Red Zone

Well dear reader in this post you will find information about

Astrology
- Change from the piscean age to aquarian age

Economy
- John Williams from shadowstats with an alert
- Banking holidays
- 35 million of US citizens receive food stamps

Banks and banksters
- Farewell America
- Harvard Study Confirms Level 3 Assets Burden Bank Balance Sheets, Lead To Information Uncertainty
- Five more banks fail – 89 so far in 2009
- Citi, the queen of the zombie dance party
- Jim Willie
- Days Away From Economic Chaos?

Equities
-Comments from Richard Russell, Wegelin, Gartman and myself

Gold
- Last days to buy gold below USD 1,000?

USD
- Banana Ben Strikes Again
- U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says

Rare Earth
- China control

Oil and natural gas
- price trend



Let’s start the post with the usual overview from www. prudentbear.com

For the week, the S&P500 declined 1.2% (up 12.5% y-t-d), and the Dow fell 1.1% (up 7.6% y-t-d). The Morgan Stanley Cyclicals declined 1.3% (up 49.3%), while the Transports gained 1.1% (up 6.4%). The Morgan Stanley Consumer index fell 1.4% (up 11.9%), and the Utilities dropped 1.8% (down 1.9%). The Banks sank 4.8% (up 2.1%), and the Broker/Dealers dropped 2.4% (up 43.1%). The S&P 400 Mid-Caps lost 1.5% (up 21.4%), while the small cap Russell 2000 fell 1.6% (up 14.2%). The Nasdaq100 slipped 0.3% (up 35.2%) and the Morgan Stanley High Tech was unchanged (up 49.4%). The Semiconductors dipped 0.5% (up 46.0%). The InteractiveWeek Internet index declined 0.8% (up 52.1%). The Biotechs fell 2.4% (up 43.1%). With Bullion surging $39, the HUI gold index jumped 12.1% (up 35.3%).




Well dear reader I do not want to sound like a broken record nor do I want to sent alerts time over time until nobody really reads the message anymore. Therefore I decided that this alert will be the last one for some weeks. Please dear reader, keep in mind that we are already in the danger or deep red zone, which is from September this year until at least December 2009. As mentioned in a previous mail, there are rumors about banking holidays. Although being rumors, the risk in my opinion is quite high. The rumors are getting more and more and this to me is a clear indication that something is close to blow up. Be careful.
Once again dear reader, banking holiday does not only mean that your bank is closed for some days. It means a total and complete mess, havoc or chaos and nothing else. Forget getting cash out of the ATM. The ATM will not work anymore. Forget using your credit card to pay the meal at your favorite restaurant. In case your favorite restaurant still would be open, they certainly would not accept your credit card because they will not know if they get their money back in a reasonable time. Forget shopping at your supermarket. Most probably the supermarket will be closed anyway. Forget about going to the movies. The cinema might not be open. Forget about moving around easily in your hometown. Many people might be out on the streets looking for food. Well I hope you have sufficient food reserves, maybe some DVD’s with nice movies at home. Cash should help too. If you have not sufficient food reserves, buy food for at least 3 to 6 months (buy food you can keep for up to 2 years). If the scenario of banking holidays will not happen, no problem, you still can use your food later.



Maybe it is the time to be out of the equity markets. While not being invested your only risk is an opportunity risk. In the sense that you might not earn or win something you otherwise could earn in case the stock market would move up considerably. On the other side, being invested means high risks of losing real money in case there would be a serious downfall in the markets which, as you know, I do expect over the coming months.

Financial institutions: Financial institutions will suffer a lot, especially, so do I believe, the big ones with exposure to the derivative market. Once again, I prefer the small banks with government guarantees and I would certainly avoid all US banks.

So once again, dear reader, this is my last alert for some time. If you want some more details about my alerts, please check as well my post from a couple of weeks ago.
http://themusingsoffritz.blogspot.com/2009_07_12_archive.html#1436291763021274355


The worst we could possibly see?
Well dear reader maybe yes, maybe no. We do not know. However we do know that we are going through a challenging time in our recent world history. Astrologically speaking we are in the phase of moving from the Pisces
age to the Aquarian age.
In her beautifully worded interpretation of the significance of the zodiac ages, author and medical intuitive Carline Myss describes the duality of the Piscean symbol as follows;
…the fundamental blueprint of Pisces (two fish swimming to opposite directions) expressed itself in a continual need to divide and conquer, separate and study, split East and West, body and soul male and female, yin and yang, the left-brained from the right brained, the intuitive from the intellectual…..



