SATURDAY July 5, 2008  -   070508(2)_IF

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

Published and Edited by: Bob Chapman

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US MARKETS

            The key to all market analysis is the bond market.  It is the lynchpin to the elitists' power.  It is the keystone to their arch of fraud whose stones consist of the various methods, which they use to pauperize the middle class and to extort and control the financial systems around the world.  This market is worth over 45 trillion worldwide with the US share of that market being worth about 25 trillion.  The bond market has five main categories, namely, corporate bonds, government and agency bonds, municipal bonds, bond derivatives such as mortgage-backed securities, asset- backed securities, and collateralized debt obligations and funding bonds.  The bond market is used to keep all business interests in thrall to the Illuminist system of finance.            Therefore, the Fed will act to save the bond market at all costs.  All other markets are secondary, with the exception of the gold and silver markets, the suppression of which is JOB ONE at the Fed.  Any other markets, in particular the stock markets, will be sacrificed in a New York second to save the bond market.  Knowing this provides a certain amount of clarity when predicting what the cartel will do in any given situation.

            US treasury bonds, which are a large segment of the bond market, are used to absorb trade deficits caused by free trade, globalization, off-shoring, outsourcing and both legal and illegal immigration and to keep all the inflation we have exported abroad from returning home.  Foreign countries with large forex reserves are told to use their dollars to buy interest-bearing treasuries instead of buying hard assets in the US which would be highly inflationary for our financial system because exported dollars would then reenter our domestic economy and increase our money supply.  In this way, the rampant inflation caused by profligate issuance of money and credit by an out-of-control Fed in its attempt to cover up the destruction of our economy stays safely overseas, having been absorbed by the treasuries.  This profligate issuance of money and credit was created by the Fed to support the free trade-globalization agenda and the transnational conglomerates, which are gutting our economy, especially our manufacturing sector.  This Ponzi-scheme is now unraveling as foreigners shun dollar-denominated treasuries yielding negative real returns as inflation, a falling dollar and increased risk destroy the value of outstanding treasury bonds.  The floodgates are now starting to open as a sea of dollar forex flees in terror from dollar-denominated treasuries into hard assets, the effects of which you are already starting to see in highly elevated commodity prices which are also being driven by banks that are desperate for profits to improve their balance sheets by exploiting the Enron loophole.            Hold on to your hat, because this flow of money back into our domestic economy is just getting started.  That is why the FTC is discontinuing publication of its statistics regarding foreign investment in the US, citing budgetary concerns, just as the Fed did with M3.  Wait until all this money pours back into the US economy.  Inflation will go inter-dimensional and take us through a wormhole back to the days of the Weimar Republic as gold and silver head for the Einstein-DeSitter radius at the outermost bounds of the visible universe.

             Treasury securities are also used to fuel the Fed's repo pool which is used to power the PPT's market manipulations by making tens of billions of dollars available on a moment's notice.  The Fed creates money out of nothing to buy treasuries from the primary dealers, who then use the sales proceeds to fund the operations of the President's Working Group on Financial Markets which assists the elitists in stealing from you on a 24/7 basis.  The dealers offer to buy these securities back from the Fed within a month or less in what are called repurchase agreements.  Thus, this "funny money" is shoveled back and forth from the Fed to the primary dealers and from the primary dealers back to the Fed as needed whenever the Illuminati deign that financial assistance for manipulation of markets is needed.  Treasuries are therefore the engine which drives this fraudulent scheme, a scheme that is completely illegal because the authority granted in Reagan's Executive Order creating the PPT is exceeded beyond all belief in what one day will be exposed as the greatest abuse of financial power by US government officials in the history of our country.  Because of this blatant illegality, Buck-Busting Ben and Hanky Panky Paulson deny that the PPT does anything but meet occasionally to brainstorm pending issues.  Those two are some piece of work.

