Attacking the Net

If you don't do anything else this weekend, go read up on corporate plans to hijack the public's Internet.  Yup - members of CONgress don't want y'all becoming too smart (for their own good) it seems.  So the corpgov pimps are pushing through "internet reform"  (read: theft of service) in return for promises and favors.  Click the Act Now button.

Here's my letter:

"You're supposed to be a political leader, right? There is presently pending legislation which would allow corporations to essentially hijack the public internet by giving preference to corporations over humans.

Now don't you think that's a little off? Weren't you elected to represent humans? Or, are you so far into the deep pocket of the 1001 Abramoff-clones who make a mockery of lobbying reform that you have completely lost touch with Americans here in the district?

I urge you (and I will be voting with my campaign contributions to free internet supporters this fall) to respect America's right to harvest the rich yields of open internet access - without bias or access restraints by corporations or hack politicos who are looking only to line their pockets and the public good be damned.

Try to remember, we paid for it."

R& R War Update

There have been a lot of developments in news headlines over the past day or so that can be lumped under the general category of the Resources and Religious Wars.  Some things to consider:

• Iran says it is going ahead with enrichment plans and the rest of the world can take a hike.  Not exactly the kind of position to take if they were sincere about avoiding a showdown with the neoCON gunslingers and warmongers.

• Al Qaida is calling for the overthrow of Pakistan.  Apparently, they have figured out that without US aid/support, the Musharraf government doesn't enjoy popular support.

• Although the death toll among American Forces is the highest in 5-months in Iraq, the latest development is the killing of an al Qaida "Emir" which is said to be a blow to the insurgency.  We hope so, but remain skeptical when such reports pop out when ugly stats about the war are coming to light.

• Indonesia's top terror suspect is still at large.  Remember, Indonesia has resources/oil.

All of these items are pressuring the price of oil, which I'm sort of expecting to see blow off to new highs ($80 anyone?) next week. Meantime, the soaring price of oil, and the tensions globally have pushed gold up to its highest level since 1980.  Nice.

Still al Qaida will remain the largest global threat to economic stability of the US declares the State Department in its Country Reports on Terrorism out this week.

I might be stepping a bit out of bounds of "fair comment" here, but one thing the Bush administration has not done is pull together a super agency for humans.  In other words, while the State Department if pointing at al Qaida as the biggest threat, we have people in the energy field saying, in effect, Peak Oil is a bigger threat.  And then there's all the climate change information - which based on oil prices, is being soundly ignored.

So what really is the biggest threat to my private pursuit of peace, prosperity, and progress?  (A phrase used by the old American Whig Party)

Desperate Acts

This coming weekend on our subscriber side, www.peoplenomics.com we look at probable future legislation as we review what was regulated in the 1920's and 1930's, examining how that's is likely to echo today.  Especially with things like the corporate power grabs to weight the internet in favor of those who pay - a backdoor scam supported by many republicorp in CONgress and greased by corpgov.  For the current week our subscribers to Peoplenomics get a quick review in leverage, options, and even a far-out way to beat the housing market decline.  Subscriptions ($30/year, click here for details) is what pays for the bandwidth for this site.

Cheap is Good

If you have $10, but not much else, check out out our best selling "How to Live on $10,000 a year or less, available in our Peoplenomics Bookstore.

Shameless Hype

Tell a couple of your friends about this site by clicking here. 

Friday April 28, 2006

GDP Report...Too Good?

The Bureau of Economic Analysis is out with the latest report on real gross domestic product this morning.  As I read it, it's inflationary, gives the Fed room to move rates higher, and perpetuates my "the bounce's long second top" idea (remembering that on an inflation adjusted basis, the Dow needs to hit 13,400 or so to equal where it peaked (11,723, Jan 2000)):

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.8 percent in the first quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.7 percent.

 

The Bureau emphasized that the first-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The first quarter “preliminary” estimates, based on more comprehensive data, will be released on May 25, 2006.

 

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), equipment and software, exports, and federal government spending that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased. '

 

The acceleration in real GDP growth in the first quarter primarily reflected an acceleration in PCE for durable goods, an upturn in federal government spending, and accelerations in equipment and software and in exports that were partly offset by a downturn in private inventory investment.

 

Final sales of computers contributed 0.11 percentage point to the first-quarter growth in real GDP after contributing 0.33 percentage point to the fourth-quarter growth. Motor vehicle output subtracted 0.23 percentage point from the first-quarter growth in real GDP after subtracting 0.64 percentage point from the fourth-quarter growth.