These were arguably the characteristics of our world for the last 2,000 years. Because there is no clear boundary between the end of one age and the beginning of the next, today we are experiencing the transition that embodies the qualities of both: the Aquarian age and the qualities that it brings with the attributes of the Piscean age. Once again, Myss eloquently characterizes this shift
….Aquarian consciousness holds the template of holism (holy)-to draw humanity together. Thus, holism has become the template for medicine, the environment for the beginnings of a global community, and for how we now model ourselves:body/mind/spirit. Holism has become the new soul impulse. We are now living between eras-half in Pisces, an age of separation-and Aquarius, an age of unity and holism. (taken from the book Fractal Times from Gregg Braden)




Following a recent comment from the John Williams from www.shadowstats.com

Revived Crisis Brewing? A confluence of signals has aroused my gut instincts of an intensifying systemic liquidity crisis, and possible pending reaction by the Federal Reserve and/or the U.S. Treasury. Since this only is at the gut level, I am just waving a cautionary flag and publishing this as an Alert.

First, growth in broad money supply has continued to falter. Although it will be another week or two before I have the data to publish a preliminary SGS-Ongoing M3 estimate, weekly reports by the Fed have shown the major M3 components (all seasonally adjusted) of M2, institutional money funds and large time deposits to be in general decline, suggesting that August will show a second consecutive monthly decline — at an accelerating pace — and that year-to-year growth is likely to slow from July’s level of 5.2% to something closer to 4% in August. Beyond being a negative for the economy, in the ongoing systemic solvency crisis, slowing broad money growth often has signaled rising systemic stress, foreshadowing intensification in the crisis that in turn has led to Federal Reserve or Treasury response.

Second, the seasonally-adjusted St. Louis Fed’s adjusted monetary base surged by 5.5% in the two weeks ended August 26th, versus the prior two-week period. The latest level is the highest in nearly three months and is 3.8% shy of the record high set in the two-week period ended May 20th. Year-to-year growth jumped to 102.0% in the latest reporting period, versus 91.8% in the prior one. The monetary base remains the Fed’s primary tool for targeting money supply, but it has proven to be of limited impact in boosting money growth, where banks have been leaving their cash with the Fed instead of lending into the normal stream of commerce. Nonetheless, the Fed appears to be pushing here, with consumer and business credit extremely constrained.

Third, President Obama has nominated Ben Bernanke for a second term as Federal Reserve Chairman. As to the merits or demerits of the nomination, the depository system has survived the crisis, so far, without a full banking system collapse or great deflation. The Fed has held the system together, while debasing the U.S. dollar and fighting to forestall a financial collapse triggered primarily by the malfeasance of Alan Greenspan’s actions (otherwise continued by Mr. Bernanke). Given the not-so-politically-popular Fed chairman and earlier expressions of Administration plans to replace him, however, something else may be at work. If a renewed/intensified systemic solvency crisis were brewing, having the question of the Fed chairmanship succession so resolved would be a plus not only for the financial markets, but also for the incumbent Fed Chairman in his ability to navigate the renewed crisis. It is this last consideration that makes the most sense to me as to what was behind Bernanke’s nomination.

Cash-for-Clunker Deals to Lower CPI/PCE Deflator. Conversations with individuals at both the Bureau of Labor Statistics and the Bureau of Economic Analysis (the BEA has published a notice), indicate that both the consumer price index (CPI) and the personal consumption (PCE) deflator will reflect new car prices net of the cash-for-clunkers rebates. As a result, lower inflation than would have been seen otherwise is in the works for August. The treatment here seems to be unusual, where automobile dealers are not cutting their profits by offering an added discount. The cars are being sold by dealers at regular prices, it is just that part of the cost of the automobile — up to $4,500 — is being paid for by a third party: U.S. taxpayers. I shall publish an estimate of the impact on CPI reporting prior to the August CPI release.

The one-time impact of the cash-for-clunkers program has started to distort other reporting, too. Any net boost in economic data from this program is not a signal of economic rebound or of any fundamental shift in economic activity. It spiked elements of the August manufacturers purchasing managers survey, for example, but pickups in new orders and production were not matched with increased hiring. For most series, severe year-to-year contractions and historically low levels remain in place, despite any month-to-month gains that either are clouded by lack of statistical significance (statistically not different from zero) or by depression-related special distortions tied to home foreclosures, difficulties for new home buyers in closing their transactions, business distortions from extremely large corporations that have passed through or still are in receivership or conservatorship, etc.