            The bond market also serves as a product pool for the Illuminist financial drug cartel, which sells over-rated crack-credit-derivatives with attractive yields that are used to addict institutional investors in much the same way as drug dealers dupe drug addicts into a life of drug addiction by offering attractively priced samples of their "products."  The bond market is therefore the primordial soup from which the toxic waste products of "financial engineering" issued forth, and is the true birthplace of the credit-crunch debacle.  The bond market was used to manufacture fraudulent toxic waste derivatives of various poisonous flavors by slicing, dicing and re-securitizing various types of assets that were being used to secure existing bonds, lacing these re-securitizations with toxic tranches of risk based on assumptions about performance and default that were patently false, and pawning them off on mainly institutional investors as AAA paper with help from co-conspirators in the ratings agencies.  The creation of this toxic waste was also enabled by fraud from top to bottom that was perpetrated by lenders, underwriters, originators, appraisers and borrowers.  Subprime mortgage derivatives are but one example of this.

            The bond market is also the source of funding for all larger business concerns seeking to leverage their growth and income flows and attempting to maximize shareholder equity.  Once a business tastes cheap credit, there is no turning back.  Trade in this credit-crack was fueled and expanded to new heights by none other than Mr. Bubbles himself, Alan Greenspan, by pushing the Fed funds rate down to a ludicrous 1.0% as directed by his Illuminist masters.  Most, if not all, large businesses continue to over-utilize what used to be substantially cheaper money and credit to finance large portions of their operations by selling bond issues.  Without this money and credit, these businesses would wither and die, and the elitists control this money.  Further, much of this bond debt was floated at a variable rate of interest tied to the prime rate, which could soon blast off into outer space in a rocket powered by hyper-stagflation, a rapidly declining dollar and ever-accelerating risk caused by ever-increasing defaults on debt across the board.  The Fed has lost control over interest rates, which will now be what bond investors require them to be.  This rate disaster will eventually destroy corporate profits and propel us into recession and depression.  Gold and silver are your only refuge.

            As many poor souls are painfully aware, the bond market was also used to dupe auction rate municipal bond investors out of their money by promising AAA ratings and liquidity as good as cash.  These investors chased after higher yields on what they thought was secure municipal debt in a liquid market backed by AAA rated bond insurers that in reality were leveraged to their eyeballs and should never have had AAA ratings.  The elitist institutions that created this market are now refusing to keep this market going or to make good on their promises to investors.

            Quite notoriously, the bond market was used to fund the real estate bubble by providing funds from bond investors chasing higher yields to mortgage lenders who then lent the money to people who should never have bought homes to begin with.   These mortgage lenders then sugar-coated the resulting toxic waste with fraud heaped upon fraud.  These mortgages were then packed into the tranches of various new toxic waste derivatives and were often sold back to the very bond investors who had originally provided the funds to the mortgage lenders to begin with.  The proceeds from the sale were thus recycled back to the mortgage lenders to create more toxic waste, completing the cycle of doom.  This was nothing short of a continual rollover of fraud and deceit, which ended abruptly when Oppenheimer analyst Meredith Whitney exposed the overvaluation of Citigroup's toxic waste.

            Note how the elitist financial institutions that run the bond market, in cahoots with the ratings agencies, have used their positions of power and influence to suck in the money of gullible investors while generating enormous profits for Wall Street banks, investment banks, brokers and securities dealers in the form of commissions, fees and spreads.     

            The bond market is where the Illuminists park their money when they are not using it in some other scam.  They use the bonds to make greater returns through arbitrage, borrowing cheaply from each other or by floating commercial paper and then investing the proceeds in higher-yielding, longer-term bonds and derivatives.  This was also powered by Mr. Bubble's 1.0% debacle.  This scheme for generating profits has unraveled as the value of the toxic waste bonds and derivatives given as security for the commercial paper have imploded due to defaults and declining real estate values, and as rising short-term interest rates have destroyed yield spreads while eroding the principal value of the bond collateral.  The elitists and other institutional investors borrowed short-term, and invested long term, after which the yield curve became inverted and the toxic waste collateral became overvalued and unmarketable, thereby putting the commercial paper market into a cryogenic state.

