unless you absolutely know how to position oneself. This involves alot of options, leaps and how to play the bond market. This was discussed heavily last night, but over my head and personally dont care since im 100% out of the stock market. Next, get out of dollar evaluated securities such as IRAS and Mutual Funds….they will drop like a rock in a crash, especially with the falling dollar. If the dollar falls 10%…you just lost 10%, that simple. The dollar has lost more than 20% of its value past year…inflation is on our door-step.

Go into hard assets such as gold, silver, platinum, commodities such as wheat and corn, real-estate, especially commercial and a basket of currencies. The Canadian and Australian dollar are highly recommended. As is Swiss Franc and the Chinese Yuan if you can get it.

Mindful this economic crash will follow into Europe then into Asia. Alot of the economists at this meeting are predicting a 7-10 year fall-out.

Dont forget our lovely welfare check we will be getting in May, more borrowed money…yeah!!! the only place you should park this $600 is pay down debt or buy gold.

I cant wait till next months meeting, alot can happen in 30 days.

Video above is last part of MTV/Myspace dialogue from Saturday Feb. 2nd.

Describes exactly why Ron Paul is different among all the “we are change” candidates. when they mention “change” its really tinkering. what we will see is ALOT of the same. Problem is we cant afford it anymore, neither can we afford to loose any more civil liberties.

Ron Paul simply wants the government out of our lives, out of our economy and out of the lives of other people around the world. Government has failed. Socialism has failed.

Why does the federal government need the Dept. of Education, Energy, Labor, DEA, Homeland Security…etc…they have no authority under the Constitution, not in a FREE society where individuals take personal responsibility and self reliance.

Collectivism won in the 20th century, lets work hard to ensure freedom and individual liberty win  the 21st!