 

The really dangerous part in the report is that consumer spending has taken off like a house afire:

Real personal consumption expenditures increased 5.5 percent in the first quarter, compared with an increase of 0.9 percent in the fourth. Durables goods purchases increased 20.6 percent, in contrast to a decrease of 16.6 percent. Nondurable goods increased 5.4 percent, compared with an increase of 5.0 percent. Services expenditures increased 2.8 percent, compared with an increase of 2.6 percent.

Repeat after me:  inflation, inflation, inflation.  We get inflation first, and then recession/crash/end of the world.  But not today.

Dollar: Thar She Goes

My buddy the Gold & Silver Trader (not Trader Jim) and I spent a bit of time on the phone last night kicking around up his current long position in silver, entered into earlier this week on weakness in the metals.  "What would you be watching?" he was wondering.  "I'd be watching the US Dollar more than anything," I suggested.  Because while it's true that Ben Bernanke  is indicating that the rise in rates may be coming to an end, the evidence on the table says that's just not the case.  So who's going to win: your thoughtful analysis (which is long) or the media hype (which is short)?"

I referred him to the Kitco chart at the top of our news source links page as one indicator.  "If it gets above .80 Euro to the buck ($1.25 USD per Euro) I might bail on the trade.  But if the buck stays weak, look at the sell signal it may have given this week on this chart."

I reminded him of the quote passed along by Bart over at www.nowandfutures.com earlier this week: "The last duty of a central banker is to tell the public the truth." -- Alan Blinder, Vice Chairman of the Federal Reserve, on PBS’s Nightly Business Report in 1994

I also suggested that he follow my Olivia Newton John trading strategy, mentioned earlier this week: "Let's get physical..."  My thinking hasn't changed here.  Overall, I'm becoming more confident almost daily that my "more inflation before the crash" scenario will play out globally.  Places like Sri Lanka with its 9.2% annual inflation rate may be nothing more than trailblazers for the rest of us. Of course Sri Lanka has domestic violence issues, it could be argued.  But I sense the potential for violence in America now more than any time I can ever remember.  The pressure cooker is on, especially with oil prices.

That said, inflation in the EU is going up a modest 2.4% annualized, versus the US rate (old weighting scheme) of 8.7%.  That spread in and of itself should push metals higher, but this is not exactly an "honest casino."

Earnings

A lot of people wonder why I don't go into an earnings frenzy when we're "in season."  Answer: I don't care.  I watch sales and quality of sales.  Earnings going up when sales aren't keeping up with a 5% or greater growth rate is meaningless to me.  I want market position and product growth!

Three Day Weekend

"How does he figure?" you're asking yourself.  Well, it goes something like this.  On Monday, there will be a national day of protest over immigration law reform.  The California Senate has endorsed the action.  Curiously, it's being billed as the "Great American Boycott 2006."  I have gotten tons of email from readers for my hardline stance against illegal immigration and the effective neutering of Border Patrol's front line by politicos.  I have no quarrel with folks of any nation coming here (although clearly, there need to be enforced quotas). 

The figures to be a live TV feeding frenzy, but from our perspective there is something else to watch - two things, in fact.  The first is that the web bot project over at www.halfpasthuman.com (if I'm reading it right) figures that whatever the big story is in May will be a sort of prequel to the huge story coming at the end of August/First of September a foreshadowing of things to come when we transition from militancy to conflict. 

The second thing to watch is how, as we are in the entry phase of a second Great Depression, how this protest Monday has a flavor of a labor protest as much as it's about immigration.  We'll be getting into this latter point - the labor protest echo of the 1930's - this weekend in our subscriber newsletter.

Iran and the UN

Iran's president said today that he doesn't give a damn about any UN resolution to come, as his country continues its nuclear development.  The issue is whether those developments could be used for war materiel.

While the deadline passes, I expect the neoCONs to ratchet up their war hype, ignoring the fact that Russia actually built Iran's reactor at Bushir, and that China has been interests in future Iranian oil and would likely be seriously angered by any unilateral US or Israeli moves to bomb Iran with first use nukes.  As a Worldpress.org writer suggested earlier this month, the problem is not so much proliferation as it is dollar hegemony as the oil trading currency.