            And then there is the whole derivatives market of credit default swaps and interest rate swaps, which are simply extensions of the bond market through "financial engineering" to provide a form of insurance for the bond market based on bond performance in terms of repayment of both principal and interest.  As defaults have accelerated, these swaps have multiplied like rabbits and will soon reach about one quadrillion dollars worth of notional principal.  This is the financial version of the China Syndrome waiting to happen.  First there will be trouble with credit default swaps as banks and large corporations fail due to a severe recession, a horrible real estate market that grows worse by the minute, hyper-stagflation, insolvency, negative yields on investment, a collapsing dollar and a complete and utter collapse of consumer spending and confidence which will continue to set all-time lows.  These circumstances will then send real interest rates into double digits, after which the interest rate swaps will implode, taking the entire world financial system down with them.  This quivering, quadrillion dollar caldera of molten death is what distinguishes our current debacle from all previous financial disasters.  When this caldera erupts, it will make what happened in the 1930's look like a picture of prosperity.  Americans have no idea how bad this situation really is.  Unfortunately, they are going to find out very soon, after it is too late.  Do not be like them!  Buy gold and silver, take physical possession of it, and wait for the financial mushroom clouds to appear.  What will be a disaster for the uninformed will be the greatest profit-generating event of all time for the informed.

            So as you can see, based on all of the foregoing, the bond market is crucial to the continuation of the elitist power structure and is the starting point for all market analysis.  If the bond market is destroyed, most of the Illuminists themselves will go down with it except for those Illuminists who maintain extremely large gold and silver hoards which consist of many thousands of metric tonnes of bullion, which they keep secretly offshore and in private Swiss vaults as their failsafe.  Basically, this means that the leaders of the Illuminati, who have been hoarding gold and silver for centuries, will survive, and their henchman will be beaten, beggared and left for dead as befits them for siding with the evil reprobates and sociopaths at the top of the Illuminist food chain.  Essentially, the henchmen will be cannibalized by their thieving criminal bosses, who have acquired their gold and silver bullion through theft, fraud, conquest, colonialist raping of assets and fire-sale purchases from despicable scum-bags like Gordon Brown, the King of Fire-Sale Gold, who sold out the British national gold for what now amounts to a 70% or greater discount from current prices.  When gold breaks into five figures, the British people will have been bilked out of 125 billion dollars on the 400 tonnes that Brown sold to people like the Rothschilds at the bottom of the market.

            These elitist gold and silver hoards are not only their failsafe against financial disaster, but may well be intended to privately back a new regional currency instead of using governmental reserves for backing.  This would give the elitists absolute control over the supply of money and credit.  According to these reprobates and sociopaths, we will have a gold standard once again, but this time the Illuminati will have most of the gold, having stolen, leased or swapped it out of our Treasury, and will set the standards, not our government, which will abdicate all financial power to the privately owned Fed.  Already, the elitists are seeking, through mouthpiece Hanky Panky Paulson, supreme control over regulation of financial markets through the Fed as well.  According to Hanky Panky, it is only natural that the creators of all the financial plagues we are now suffering should be put in total charge of regulating markets to prevent such debacles from happening again.  Only in America.

