I just found this article which is a couple weeks old.  It seems that Iran placed of few of its own sanctions on the US for once.  Iranian president Mahmoud Ahmadinejad decided to ban popular western products like Coca Cola, Intel and IBM.  Not sure how popular this will be with the Iranian people but continuing to ban items like this can start an interesting trend.  Given these are large corporations but if several countries decided to protest the US for whatever reason this could really affect global politics.  These large corporations have massive power that reaches beyond the borders of any country.

Does this mean everyone drinks Pepsi and uses older Mac products?

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It appears that many of the wealthy people in North America have increased their wealth even as the economy slowed down in 2007/2008. The numbers for rich in the US and Canada have increased around 15% in 2009. Check out all the numbers form this article posted by Blacklisted News.

With emerging countries like Canada the leaders of the major financial institutions have found ways to send foot soldiers into all the right places.  Here they can manipulate  laws and regulations in their favor.  For instance the Bank of Canada’s Governor Mark Carney enjoyed a thirteen year career at the Goldman Sachs.  Apparently one of Mark’s buddies Timothy Hodgson will be “advising” him with regards to financial reform in Canada.

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Even though I think Mr. Carney is doing a great I am concerned the major financial institutions will try to push their weight around in Canada in order to suck the economy dry.  Canada is a resource rich country that has remained stable by choosing a safe conservative approach to banking and foreign investment.  I sure hope they remember how they got in this position as they look to grow their economy in the spot light of the world.

Recently several articles and podcasts have been forecasting nothing but gloom and doom for the later part of this year.  Historically markets due worse in the fall, particularly September – October.  There are even investment strategies that are built completely around this theory like the October Strategy.  Here is a quote from Dale Rathgeber of the October Strategy site.

I’m Dale Rathgeber and I’ll explain how subscribers to my investment newsletter, The October Strategy, have earned above average equity mutual fund and ETF returns by following two simple practices.

First, every year, I advise my subscribers to sell their equity mutual funds and Exchange Traded Funds (ETFs) in early September, and then park their money in a safe money market fund for the months of September and October.

Why? Because the stock market is quite predictable in one way: in most years, the stock market (and equity mutual funds and ETFs) fall in September and October. They do so because most of the great Market Crashes throughout history have happened in the month of October, – (1929, 1987, 1999, and 2008 for eg.) – and therefore many investors get skittish, and pull all or much of their money out of the stock-market in September and October, in anticipation of “scary October.” For this reason October (and now September) thereby become negative most years — (because too many sellers flood the market, and prices thereby tend to fall). Summer vacations, for both governments and investors, also mean that bad economic news tends to “fly under the radar”, in the summer, only to be acted upon with sell orders when everyone gets back from vacation in September. Accordingly, we always sell all of our equities just after Labor-Day, and buy back in, in late October.

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The strategy listed above is a yearly ordeal but the coming crisis could be sudden and longer than normal.  A recent post from the Economic Collapse Blog states 25 signs that a collapse is near.

Here are a couple signs that have been noticed recently.

#1) The Conference Board’s Consumer Confidence Index declined sharply to 52.9 in June.  Most economists had expected that the figure for June would be somewhere around 62.  To get an idea of how bad this is, the index was at 100 back during the baseline year of 1985.

#2) Major banks are being instructed to hoard cash in preparation for the next financial crisis.

#3) French bank Societe Generale is forecasting that gold could reach $1,430 an ounce in the third quarter of this year due to fears of a double-dip recession.

#4) Paul Krugman of the New York Times declared in a recent column that we are about to enter “the third depression”.

#5) According to one recent poll, about eight out of every 10 Americans expect the Gulf of Mexico oil spill to damage the U.S. economy and drive up the cost of gas and food.

Read the entire list

In the Disciplined Investor podcast 165 Andrew interviewed Harry Dent who has been very accurate in predicting the boom from the 1990′s into the 2000′s and the collapse of 2007/2008.  He claims that certain indicators paint a very bleak picture for the end of this year.

I’m not trying to spread the pessimism porn but the public should be made aware of these signs so they can protect their wealth in these uncertain times.

Here is  heat map the Royal Bank of Canada recently published regarding the risk of certain countries debt.  It’s interesting to see that Greece isn’t even number one considering the major media attention they have recently been given.  The number one spot goes to Ireland which has an even smaller GDP than Greece.  The GDP of Greece and Ireland combined it just narrowly surpasses that of Indonesia.

I plan to write an upcoming article of the current “debt crisis” and how it may or may not play out in global economics.

10 year bond prices:

Greece 8.08%

Ireland 5.17%

Recently I have been doing some research on the price of silver. A lot has been said about the current suppression of silver and gold prices at the recent CFTC hearings. In my research I found some interesting facts that support a rising price of silver that has been largely left out of mainstream media (shocking).