Sadly, just as the neoCONs are off in their own private Idaho, divorced from geopolitical realities of the world, so too is Iran's oil minister who says the nuke issues won't affect oil prices.  Is he nuts? Lately the Mogambo Guru is starting to sound more rational that anyone (SMRTA).

Katrina Fallout Continues

The White House says it will resist pressures to replace FEMA following the report of a Senate panel.  Of course what's not in most coverage of FEMA is how politicos at the top forced hundreds of highly competent disaster managers out of their jobs over the past 2-3 years, sources tell us.

Lobbyist Reform Sham Gathers Speed

Sitting on an immigration bill, stuck with a runaway federal budget, and saddled by The Forever War, what are the republicorps to do this fall?  Go home and fess up to voters about all those perks from the neoCON's masters, including a prostitution investigation that's reported ongoing?  Hope the home district folks don't read about lobbyist Jack Abramoff's latest swanky vacation?  

Hell no.  Instead, they're putting on a full court press to try and pass some kind of watered down lobbyist "reform" measure so they can return to their home districts all repentant like. 

Free Advice

People ask me for investment advice all the time.  Usually, I decline, other than saying the worse investment on earth is a bad marriage which I can assure you from personal experience will set you back $500,000 (in 1991 dollars) or more.  But every once in a while, I get a well though out piece from Steve Selengut worth passing along.  Today's article is: Ten Common Investment Errors: Stocks, Bonds and Management.

"Investment mistakes happen for a multitude of reasons, including the fact that decisions are made under conditions of uncertainty that are irresponsibly downplayed by market gurus and institutional spokespersons. Losing money on an investment may not be the result of a mistake, and not all mistakes result in monetary losses. But errors occur when judgment is unduly influenced by emotions, when the basic principles of investing are misunderstood, and when misconceptions exist about how securities react to varying economic, political, and hysterical circumstances. Avoid these ten common errors to improve your performance:

1. Investment decisions should be made within a clearly defined Investment Plan. Investing is a goal-orientated activity that should include considerations of time, risk-tolerance, and future income... think about where you are going before you start moving in what may be the wrong direction. A well thought out plan will not need frequent adjustments. A well-managed plan will not be susceptible to the addition of trendy, speculations.

2. The distinction between Asset Allocation and Diversification is often clouded. Asset Allocation is the planned division of the portfolio between Equity and Income securities. Diversification is a risk minimization strategy used to assure that the size of individual portfolio positions does not become excessive in terms of various measurements. Neither are "hedges" against anything or Market Timing devices. Neither can be done with Mutual Funds or within a single Mutual Fund. Both are handled most easily using Cost Basis analysis as defined in the Working Capital Model.

3. Investors become bored with their Plan too quickly, change direction too frequently, and make drastic rather than gradual adjustments. Although investing is always referred to as "long term", it is rarely dealt with as such by investors who would be hard pressed to explain simple peak-to-peak analysis. Short-term Market Value movements are routinely compared with various un-portfolio related indices and averages to evaluate performance. There is no index that compares with your portfolio, and calendar divisions have no relationship whatever to market or interest rate cycles.

4. Investors tend to fall in love with securities that rise in price and forget to take profits, particularly when the company was once their employer. It's alarming how often accounting and other professionals refuse to fix these single-issue portfolios. Aside from the love issue, this becomes an unwilling-to-pay-the-taxes problem that often brings the unrealized gain to the Schedule D as a realized loss. Diversification rules, like Mother Nature, must not be messed with.

5. Investors often overdose on information, causing a constant state of "analysis paralysis". Such investors are likely to be confused and tend to become hindsightful and indecisive. Neither portends well for the portfolio. Compounding this issue is the inability to distinguish between research and sales materials... quite often the same document. A somewhat narrow focus on information that supports a logical and well-documented investment strategy will be more productive in the long run. But do avoid future predictors.

6. Investors are constantly in search of a short cut or gimmick that will provide instant success with minimum effort. Consequently, they initiate a feeding frenzy for every new, product and service that the Institutions produce. Their portfolios become a hodgepodge of Mutual Funds, iShares, Index Funds, Partnerships, Penny Stocks, Hedge Funds, Funds of Funds, Commodities, Options, etc. This obsession with Product underlines how Wall Street has made it impossible for financial professionals to survive without them. Remember: Consumers buy products; Investors select securities.