            The primacy of the bond markets, and the elitist's supreme objective of gold and silver suppression, together explain what is happening in stock markets worldwide.  Their bid to boost stock markets to a blow-off top has failed utterly, and their greed and deceitfulness are the primary cause of this failure.  As a result of the subprime and other derivative fraud, the credit-crunch was engendered, and this has crippled the economy, exposed the overvaluation, overrating and lack of marketability of huge cross sections of the bond and derivative markets and negated the fractional reserve banking multiplier, thereby cremating both balance sheets and income statements alike for banks and other financial institutions in a fiery furnace fueled by false asset valuations and ebbing income flows.  Banks do not trust each other, much less non-banking customers, for purposes of lending money.  No one wants to make a loan to a financial zombie, a walking dead horror of insolvency and bankruptcy.  All confidence has been lost in an unregulated, opaque system where fraud and deceit are part of the banking and corporate culture.  Making loans is now like playing Russian roulette, a game which only the suicidal want to play.  Attempts at resurrecting the system have failed miserably.  As the direct result of these problems and a litany of other present and future problems, the stock market will continue to fall, and, in the words of "the Beaver," it "ain't never comin' back."  If the stock markets are temporarily reinvigorated by the PPT to keep appearances up during an election year, much of the extra liquidity from a weak yen or otherwise that will be provided for such stock support will be plowed into precious metals, which will skyrocket.  It's win-win for gold and silver.

            The elitists of the cartel are now backed into a corner as we have been saying for several years, and that corner is growing ever smaller as time proceeds.  The destruction of their precious bond market is imminent, and the Illuminati are running out of bullets.  They are desperate, and their destruction of our economy has not only gone awry, but now threatens to take them down with us.  They are scared witless of what will happen to them when the light bulbs finally go off in the heads of average citizens, and their filthy deeds are exposed.  They will not retain the power and wealth they had hoped to possess when the destruction finally becomes manifest, and they will remain vulnerable for a long time thereafter.  The Klingon-like neocons and the "geniuses" on Wall Street have engineered a disaster, which was too late for them to stop.  When the wars did not go as planned, and they got caught with their pants down trying to pawn off their "financial engineering" products on the rest of the unsuspecting world, their plans for world government went totally astray and will be on hold for half a century.  Their death certificates will read as follows:  Name:  John Smith; Occupation: Illuminist and neocon;  Direct Cause of Death:  A combination of multiple contusions from blunt instruments, multiple gun shot wounds and multiple stab wounds inflicted by starving and angry mobs; Contributing Cause of Death:  Financial Engineering.

            The bond markets are now threatened for many reasons while gold and silver are rallying in sympathy with that threat.  First, real interest rates are threatening to rise because bond investors want a proper return in light of actual inflation which is more than triple the moronic official inflation figures we are given, and to properly reflect the risk of default in a floundering economy with little or no prospects of recovery at any time in the foreseeable future.  The bond investors know how much inflation really is, they know that M3 is running in the 16% to 18% range which locks in even greater inflation for years to come, and they know the fane-stream media and government are lying about everything else.  While this transpires, the Fed holds at 2% while the ECB hikes to 4.25%, more than double the Fed rate, and the Bank of International Settlements  requests a thorough audit of the US financial system because of the screwing given by American Illuminists to their European and Oriental counterparts in the subprime derivative fraud and ensuing credit-crunch.  The rising inflation and declining dollar are quickly eroding the value of their existing bonds which are yielding a hideously negative return, and they do not intend to allow this to happen to future issues, especially those of the long-term and/or high risk variety, which now includes all municipal bonds whose insurers are worse than garbage from a ratings perspective.            What the Fed does to its funds rate is now completely irrelevant to all but the banks which are the only beneficiaries, and those banks are sometimes using the cheap credit from the Fed to purchase even more higher-yielding toxic waste which they figure they can pawn off on the Fed later, thereby gaming the central bank.  Soon broken dollar pegs and a flood of foreign investment which will flood our domestic economy with previously exported dollars threatens to send hard asset values into the ozone and bond values into the toilet for a big financial "swirly" while the dollar loses its reserve status.  The Fed will run out of general collateral to exchange for toxic waste and will have to resort to the creation of treasuries out of thin air, which is highly inflationary.  What is an elitist to do under such dire circumstances?

