April Fool

"The problem with Socialism is that you eventually run out of other people's money." -- Margaret Thatcher

Confidence in America's ability to overcome the severest of challenges has always been taken for granted: But as of today, America has yet to recognize its major problems, let alone begin that arduous process of overcoming them. We are living an unrealistic lifestyle on borrowed money and borrowed time.

That's why I have long been warning you about a looming crisis with the power to crush the U.S. economy. Unless Washington makes a 180-degree turn, we face a catastrophe that could end our way of life as we know it.

Now, just as we predicted, America's massive debt crisis is exploding into the headlines. My warnings - the same ones that were continuously scoffed at are now being echoed by economists the Media as well as many of the political elite. Recently, Senator Mark Warner, Congressman Allen West, and Senator Joe Manchin publicly stated and I quote - a "Financial Armageddon," and a "Fiscal Titanic" are fast approaching if the congress does not act. No fewer than TEN former members of the White House Council of Economic Advisers - including President Obama's former top economic adviser Christina Romer, added their voices to those warning of a looming economic catastrophe. Unless the White House and Congress slash the federal deficit, the bond market could turn on the United States, triggering an economic crisis that would "DWARF 2008."

Consider that for a moment: In 2008, Wall Street came within a whisker of a financial meltdown. Financial monoliths like Citigroup and Bank of America would have gone belly if not for the FED bailing them out. And Lehman - one of the giants of Wall Street - simply ceased to exist. Suddenly all these top economists and Congressmen are now repeating my warnings, by saying in effect, "That was NOTHING. Just wait until you see what happens NEXT!"

Obama's response thus far is , "It took years to get us into this MESS." referring to only the Bush years, but seeds to the current "Mess" as Obama is calling it, were initially sown as far back as 1913 when the FED came into being. It got rolling in earnest 20 years later when FDR started a lasting and ever increasing government meddling with the economy on a scale unheard of in American history. President JOHNSON then did his Bit with his "WAR ON POVERTY" which thus far has cost us over $14 trillion with nothing to show for it except massive increases in entitlements and debt. Each successive president, except perhaps Kennedy and Reagan, did their bit to bring us to where the Death of Capitalism is at hand. The FDR of the 21st Century has unrestricted, unchecked political power and only the Supreme Court now split 5 to 4, is left to perhaps provide some modicum of balance to stave off the complete destruction of the foundation and principles on which this nation was built. But they can do nothing until a case is brought before them. This may sound like a purely political statement, but its not: It's a statement of fact as this massive shift "left" takes place with the complete takeover of Congress in 2007 by far left Democrats without even one true Republican out there to act as any kind of meaningful check and balance on which our system of government was based. Should their be any doubt in your minds, the stock markets around the world are screaming loud and clear, but nobody seems to be listening?

Well my readers and I may not be able to do anything about the government but there is plenty we can do about managing our own finances; as most of us are up substantially over both 2007 and 2008 as compared to being down 30 to 70% by some of the biggest and best professionally managed mutual funds. Have you checked your 401K's lately?

BERNANKE is so steeped in Keynesian, Marxist; Socialist philosophy that he cannot recognize the truth when he sees it and he certainly cannot foresee any of the unintended consequences of his actions.

WHAT HAPPENED TO COMMON SENSE?

What is really happening? Either nobody sees and/or is definitely not commenting on it. Bernanke, Geitner and Paulson before him, with the Government's collusion (or stupidity), are rebuilding the capital of the banks by lending them money at 0% interest while allowing them to GOUGE the poor and middle classes: By allowing them to charge upwards of 35% on credit card balances and only issuing below 5% mortgages if the borrower has a credit score of over 800 or they can unload those mortgages on to Freddy and Fanny for the taxpayer to assume and get stuck with the risk.

BACK TO REALITY

The rally lasted less than one day. Obama made another couple of speeches and investors had one night to think over the FED'S moves and the Market promptly sold off nearly 150 points. As the day wore on, there were a few guests that appeared on CNBC such as Bill Seidman and Peter Schiff who know what they are talking about, but they were constantly interrupted and shouted down and not allowed to express their ideas by the likes of know nothing, self-proclaimed economists/journalists like Steve Leisman and prostitute economists like Larry Kudlow, both of whom are either devoid of common sense or more likely are so wedded to a Bull Market that they act as if they are one of the "three blind mice".

The truth of the matter is that this economy, stock market and especially Gold and silver have been behaving almost exactly as I have been writing about as long ago 1999 for gold and 2007on the economy. Printing and creating money "out of thin air" is by definition Inflation. At the rate that Bernanke is creating Fiat money, there is every probability that we will be into HYPER INFLATION in the not to distant future. This could occur as soon as all of the long delayed budget and spending plans hit the economy and both American and the world economies start to feel the effects of the massive increase of money as it works its way into circulation. The simple common sense fact is that "out of thin air money" is not Wealth. Printing money by the $trillions does not create even one apple or one pair of shoes; all it does is raise the cost of everything by destroying our currency, along with all domestic savings in the process. The only reason we are not getting the full impact of the inflation yet is because the major portion of the "STIMULUS" (pork) package does not take effect for 2 years. We are now witnessing what the usurping of our education system by the Marxists and Socialists has wrought. There are NO conservative economists out there of any stature that can even think of or come up with any real free market solutions to solve our problems..

