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Stock Market… August 12, 2008

How we get these Future News Predictions

NOTARIZED PROOF

There is an irrational rally going on in the stock market.  When the only reason people can give for stocks going up is that the dollar is getting stronger, then this is artificial.  Some equities have lost more than 25 percent of their value while other troubled stocks have gone up.  It makes no sense why home-builders and financial stocks are rising.  Other important stock sectors are declining like agriculture stocks.  You can see that something artificial is holding up the banks, financials, and home-builders.  The U.S. is in its worst financial situation since the great depression.  There is and will continue to be a domino effect that started with sub-prime mortgages.  The sub-prime mortgages were just the beginning.  The momentum has now spread to other types of mortgages like prime and even the safer ones.  The next domino to fall is credit card unsecured debt.

People will continue to use their credit cards and get more cards or higher credit limits until they can no longer pay back the tens of thousands of dollars they owe on credit cards. Next, there will be a huge repossession of autos and trucks.  People will figure if they can’t afford to feed them they don’t need them.  The banks will have just as many autos as they have houses, maybe more.  The domino to fall next will be people’s inability to repay school loans.  Graduating students will not be able to find the high paying jobs that their predecessors did.  Therefore, they will default on their student loans.  You can now see how this will affect the economy further.  Bad loans on houses, cars, credit cards, student loans, and any kind of unsecured debt like store-issued cards.  This problem will not go away for a long time.  The crumbling financial sector is not just a sub-prime mortgage mess; it is a sub-prime financial system.  You will see as we have said before, several large home-builders go bankrupt.  Next, you haven’t heard the end of the bad financial news from the banks.  Today, some banks had their ratings cut.  These are bank stocks that have been rising recently.  Another portion of the banking system is the stealth or shadow banking system.  These are borrowers and lenders that do not operate as a true bank but are the broker type financial institutions.  These institutions are not backed by the Federal banking system since they do not take deposits.  Their business model of taking on debt, then securitizing it, and packaging it in many toxic forms, and selling it to collect fees on top of fees will come to a screeching halt.  You will see three or four of these broker bank types become illiquid and either go out of business or be bought by a major bank.  Oil pricing continues to fall, although demand is rising.  Other nations are increasing their demand while Americans, afraid of $4 a gallon gas, are finally realizing that you cannot waste precious resources just because you want to drive an SUV.  The trend toward smaller cars will accelerate very quickly, and automakers will see 40 percent of their sales come from smaller cars.  

You will see as we have said before, several large home-builders go bankrupt.  Next, you haven’t heard the end of the bad financial news from the banks.  Today, some banks had their ratings cut.  These are bank stocks that have been rising recently.  Another portion of the banking system is the stealth or shadow banking system.  These are borrowers and lenders that do not operate as a true bank but are the broker type financial institutions.  These institutions are not backed by the Federal banking system since they do not take deposits.  Their business model of taking on debt, then securitizing it, and packaging it in many toxic forms, and selling it to collect fees on top of fees will come to a screeching halt.  You will see three or four of these broker bank types become illiquid and either go out of business or be bought by a major bank.  Oil pricing continues to fall, although demand is rising.  Other nations are increasing their demand while Americans, afraid of $4 a gallon gas, are finally realizing that you cannot waste precious resources just because you want to drive an SUV.  The trend toward smaller cars will accelerate very quickly, and automakers will see 40 percent of their sales come from smaller cars.  (NEWS proof) This will be the beginning of a serious time for the remaining automakers to reconsider their product mix.  When the U.S. automakers see that they can’t compete anymore with small car producers from overseas, they will merge with these foreign manufacturers and this will signal the end of America’s great love of U.S. cars.  Gold and silver may have a ways to fall further.  Look for them to settle around 30 percent less than their highs.  Then will they make their comeback as the financial sector gets beaten down by constant bad news.

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QUESTION: Why is the dollar getting stronger?

ANSWER: The U.S. dollar is only getting stronger relative to foreign currencies which are weakening due to inflationary pressures in those countries.

QUESTION: What is artificially holding up the banks?

ANSWER: Wall Street is circling the wagons to protect itself.  Also, the Republicans want to go into the election using anything they can point to that they did well.  Holding up the financial system will be their trump card.   The healthy financial system is what will help McCain.  The financials will resist bad news only for so long and the Republicans want it to last through the end of the year and will be doing everything they can to accomplish this.  If the democrats win, it will be because the Republicans failed to keep up the financial mirage.

QUESTION: Will the Republicans be able to hold up the financial mirage until after the election?

ANSWER: They will cite two things, the falling price of oil, and the health of the banks.  Will they be able to do it long enough to win an election?  Yes, if only there is not a major pipeline disruption due to war and if they can influence the Street not to bad mouth the financials until next year.

QUESTION: If a person has a trading account with a broker, would their liquid funds be at risk?

ANSWER: Cash sitting in personal brokerage accounts is usually swept into a money market vehicle set up by the brokerage.  This money is invested at their discretion, many times in risky things.

QUESTION: What is an investor’s alternative?

ANSWER: An investor that has millions to invest, should look for investments he can take possession of, like expensive art or classic cars, or take possession of metals.

QUESTION: For the average investor that has 401K retirement and mutual funds, how should they minimize their risk?

ANSWER: Many 401K plans give you several options to invest in, some more risky than others.  If you can, invest in a metals fund.  If you can’t, try to only have cash in the plan up to the protected limit.

QUESTION: At what point will gold and silver take its full 30% correction and head back up?

ANSWER: Start to look at gold going back up when it hits $743.  Silver is near it’s low point of 30% correction now.

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