7. Investors just don't understand the nature of Interest Rate Sensitive Securities and can't deal appropriately with changes in Market Value... in either direction. Operationally, the income portion of a portfolio must be looked at separately from the growth portion. A simple assessment of bottom line Market Value for structural and/or directional decision-making is one of the most far-reaching errors that investors make. Fixed Income must not connote Fixed Value and most investors rarely experience the full benefit of this portion of their portfolio.

8. Many investors either ignore or discount the cyclical nature of the investment markets and wind up buying the most popular securities/sectors/funds at their highest ever prices. Illogically, they interpret a current trend in such areas as a new dynamic and tend to overdo their involvement. At the same time, they quickly abandon whatever their previous hot spot happened to be, not realizing that they are creating a Buy High, Sell Low cycle all their own.

9. Many investment errors will involve some form of unrealistic time horizon, or Apples to Oranges form of performance comparison. Somehow, somewhere, the get rich slowly path to investment success has become overgrown and abandoned. Successful portfolio development is rarely a straight up arrow and comparisons with dissimilar products, commodities, or strategies simply produce detours that speed progress away from original portfolio goals.

10. The "cheaper is better" mentality weakens decision making capabilities and leads investors to dangerous assumptions and short cuts that only appear to be effective. Do discount brokers seek "best execution"? Can new issue preferred stocks be purchased without cost? Is a no load fund a freebie? Is a WRAP Account individually managed? When cheap is an investor's primary concern, what he gets will generally be worth the price.

Compounding the problems that investors have managing their investment portfolios is the sideshowesque sensationalism that the media brings to the process. Investing has become a competitive event for service providers and investors alike. This development alone will lead many of you to the self-destructive decision making errors that are described above. Investing is a personal project where individual/family goals and objectives must dictate portfolio structure, management strategy, and performance evaluation techniques. Is it difficult to manage a portfolio in an environment that encourages instant gratification, supports all forms of "uncaveated" speculation, and that rewards short term and shortsighted reports, reactions, and achievements?

Yup, it sure is.

Steve Selengut

http://www.sancoservices.com

Publication Times

If you've only recent discovered this site, our daily schedule Monday-Friday has the first report  up by 7:55 AM Central which is 5:55 Pacific, and for our Washington DC reader: That'd be when the little hand points at the 9 - that's the upside down six thingy... About 8:15 Central I have a few of the typos fixed...

Last week's report is always at www.urbansurvival.com/lastweek.htm and older weekly reports are archived at www.urbansurvival.com/library.htm.

Thursday April 27, 2006

China's Big Rate Move

The big financial news of the week may well be China deciding to move its benchmark rate from 5.58% to 5.85%, a slightly larger than quarter point move. There's a good summary of events in the Washington Post's online editions.

How this will likely play out may be examined with a short thought exercise that goes something like this:  Imagine you have two countries that are trading partners.  One, which is buying a tremendous amount of goods (more than it can pay for, in fact) from the trading partner, has been raising its rates in order to keep "hot money" interested in buying US debt instruments - because without that, we would have no way to pay China for all those goods and services.

But now suppose that China raises its rates.  What will happen?  One thing is that the US will have to continue raising its rates - something which we pointed out recently was obvious because of the balance of trade nightmare. As the US prints more money than our growth in goods and services dictates (to paper over the BOT gap), we've been able to attract investment money - including Chinese buying of our debt - by raising rates.

We are likely to see significant short term weakness in the metals and the markets today, at least until Ben Bernanke's appearance before the Joint Economic Committee of CONgress up on the hill.  However, for savvy investors, the immediate impacts on the metals markets may represent a buying opportunity because if the US and China get into any kind of continuing rate escalations, the outcome weighs more toward a major recession by the end of this year (or much sooner) as the cost of money goes up.  This in turn will slow business investment, drive up credit card (and housing) rates, which will in turn slow the US economy.  When that happens, the usual suspects back in DC have exhibited only one solution since the 1930's: Print more money (inflationary) to jump start the economy and get the free lunches served up again.

Russia Sees Dollar Troubles, Too

Russia's Finance Minister is already laying the groundwork for a reformation of the international currency club, telling the World Bank and IMF that the future of the dollar as the world's "reserve currency" (e.g. lending of last resort) is probably history.

Iran's Oil Bourse

While the "big boys" of international finance are sorting out the one-upsmanship of interest rates, we notice there's a report this morning that Iran will be opening its oil bourse next week.  This places extreme pressure on the US neoCON faction to blast away with all possible speed for a number of reasons.  One is that Israel may not be willing to take the first swipe at Iran on our behalf, and secondly, the currency/BOT/dollar future are all being tossed around by events out of direct US control now.