            We'll tell what they're doing.  They are scaring money out of the stock markets and into the crucial bond market, which is the source of their power.   Why?  Because when stocks in foreign markets are liquidated, the proceeds must be parked somewhere.  Because investors are still in possession of an IQ somewhere between that of a moron and an idiot, they think that dollar-denominated bonds, treasuries and money markets are a safe-haven to put their money while waiting on the sidelines because the dollar is still the de facto world reserve currency.  Never mind the negative rate of return and very real possibility of the dollar's destruction and loss of reserve status.  And never mind the only real money, gold and silver, which are the only assets producing positive returns even after true, actual inflation is accounted for, although more and more investors are beginning to see the light.  So what happens is, all the foreign currencies obtained through the sale of foreign stocks are converted to dollars to make these so-called safe-haven investments.  This drives the dollar and dollar-denominated bond principal up, and drives dollar-denominated bond yields down.  Because the dollar is supported, precious metals are suppressed.  And because bond yields increase, so do the assets of the banks and other Wall Street financiers, thereby improving their balance sheets.

            This all started on Thursday, June 26, when gold had the biggest up day since 1985, climbing straight up for a robust closing gain of over $32 dollars an ounce.  This gave the cartel elitists a collective myocardial infarction, and the PPT jumped into action, withdrawing support for the stock markets and allowing the Dow to take a 358 point cliff dive towards Bear Market Territory.  Then as gold threatened to take out 950 on Wednesday, July 2, and go screaming past 1000 again to who knows where, perhaps 1200, the cartel reached again for their nitroglycerine pills and called the PPT on the bat phone to demand more action, which they received promptly with another 167 point jack-hammering of the Dow that brought the Dow to a close below technical bear market territory for the first time.  That is because they do not give a rat's derriere about the stock markets anymore.

            These events triggered a worldwide sell-off in foreign stock markets as well in sympathy with the hapless US supertanker's crash into an inflationary iceberg.  This is confirmed as follows with the following stock market declines which occurred from the close on June 25 to the close on July 3:  The Dow lost 4.43%, the S&P lost 4.46%, the Nasdaq got waylaid for minus 6.49%, the FTSE 100 lost 3.34%, the DAX lost 3.99%, the CAC 40 lost 4.24%, and the oriental markets got blasted with the NIKKEI 225 losing 4.08%, the HANG SENG losing 6.15%, the Chinese SSE Composite Index losing 6.94% and the Indian BSE SENSEX was pile-driven into the bedrock under the Ganges River to the tune of 7.92% (ouch).  So much for the support from emerging economies as Western economies plunge to their deaths.  That's a lot of freaking stock sold, and as you can see the investment of those proceeds in dollar-denominated bonds, treasuries and money market funds sent the dollar way up, boosted principal values on bonds and treasuries upward, and sent gold, silver and treasury yields down off their recent highs.

            The only problem now is - what will they do for an encore to support their precious bond market and to subdue gold and silver?  The ECB is done selling gold through the end of September, and they have only parted with 72 out of a possible 500 tonnes, showing you that they know where the price of gold is going.  And whatever happened to those much-touted IMF gold sales?  We haven't heard a peep lately about that.  Perhaps that is why we only seeing 72 tonnes, because of the IMF's 400 tonnes of planned sales which we do not even know if our Congress has approved yet, which are supposed to be coordinated with other sales under the Washington Agreement.

            And how many times will they crash the stock markets to keep their charade going.  Will they instead send the Dow down to 7000?  We do not think so, at least not yet.  Remember, this is an election year.  And that is why the dark pools of liquidity are going on line shortly, known as "Project Turquoise" and "Baikal."  The end is near, and the elitists know it.  So they want to bail before the PPT lets the stock markets plummet to their deaths on the rocks below and lets the bond markets explode and go down in flames with double digit interest rates.  The Illuminati will bail out without the public's knowledge and leave the public and non-insider institutional investors holding the bag.  Their proceeds will be plowed into precious metals, commodities and other hard assets, so make sure you get your gold and silver quickly.  Not only will you make a fortune, but the elitists will have to pay much higher prices than they had anticipated as a result of your support for the only markets that will save your bacon.