Week Ahead. August Employment/Unemployment. Negative surprises here are a good bet. Due for release on Friday, September 4th, both a decline in payroll employment and an increase in the unemployment rate should be worse than consensus expectations. Bad quality seasonal factors that generated better-than-expected numbers last month should more than reverse. Further, help-wanted advertising both in newspapers and online, new claims for unemployment insurance and the purchasing managers survey (ISM) manufacturing employment all show annual growth or activity levels that are historically negative enough to support much weaker than the expected results for the August numbers.
Briefing.com shows expected payroll loss of 225,000 (versus a loss of 247,000 in July), with expected unemployment of 9.5% versus 9.4% in July.


Well dear reader the following message seems to confirm that not all is well
Food stamp list soars past 35 million: USDA
Thu Sep 3, 2009 3:17pm EDT

"WASHINGTON (Reuters) - More than 35 million Americans received food stamps in June, up 22 percent from June 2008 and a new record as the country continued to grapple with the worst recession since the Great Depression of the 1930s.


Banks and Banksters

Farewell America
Swiss Private Bank Wegelin says farewell
Well dear reader the information on the following webpage is a must read for everybody but especially for all NON US readers holding US securities, holding an account in the US, having children studying in the US and those who pass the so-called “Substantial Physical Presence Test”. Do you know what this test means? Well it is a particularly delightful design. It is passed when someone has been in the USA for at least 31 days in the current year and a total of 183 days over a period of 3 years.
Well anyway as mentioned this is a clear must read. Clear word, excellent analysis.
http://www.zerohedge.com/sites/default/files/Wegelin%20Document%20on%20American%20Taxes%20and%20Assets.pdf


The following I found on http://www.zerohedge.com/


Harvard Study Confirms Level 3 Assets Burden Bank Balance Sheets, Lead To Information Uncertainty

An interesting paper out of Harvard Business School that focuses on the information opacity in various asset disclosure classes (Level 1-3), concurrent with some interesting conclusions. From the abstract:

Finance theory suggests that information risk?that is, the uncertainty regarding valuation parameters for an underlying asset?is reflected in firms’ equity betas and the information asymmetry component of bid-ask spreads. We empirically examine these predictions for a sample of large U.S. banks, exploiting recent mandatory disclosures of financial instruments designated as fair value level 1, 2, and 3, which indicate progressively more illiquid and opaque financial instruments. Consistent with predictions, results reveal that portfolios of level 3 financial assets have higher implied betas and lead to larger bid-ask spreads relative to those designated as level 1 or level 2 assets. Both results are consistent with a higher cost of capital for banks holding more opaque financial assets, as reflected by the level 3 fair value designation.
Nothing earthshattering here, however, it does reinforce the threat that as banks move increasingly more assets to the the mark-to-model Level 3 category, so as to hide the true sad state of their asset exposure, entire security classes that reference the specific balance sheet (think stocks) will likely end up becoming increasingly volatile, as the bank itself is perceived as merely a proxy for unlimited, opaque and likely mismarked Level 3 holdings.

Our results suggest that concerns surrounding the measurement and reporting of illiquid financial instruments appear warranted. Specifically, the evidence suggests that current disclosures surrounding these financial instruments are insufficient to mitigate investor perceptions of greater information risk for highly opaque financial assets. This suggests that further regulation may be warranted, included enhancements to the disclosures particularly for financial instruments reported at level 3 fair value. Our results also suggest that future movements to incorporate risk-weighted regulatory capital, particularly in which illiquid financial instruments receive higher risk weightings, appear justified.



Five more banks fail – 89 so far in 2009

Regulators close banks in Arizona, Illinois, Iowa and Missouri
Amy Haimerl, CNNMoney.com senior producer
Last Updated: September 5, 2009: 5:58 AM ET
NEW YORK (CNNMoney.com) — Five small regional banks were closed by regulators on Friday evening, pushing 2009’s tally so far to 89 institutions. Of the five failures, two were in Illinois, and there was one each in Arizona, Iowa and Missouri.
Customers of the banks, however, are protected. The Federal Deposit Insurance Company, which has insured bank deposits since the Great Depression, covers each customer account up to $250,000.
In Illinois, Platinum Community Bank, in Rolling Meadows, and InBank, in Oak Forest, were the latest institutions to be cosed by regulators. This makes for a total of 15 failed Illinois banks this year. The last one to go under was Mutual Bank, in Harvey, on July 31, 2009.
The Office of Thrift Supervision was unable to find a buyer to take over the assets of Platinum Community, which were estimated at $345.6 million with deposits of $305 million. As a result, the FDIC will begin mailing customers checks for their insured deposits beginning on Tues., Sept. 8.
That means customers are out of luck over the weekend and cannot access any of their Platinum Community accounts. “The bank is gone. It no longer exists,” said David Barr, spokesman for the FDIC. “We couldn’t find an appropriate buyer. We don’t do that very often.”
http://money.cnn.com/2009/09/04/news/companies/bank_failures/?postversion=2009090421