Now let's bring the China rate move full circle and point out that China is calling for restraint on the Iran crisis, no doubt because they have oil deals with Iran.

Banks and Gold

Rare coin company HCC has noted something of interest.  Banks offering free appraisals of coins.  Check out their website for a list of the banks ( ion the Midwest mainly - at least thus far) which are offering appraisals.  Very curious, don't you think?

Church Marketing

Perhaps it's the wave of the future, or a sign that Churches are trying to get back to their traditional role as both an ethical stronghold and community gathering point, but the UK Guardian newspaper has spotted karaoke hymn machines.  Own the music, own the imagery, and you own the culture as any rap promoter will confess.  Can Church Bling be far behind?

Silver and Solder

If you've been wondering what is driving the price of silver lately, you might want to check this email from a reader that says, in so many words, the drive to reduce lead in consumer products is the biggie...

"George I was unaware of it but starting in July in Europe is the RoHM standard similar to our RCRA (pronounced Wreck-Rah). They have mandated up and down the supply chain removal of Lead from consumer products. Europe has an ever increasing pile of obsolete electronics-gear waste, all of it containing lead-tin solder. Only replacement out there right now is Tin-Silver-Copper. The tin has to have either lead or silver to avoid growing 'tin whiskers" which appear to be a "sublimation" mechanism where elemental tin evaporates into the vapor state directly from the solid (in chemistry, "sublimes") and then condenses back to the surface of the tin solder-blob as "whiskers". When these start growing on your circuit board you can imagine the short-circuit potential.

I was unaware of this driver on the world price of silver. Europe has exempted lots of critical electronics such as airplane navigation and flight hardware that needs more time to fight the whisker problem, similar to Bush's move to slow enactment of the EPA rules on fuel oxygenates for the summer. Look for less reliable electronics coming out of the EU this summer, and higher silver prices. All this was in the February 2006 Popular Science found on a colleagues desk at lunch today.

Of course this is also mirrored in the gas prices where half the blame is Democrats refusing liability protection for MTBE producers, and locking down ANWAR, and the Republicans pushing the fuel industry to use their ADM buddies ethanol, which didn't have the necessary capacity to support the fuel supply. (You were mentioning food shortages; what will this drive to produce more ethanol do to not just corn but all grain prices?) All this pile of unintended consequences, which we could see from down the road when they enacted this mess, but now here it is in the road for us to step in. How nice. Your URE Theorem analogy is very appropriate.

Reading you every day. Post pictures of the tractor!"

Well, tractor should so up today...so yeah, I will try to get a picture or 10.

Healthcare Roulette

The number of Americans who don't have health insurance has climbed to 40% in 2005 from 28% in 2001. What's caused this?  Thousands of corporations have gone from paying regular humans regular wages plus benefits to a reduced employment package that looks something like this:  You get a paycheck.  Your benefits?  You get a paycheck. 

Secrets Revealed Rolls On

Once again, Karl Rove is up before a grand jury which is looking into leaks.  While the press reports characterize Rove as confident, we have to wonder if the 5th time's a charm?

IE 7 Beta 2

Although I don't usually walk out on the bleeding edge of technology, I have to confess that I spent some time this week and put in Microsoft Internet Exploder...er...Explorer 7.0 Beta 2.  And it seems to work great!  Among other things, it picks up the tabbed browsing feature of FireFox and has you can run in a smaller menu mode to give yourself a little more real estate on screen.

Another Free Billion Dollar Idea

While Microsoft seems to get getting a lot of things right in 7.0 B2, the future of FrontPage has me a bit confused.  If I understand it right, they're planning to phase out of FrontPage by July 2008 and offer some SharePoint and another web creation tool.  All this as there seems to be a generalized movement of web s/w providers toward more complex "content management suites" some of which are in the thousands.  Somehow, I sense an opportunity for the Mozilla folks to improve on Composer and waltz in with a feature rich product at America's favorite price point..

My dream for web authoring?  I call it "SWAT"  Which means: Simple Web Authoring Tool.  It starts off with a 10th grade level basic web creation platform, perhaps like the current FrontPage less all the navigation and "to do" list features.  Then, as your wallet can afford, and as your needs require, you would simply download plug-ins.  Say you wanted to have content management via the web:  Download the module (Big $$$) to enable it.  But keep the interface familiar.  Need advanced hooks/bells/whistles?  Download, for additional monies, anything you might desire.