            After the cartel's denizens bail, they will pile into precious metals, commodities and other hard assets as just mentioned.  The great wealth accumulated in hard assets will then be used to acquire all the paper assets at pennies on the dollar.  Bankrupt corporations, of which will there will be many, many thousands worldwide, that have some value to the elitists as a going concern, will be absorbed intact for pennies on the dollar, through stock takeovers and forced sales, as will resource stocks, which will have skyrocketed from their current, suppressed bargain-basement levels as a result.  Get your resource stocks now, while you can still afford them and get some real appreciation, while making the elitists pay a lot more for them than they had hoped.  This is why they continue to hit the resource stocks with naked-shorting - so they can buy them cheaply after they bailout from stocks and bonds through the dark pools of liquidity.

            Remaining corporations that have no value as a going concern will be gutted by stripping out the good stuff, again for pennies on the dollar, and letting the rest rust in a financial scrap heap.  Certain elitist companies will be allowed to fail, and fortunes will be made on naked shorts and puts by insiders when they do.  Such elitist companies will be absorbed by surviving elitist insider companies that are bailed out at taxpayer expense through the traitorous Fed and US Treasury, which will give new meaning to the phrase "moral hazard."  The real kicker here could be the quadrillion in credit default and interest rate swaps, which could potentially wipe out any proceeds and/or gains from the elitists' exit out of stocks and bonds through the Project Turquoise and Baikal dark pool bourses.

            The elitists will try to concentrate and consolidate their power by absorbing all the weakling companies into their favored institutions to make even bigger and more powerful international conglomerates.  The cry will be heard for the Fed to take over regulation of both banks and non-banks such as investment banks, brokerage houses and other financial institutions so we can have one fascist financial system uber alles, while our government officials become mere figureheads, which most of our regulators practically are now anyway.  You must stuff these elitists and stop them from doing this.  Get rid of the Fed instead of giving it even more power and put an end to all bailouts.  Let the big elitist financial institutions fail, and let their concentrated power be disbursed to create more competition.  Disband the PPT and restore our free markets, while we impose trade tariffs, eject illegal aliens, and dismantle globalism, free trade, off-shoring and outsourcing.  Stop profligate fiscal spending, trade deficits and dollar destruction while discarding the Income Tax and replacing it with a reasonable national sales tax while reducing government spending and pork.  Dismantle the phony two-party system, implement campaign reform and put an end to all lobbying.  Put an end to the phony "War on Terror," the useless wars for profit in Iraq and Afghanistan, the Patriot Acts, the Homeland Security Gestapo and all legislation that would tend to make us into a surveillance society.  Then we will have a real recovery and prosperity will be restored over time.  Otherwise, get ready for Big Brother on steroids.

            Unless the PPT continues to hammer stock markets and investors continue to stupidly plow their proceeds into mainly dollar-denominated assets, the dollar will continue to plummet and gold and silver will continue to rise.  Do not worry about Thursday's hammering, which is now over and was accomplished as usual during thin holiday markets.  The dollar boost from the stock market crashes is over, and the large specs have made a fortune on their protective derivatives which they will now plow into precious metals, which are the only bargains left in world markets anywhere.  The oil card will be played if gold and silver continue to rally, so be ready for a sudden drop in oil prices.  The elitist are running out of aces up their sleeves.  Next week gold and silver are going much higher, and have resumed their habit of setting new daily highs during big rallies even if the closing prices are a little lower from a previous trading day.  Gold and silver will continue to increase their prowess as the safe-havens and hedges of choice as banks start to fail, inflation worsens and consumer confidence and spending set new all-time lows, while corporate profits for the second quarter show the devastation reeked by higher energy and input costs.

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