Bernanke's intent is clear - he wants to make sure interest rates stay low. A little foresight should tell him that if the banks give out 30 year 4% mortgages, they are signing their own death warrant; that is why they are off loading them all to Fannie and Freddie. The moment interest rates start to rise, watch out for the next S & L type crisis. Or is Bernanke assuming that we will be in recession/depression for the next 30 years? Overnight interest rates are already near zero. Any more easing and the Fed would be paying banks to accept Fed money. So buying debt is the only thing they can do to get more money into the banks: Who are increasing becoming government instruments of Social Policy: That and getting AIG to pass FED money through to the brokers and banks (including foreign banks). *****Analysts are already saying that this move will lower mortgage rates by up to 50 basis points immediately. But something happened on the way to Nirvana. The hope is clearly that lower mortgage rates will boost home buying and start to pull the economy out of recession. (It has not worked thus far) Bank stocks loved the announcement and so did the homebuilder stocks. But that love fest lasted less than one day. I guess the public is not as stupid as the Government thinks they are.

HOW IS IT POSSIBLE THAT DOING MORE OF THE SAME AS WHAT GOT YOU INTO TROUBLE IN THE FIRST PLACE CAN POSSIBLY BE A SOLUTION? OH yes, I know this time the Government will pass new regulation and create even larger bureaucracies to enforce their new regulations. That should do it, right? Have you ever heard of even one instance where passing laws prevented crime?

Gold and Gold Shares also rallied on the announcement that "Helicopter" Ben is making good on his promise to flood the market with liquidity to avoid a depression. Only this rally lasted a lot longer than one day. Of course, the fear is that a massive increase in the money supply will spark inflation down the road. At some point, the Fed will have to act quickly to raise interest rates and sop up liquidity. Has everyone forgotten about the lag effect? The Fed is always behind the curve because of it, we will see more Greenspanesque asset bubbles and runaway inflation. The FED has never in its history been known to be so nimble- but maybe this time it will be different, AY?

Warning: Even though the $50 rally in Gold lasted more than one day Gold is still in its consolidation phase: So don't despair if Gold pulls back from here. It will just present you all with more good buying opportunities.

HOW NOW DOW

INSPITE of all the negativism you are getting from me, as I have pointed out to you time and again, it has very little to do with the stock market in the short term.

Although the market was overbought I did not send out a Bulletin because we are not attempting to be day traders. I believe this pull back maybe only be a mini correction of a multi-month rally phase. But time is running out on this The Biggest Of All Bull Market Traps.

The rally to new highs should convince the majority that a new Obama BULL MARKET has begun so be careful not to get trapped by all the propaganda that will flood the media. This rally will be your last chance to build up your cash positions, if you haven't done so already, especially in your 401K's and plan on going short big time in preparation for a cataclysmic second down Wave of this first stage of this Bear Market, which will likely give back all of the gains, and then some.

GOLD

Gold have entered a temporary irrational exuberance stage, but only among fans of gold (Gold Bugs). I have still never heard even one major portfolio or mutual fund manager say that he is buying Gold or Gold Stocks. Most of the ads for Gold are to purchase consumer's Gold jewelry: Which is tantamount to a sell recommendation. We are not yet even close to the kind of media coverage that is associated with a top in Gold. However, temporarily we are in overbought territory going through a consolidation: Despite global uncertainty, leading to weakness in equity and bond market, support is likely to come from Euro zone debt concerns, geopolitical risk and the deepening nuclear crisis in Japan - the true extent of which remains unknowable at this time. While further short term weakness cannot be ruled out, the fundamentals would suggest that after the consolidation phase is over, gold could soon take off to the $1450/oz, $1500/oz area which remains a viable near-term target. Contrary to popular perception, speculative sentiment remains low with little or no media coverage of gold's record highs, and what coverage there is often negative. Consequently, there is very little public participation or "panic buying" of bullion. Real physical demand is driving price rises as is seen in the accepted figures from the World Gold Council and others. Yet, gold ownership remains very small among the investment public in the western world with many estimating that gold accounts for less than 1% of global equity Does that sound like a buying Bubble?

LOOKING INTO THE PAST TO DEVINE THE FUTURE FOR GOLD

Before we can figure out where we are going, we must first figure out where we are and where we came from. In rounded terms, the rally started in 2001 and went up 400% to $780 and then in a perfect Elliot 5 Wave move to a high of $1030 in March of 2008. The minimum time frame to correct 7 years is 18 to 20 months giving us a time frame for the end of the consolidation phase that were in of Sep. to Nov. 2009. Using the rules of alternation, the most logical expected correction should be some form of a flat correction, either a double or triple flat ZIG ZAG correction or a horizontal triangle correction down to between $735 to $835. So far, based on the first year of the correction, we seem to be in a horizontal flat correction which should last another 6 months or so with Gold fluxuating between $735 and $935 before we get a WAVE III Blast Off to a minimum target of $2050, which would be 1.62 % of the $750, Wave I rise, or $1,460

Going back to the 1971 - 1980 Bull Market, Wave V was the most explosive of the moves which was 3 X the entire move from 1971 to 1979. So what do we have to look forward to? Another $4,000 or so points over the next 6 to 8 years and blastoff should begin sometime in the next 1 to 6 months. If you think or know of a better market to invest in over the next 7 years please let me know.

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I have spent my entire career identifying major trends in the markets and helping others to profit from them. These are trends that will be happening in the near future; trends that most analysts and investors notice only after they have already been well established and we have made the majority of the easy money. In my newsletter, "UNCOMMON COMMON SENSE", once I uncover changes to the major trends, I then present specific, actionable recommendations that will help you profit even during the worst of times and before they become obvious.

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UNCOMMON COMMON SENSE
Aubie Baltin CFA, CTA, CFP, PhD.
2078 Bonisle Circle
Palm Beach Gardens FL. 33418
[email protected]
561-840-9767