The idea of downloadable plug-ins adding features has been around the music production circles for a long time.  It would be a fine way to offer a sort of open source approach with big economic incentives for the giants.  If you've played around with music creation software, think of it as VST's for web creation software.  (If you don't know what a VST is, click here and learn something.) 

Mark of the Beast

California is looking at a bill to put RFID chips in government issued ID cards. Gets around the messier "papiere bitte" doesn't it?

Wednesday April 26, 2006

Silver Update - Part 3

Turns our our earlier story on the CBOT Margin change was in error.  Not due to our reporting (which was based on the information sent to floor traders Tuesday) but because of an error in an email list sent to traders on Tuesday.  Yes silver margins are going up, but not by the large amount reported earlier.

Outdated:Sitting On Silver - Part 2

There I, toward the end of the day Tuesday.  I had just finished up a client project and I decided to check my email one last time before shutting down for the evening and getting on to farm chores.  Panama and Elaine were cutting rounds and furniture parts out of a 35' Western Red Cedar and obviously, with two people working, there was an obvious opening for management or at least a supervisor.

But there in my inbox was a note from Trader Jim (Goulding) that riveted me to my chair for several minutes before I picked up the phone to call Trader Jim with a few questions.

R&R to Iraq

Don Rumsfeld and Condi Rice are off to Iraq to work on getting the government working there.

Circular Reference of the Day

Russia, which is the builder of Iran's main nuke plant, has just laucnh3ed a satellite for Israel to help spy on Iran. Kind of like working both sides of the street, huh?

George, Patriot Farmer

Tomorrow our new Kubota tractor (and implements) is due to show up.  I was halfway feeling bad about buying a Japanese tractor when a reader advised it might have been made in Georgia.  That's more like it....I feel way better, thanks.

Tuesday April 25, 2006

$100 Redbacks & Inflation

Sean David Morton has seen the future - and if you live outside the US, that future may include red $100 bills. This is an extremely important story, so let me start with the background so you'll have a good sense of the economic playing field.  Sean's report will make a lot more sense that way..

There are several reasons that despite the falling price of precious metals in the past week, I am continuing to hedge as though all major purchases will be made at substantially higher prices than what's available today.  The reasons are purely economic:  The Bush war in Iraq was recently reported to be costing $1-trillion dollars (or more) and with a miniscule manufacturing base, the US has only one way to pay for it: monetize (paper) the debt.  This will have the effect of "watering down" the purchasing power of US currency.  It's also why I believe the trend for a declining dollar is now reasserting itself in the markets.

The second major reason has to do with the balance of trade deficit, which we duly report has been in a massive uptrend and shows no change in course.  And then, there's the recent IMF/World Bank statements that the US dollar is too strong.

It's against this backdrop that we've also discussed ways for the US to get "out of the box canyon" from a policy perspective.  A quick check of history would suggest that hyper-inflation is a workable route, as the Weimar Republic (Germany circa 1923) experience was only a few short years.  Conversely, a deflationary collapse which began in 1929 in the USA too more than 10-years to recover.  Instructively, both ended in World War II. 

Now you may recall that I recently published a note from sources that there were reports of "red currency" being in place in strategic centers outside of the United States - apparently in preparation for a two-tiered currency system.  The way such currency works is this: Money outside the US would have one exchange rate, while money inside the US would have another.  How do you separate the different dollars?  Color-coding is one way to do it, although there are naturally extreme difficulties with electronic transactions.

Now to Sean David Morton's report.  After I recently reported on the rumor of the "redbacks" in my April 8th report.  But today, Sean David Morton has been kind enough to send us a full report on what he has seen for himself:

"Dear George,

One of my friends and subscribers said that you had some questions regarding a few things I saw while on a business trip to the Netherlands, and I just wanted to give you the straight scoop on what I experienced.

In April of 2005 I went to Amsterdam for five days to finalize a financial deal that regarded paying a number of fees for a transport of capital from Africa, to Holland to some banks in Andorra. This deal is my private business and I shall not give any more details, but it was something that I had been working on for a number of years.

I was taken via limo with my partner in the deal to some offices that were adjacent to a number of warehouses in a warehouse /business district that was near the Amsterdam airport.