Read the full paper on the following link
http://www.hbs.edu/research/pdf/10-008.pdf


Citibank
Citi, the queen of the zombie dance party. Well dear reader Citi is rated F by the IRA Bank Monitor might be one of the banks with major problems in these coming weeks. If you work with Citi, please get ready for some heavy storms.
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=378


Following a comment from Jim Willie
By the way, a final note of vital importance from a likely critical breakdown element. Rumors swirled on Tuesday of an imminent large US bank suffering a death experience. See Wells Fargo for a likely candidate. Its bank stock option put contract activity hinted of a walk down Death Row. But wait! They passed the Stress Test, did they not ?!? Yes, they did. They passed the rigged stress tests that contained very little programmed stress and avoided the entire second round of bank assaults. Even USFed Chairman Bernanke (last guy to figure out anything anything anything) noted that the commercial mortgage sector will deliver powerful losses to US banks. Those losses will show up this autumn and winter, with big blows next spring. The already insolvent big US banks will probably admit their ruin by then. Maybe when such facts are more clear, the nation will be subjected to a US Bank Holiday. During the holiday, watch Wall Street and other Big Banks demand mergers with the scores of midsized regional banks. Instead of liquidation of Big Banks, expect them to take full control of the entire national banking structures. If you think that item was included in the Stress Test, you operate with limited wattage and qualify for USGovt service. The Politburo tagteams are being formed.

Days Away From Economic Chaos?
America is just a few days away from a possible day of reckoning. I again call attention to this day, August 25, when the Federal Deposit Insurance Corporation issues its 2nd Quarter report for 2009 on the state of health of American banks.
http://www.lewrockwell.com/sardi/sardi116.html

Well dear reader, although stock prices of financial institutions have gone up considerably over the past weeks, that alone does not mean that the financial institutions are now in a healthy state. The real situation is far from that. Could the stock prices of these institutions rise more? Well I do not know. However what I do know is that I never would invest in institutions that are in deep troubles. Furthermore I would not invest in institutions where the stock price is too high and therefore does not reflect the health of the institutions at all. Risk reward does not seem to justify a purchase or holding such stocks.


Equities

When this rally ends and it will soon in my opinion, the decline in the market most probably will unexpected and precipitous. Stock prices will melt rapidly and bids will dry up by the hour. All the bearish force of a primary bear trend that have been "bottled up" will be released.
Well the question dear reader is when does this bear market rally top out. Nobody knows for sure. However and although a call of the top is difficult, I take the risk of being wrong and say we are closer than most think. How close? I say we talk about days not months. Once again, being out of the market does not cost you real money. If the market goes up you lose an opportunity. But if the market goes down and you are invested, you lose real money.



Well according to the report from Wegelin, see above, one should be out of any US security anyway. Following an comment from Richard Russell
“From the market sentiment side, it bothers me that in March market sentiment was near the panic stage. Now, only six months later, all the experts who never saw the bear market coming are announcing a "new
bull market" and "it's time to load up on stocks." Should we believe the experts? In hindsight, they failed, so how good can their foresight be?”
Well I think he is completely right

As long as the stock market was rising, the US public felt that everything was "all right" -- a rising market "softens" a lot of sins and anxiety. Bernanke's nightly prayer: "Please Lord, bring back rising asset prices -- let it all move higher except for gold."

From the Gartman letter
"…we get the sense that something really quite ominous is upon us and that some news… and clearly not good news… is waiting out there on the market’s periphery that shall tend on balance to weigh heavily upon stock prices, shall weigh heavily upon government intervention efforts; shall weigh heavily upon the global capital market’s collective psychology…we have the sense that we are at an historic turning point for the gold market, and that that turning point was made mid-day yesterday when the dollar began the strengthen, as commodity prices began to weaken, and yet gold held steady as a rock."