Again, this was a private affair that demands some delicacy but part of the address was:

"Schipol, Clearing House, Schipol, The Netherlands"

The people were listed and licensed as "APPROVED DIPLOMATIC HANDLERS" and were a SECURITIES and FINANCE firm. We met with these men and went out to lunch, and had a quite pleasant and jovial conversation about politics, world finance and the future of the global markets. They knew me by reputation, and had actually heard me a number of times on the radio via the Internet. I guess I have quite a following in the Netherlands.

Later, we wanted to see the money that was being transported before any more business was to take place. Usually this is done via wire transfer and bank to bank deposit, but because of the high incidents of fraud in this particular part of the world where it came from, cash was the only thing that was trusted.

The two men we were dealing with took us to a high security warehouse and there was a section that contained a series of vaults. We entered one of the vaults, and they opened a case and they showed us the capital that was to be transported.

After this, one of the men who was friends with one of the warehouse guards, asked if they could enter another section of the warehouse, and he was agreeable, and said all right and we went to another very large section.

There, with the permission of the guards, they opened one large steamer sized case that was filled with the new "large face" Ben Franklin US $100 bills. They were under what appeared to be heavy glass or plastic with large circular metal bolts at the top.

I could only see the FACE SIDE of the FRONT of the bills under the glass. The bills had a RED TINGE or coloring on either side of the large FACE of Franklin.

The men said that there were approximately $60 BILLION worth of these "REDBACKS" (their words, not MINE) all printed and ready to go, in banking centers around the world and that they were to be used as part of a "Contingency plan" for a secondary foreign US currency, or USDs that could ONLY be used outside the United States.

I asked when they thought this would happen and they said that it would be later that year (2005) or the next. They were NOT SURE and were only guessing as to why they were there. They said the bills had only arrived a few weeks before, which of course had raised a great deal of curiosity in many of the financial markets.

Again, I ONLY SAW INSIDE ONE CASE. There were numerous similar cases, which I ASSUMED would be filled the same way, but that is ALL I DIRECTLY SAW.

We went back to the office and concluded our business.

I do not know why so many people are making such a gigantic fuss over this, but that is the story as it happened.

I feel that this information has now been vindicated, as only a few weeks ago, the brand new Hamilton $10 bill is now in circulation, and it HAS A RED TINGED DYE all around the face parts and back of the bill, only slightly lighter than the red dye I saw on the USD $100s.

My THEORY is that the US economy is about to go into free fall and enter a "printing press" economy, as I have predicted, and I feel that is happening NOW. A two-tiered currency, just as Japan did in the 1980s, would allow them to hyper-inflate the dollar here at home, and keep the dollar more stable, against the Euro, overseas.

Also, let's say they pass a law that says you can only use REDBACKS outside the USA, and that all other USDs will become FIAT in, say, 120 days. Most estimates put illegal USDs, both counterfeit and drug money outside the USA at about $100 billion. Can you imagine people with huge amounts of CASH going into banks to trade it in for NEW REDBACKS?

They would be photographed, fingerprinted, or possibly arrested. It means that this money would DRY UP, and just disappear, and VIOLA! The Fed Reserve Note suddenly becomes that much MORE valuable without another single piece of paper being printed.

Again, I am only trying to provide information to the world and my fellow man, and have no real vested interest in outcomes. So do with all of this what you will.

MAY MIGHTY ANGELS KEEP YOU NOW AND ALWAYS! May the silver chalice of the Holy Grail be placed within your heart to catch all the power, love and grace of the Infinite Radiant Creator!

Blessings!

Sean-David Morton

The Delphi Associates Web Page"

Morton's report may mean any number of things:

• First, it could mean that the US has an "emergency plan" in place to impose two-tiered currency in the event of a real shock to the US economy.  If we had a huge terrorist event within our borders, for example, global confidence in the US dollar as the reserve currency might be shaken to such an extent that a new currency outside the US (with different purchasing power) would be a useful policy tool.

• Along the same lines, a massive collapse of the US economic system under its own weight might also be a cause for a two-tiered currency.

• We also need to note that the currency system itself might come under attack from one or more rogue states seeking to destroy the US currency by simply printing it up wholesale.  We've seen reports that North Korea, for one, may be engaging in large scale counterfeiting operations.  This is particularly significant because the bills involved were $100 bills!

If a large-scale currency change is in the future, I'd bet that it will be against an inflationary background.  That being said, there are several things the small investor/ just-regular-human can do.  Accumulate a good home supply of food, put in your own garden, that sort of thing, so that you'll be able to restraint price increases at the grocery store by supplementing higher priced food with previously purchased or home grown. 

Another tack:  Elaine and I will be taking delivery of our new Japanese-built tractor later this week based on my personal expectation that overseas goods will climb steeply in price as the year continues.  That, and a new freezer to store the output from our garden when the crops start coming in - plus a Seal-a-Meal with lots of bags.  All these kinds of goods would likely go up in price within months as oil prices break through to new highs.

We're not the only ones who see the inflationary workout - watch the fall of the US dollar and the price of gold and silver as key indicators of what's to come.

Shortages Ahead

Steve Quayle was kind enough to share a letter from one of his readers about the current gasoline shortages in a couple of key Eastern states:

"We still have gas shortages in the form of closed pumps here in the  Tidewater, VA  area. There are also a number of bags on the diesel pumps. There is no  ethynol in  diesel. This, despite AMACO has a refinery approximately 25 air miles  from where I  sit. This refinery is called the AMACO Giant refinery; justifiably so. 

 

On Friday, the  21st, I personally saw gas lines that were are bad as any during the Arab  Oil  Embargo.   On Saturday, the 22nd, I had a chance to have an in depth conversation  with an  independent trucker who had thrown in the towel. She was a team driver  and said  that more and more independents cannot bear neither the fuel costs. I  mentioned  the toll situation and she rolled her eyes in frustration.  

 

Please pass this to your audience. She said that in 2 weeks, we WILL  start seeing  the beginnings of shortages appear on the store shelves."

I'm sure Steve will be talking more about this on his radio show tonight, so tune in at 7PM Eastern, 6 Central.

Shortages

I haven't updated you on our "shortage meme" tracking for a while.  With the gasoline problems I would have expected a more aggressive advance, but there are two things that we haven't been tracking which could skew our results.  First, we don't know how often the cached returns from the news search engine are flushed.  Secondly, we haven't been tracking similar words which are being widely used to describe the gasoline situation.  Specifically, for example, the MSM word is "disruption" or "supply disruption" as an alternative to coming out and saying "shortage"

There are some new returns for the shortage meme that are curious and may be precursors to watch:

• British Columbia lumber firms are experiencing a rail car shortage says the Globe and Mail. This could have an impact on lumber prices (traders note) and it could ripple over into the construction industry.

• We're reading from Kuala Lumpur that natural rubber will be in short supply for the next 5-7 years.  Not the kind of shortage you'd want with pandemics afoot, eh?

• You may not be too interested in plans to end the water shortages in Islamabad...

• But the big one - for now - is the talk of fuel shortages everywhere from the US to Thailand.  That's the biggie.  Until the May 1st Latino work stoppages, that is.  George Bush has ordered an investigation of gas prices, but I wouldn't hold my breath for any meaningful outcome there.

Something you might want to bookmark: 

The http://www.gasbuddy.com/gb_gastemperaturemap.aspx map of prices nationally.

Booms Before Quakes

We've reported in the past how many people experience ringing of their ears before major earthquakes.  We've also told you that before major earthquake we often have mysterious "booms" in regions soon impacted by quakes.  All of which brings us to the Sunday report in the San Diego Union today about "Mysterious booms" being heard over wide areas.  Note: do you have 3-weeks of food and water on hand right now?

Resort Blast

23 dead (so far) from the explosion in an Egyptian resort city yesterday.  A suicide bomber is suspected. 

Flying Sardines

Airbus is pitching the idea of "stand up" air travel.  Packing people so tightly into planes that they would be held in place by harnesses and in padded areas.  Cattle car sounding?

Suite Move, Mic

Mic Jagger (if I have to say "of the Rolling Stones" call your doctor, you're dead) aced George Bush out of a hotel room at the Imperial Hotel in Austria. Somehow, I'm not surprised by Jagger's hanging onto his rooms.  Especially when you recall the lyrics of one of my favorite Stones tunes - after "Start Me Up" -  "High Wire" that goes in part...

"We walk the highwire

Sending men to the front line

And hoping they don't catch the hell-fire

Of hot guns and cold, cold lies"

Read It and Get It

Catherine Austin Fitts' "Dillion Read & Co. Inc. and the Aristocracy of Prison Profits."  Chapter 1: "Brady, Bush, Bechtel, and "the Boys". "Make a law, make a business," indeed.

Monday April 25, 2006