Gold

Well dear reader, last week was definitely a good week for gold and silver holders. As mentioned in a previous post, September to March or April have at least since 2000, been excellent months with risings gold and silver exchange rates. We are back on track. The exchange rate of Gold versus USD is close to shoot through the 1,000 mark. Silver versus USD does look extremely well. Of course we have to expect the Central Banks to fight hard in order to control rising exchange rates for Gold and Silver. The battle is for the 1,000 mark in Gold and 16 in Silver. My guess is that this coming week we will see gold above 1,000 and silver certainly above 16. Maybe it is the last time to buy gold below 1,000 as the report on the following link says
http://news.goldseek.com/EricHommelberg/1251910800.php



USD

The dollar index slipped 0.3% this week to 78.14. For the week on the upside, the Brazilian real increased 2.2%, the South African rand 2.1%, the Australian dollar 1.2%, the British pound 0.8%, the Japanese yen 0.6%, the Canadian dollar 0.6%, the Norwegian krone 0.5%, and the New Zealand dollar 0.5%. On the downside, Mexican peso declined 0.9%, the Swedish krona 0.7%, and the Swiss franc 0.1%.

Banana Ben Strikes Again
http://www.deltaga.com/market-commentaries/banana-ben-strikes-again.html

U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says

By Sonia Sirletti and Jeffrey Donovan
Sept. 4 (Bloomberg) — The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.
“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy.
 
“The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.SW_71xPhjA


Rare earth


for a bigger, readable picture, please click on the above table

Well dear reader do you know what rare earth metals are? Well these metals are very important for everybody? Why, because many items you use do need rare earth metals in order to run smoothly. For more information see http://en.wikipedia.org/wiki/Rare_earth_element

Well rare earth is something we do not hear much on a daily basis. Following some information
September 2 – Bloomberg: “China, holder of the world’s largest rare-earths deposits, may build a strategic reserve in Inner Mongolia, strengthening its control over materials used in technology ranging from iPods to guided missiles. Inner Mongolia, which contains 75% of China’s deposits, is in talks with the central government to build stockpiles to support prices… China, which imports most of its iron ore, oil and copper, is tightening control over supplies of rare earths, a range of more than 15 elements such as scandium and lanthanum… ‘The plan of building a national reserve stockpile is part of a government-level strategy to protect the resources of rare earths and prevent it from being sold cheaply,’ Liu Minda, analyst at Huatai Securities Co., said…”



September 1 – New York Times (Keith Bradsher): “China is set to tighten its hammerlock on the market for some of the world’s most obscure but valuable minerals. China currently accounts for 93% of production of so-called rare earth elements — and more than 99% of the output for two of these elements, dysprosium and terbium, vital for a wide range of green energy technologies and military applications like missiles. Deng Xiaoping once observed that the Mideast had oil, but China had rare earth elements...”

World faces hi-tech crunch as China eyes ban on rare metal exports
Beijing is drawing up plans to prohibit or restrict exports of rare earth metals that are produced only in China and play a vital role in cutting edge technology, from hybrid cars and catalytic converters, to superconductors, and precision-guided weapons.



http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6082464/World-faces-hi-tech-crunch-as-China-eyes-ban-on-rare-metal-exports.html


Oil
Well dear reader after having touched USD 150 per barrel last year, the price of oil fell down to the USD 30 level. Now we are back at 70. What will the future of oil prices be? First of all please keep always in mind that we should look at purchasing power price. A higher price does not automatically mean that the price has risen. In case that there would be a high inflation, prices most probably only would adjust to inflation. Well the question is what will be the price of one barrel oil in a couple of months. I think that at this point of time, due to having simply too many variables involved, it is very difficult to foresee where the oil price will be, let’s say in 6 months. On one side we do have lower consumption due to a world wide recession that in my opinion will deepen more, which will lead to lower demand and lower prices and we have on the other hand the peak oil situation that will lead to less offer and higher prices. Although it is difficult to make a forecast regarding oil, we do know that the world’s conventional oil production has not increased since 2005 and somewhere within the next five years, depletion from existing oil fields is almost certain to get ahead of new production and spare production capacity. As it seems that the world’s economy continues to deteriorate and the worldwide demand for oils falls more rapidly than depletion, it could be that we first will see lower oil prices, before we will have to face large price spikes due to depletion or Peak Oil.


Natural Gas
Natural Gas prices have gone down because America is swimming in the stuff this year. A combination of increased production from new shale drilling techniques, a steep drop in industrial demand, and a mild summer on the populous East coast has left the storage caverns full and prices dropping to less than $3 per million BTUs. While natural gas supplies are finite, the relative abundance, domestic origin, and lower emissions may lead to natural gas playing a larger role in generating our electricity or even powering an increasing share of our cars.

Energy
Production and Prices
http://www.aspousa.org/index.php/2009/08/production-and-prices-25/