If you look back in history silver has been used as money for thousands of years just like gold.  The average  ratio of silver price to gold has been roughly 1:15 until recently where it currently stands 1:55.  So silver has been lagging in comparison to gold for some unknown reasons.  I’m not that good at math but I believe the price of silver should be between $60-$70 per ounce given the historical 1:15 ratio.

As I mentioned this difference in price is a bit unusual since majority of the gold ever mined has remained in circulation in one form or another where silver is used for batteries, electronics, and medical products which are not generally recycled.  This coupled with an 86% decline in available silver would generally mean the price should rise.  Also keep in mind the demand for silver continues to rise with the growth in the electronics industry and the Asian consumer being born.  It’s also interesting to note that last year the US Mint suspended the production of gold and silver American Eagle coins due to a massive increase in demand.  The production was resumed shortly the following month when inventories began to rise.  Just this month an article by Zerohedge reported that the US mint had sold a record number of American Silver Eagle coins for the month of March.

A few more reasons why the price of silver could rise.

1)  The Chinese Government has now permitted and encouraged its citizens to purchase silver bullion.

2)  The paper market for silver far exceeds the actual inventory.  This means that investment firms have been using a fractional lending type method when selling you silver that you choose to keep stored with them.  If all the silver certificates and investments were called in for redemption the companies would not be able to deliver actual silver to the investor.  This is why you should always buy physical silver to ensure you don’t get screwed.

See empty Canadian vaults.

3)  Individual investors are turning to silver investments instead of gold because of the low price.  This is most likely why the US mint has seen record sales of silver coins.

4) The very popular author of “Rich Dad Poor Dad“, Robert Kiyosaki  is promoting silver as an investment.  This may sound funny but he has the ear of many middle-class citizens.

Every where in the media we are bombarded by the status of the economy.  Are we recovering or how much longer will this down economy continue?  As far as I can see the recovery is nowhere to be found.  Even with all the government intervention(which prolongs the inevitable) things do not look all that well and here are a few reasons why.

1. Big Banks are Still Hurting

Even after all the bailout money the large banks are in very bad shape.  First they were allowed to hide some of their losses with the mark-to-market accounting strategy.  This essentially allowed the banks to value all their mortgage assets by what they think is the right price and not what the current market value (which is low) really is.  Maybe you heard of a little company called Enron which was famous for using this accounting method.

Secondly the big banks are required to report their debt levels to the public at the end of every quarter.  It seems most have been paying back the debt just before quarter end then re-borrowing back to their previous level.  Keep this in mind when looking at quarterly results.

market-to-market

banks hide debt

2.  Employment Number are not Getting Better

Despite what you have heard the employment numbers are not really getting any better.  Their are 1.2 million jobs being created by the government for the 2010 census.  These jobs are temporary and are currently filtering into the system.  Along with this the FDIC had to hire 1000+ new people to deal with all the new bank failures.  These are not the kind of jobs you want to show a strong economy.

FDIC hires

3.  New Home Sales

Once again there have been numbers that show an increase in new home sales.  This is most likely true but for all the wrong reasons.  Just recently the state of California announced it is offering first time home buyers a $10000 tax credit and combined with the $8000 Federal tax credit you may qualify for up to $18000.  If I could I would probably buy a house as well.  How can the Federal government afford this let alone the state of California.  We as tax payers are ultimately on the hook for this debt.   Last week I heard Peter Schiff mention that all these credits benefit the hoem seller and not the buyer.  If people did not have these large incentives they probably would’nt and could’nt afford a new home which would aeventually cause the prices to fall.  This scheme just falsely props up the housing market.  The home builders need to stop adding to the inventory which I know is hard cause that’s how they survive.

New home tax credits

4.  Cash For Clunkers Will Hurt the Auto Industry in the Long Run

This was another government scheme to help out the hurting auto industry by offering incentives for new vehicle purchases.  This did help the auto companies but it has also created a feast now and famine later problem.  Now those who were planning on purchasing a new car for full price would have done so and probably won’t be spending any money for several years now.  This may cause future auto sales to dry up completely.  Oh yeah and the “clunkers” that were traded in were forced to have their engine and drive-train destroyed.  Even though this was supposed to help the environment by taking fuel inefficient cars off the market what about all the perfectly fine used cars that were destroyed for  no reason.    It takes many years to recognize the gains of a new fuel efficient car compared to your old one.  Keeping in mind the amount of resources it took to manufacture and transport the new car and disposing of the old one.

cash for clunkers faq

5.  Countries No Longer Feel Safe Financing US Debt

The Federal Reserve has been buying up its own treasuries at a furious pace.  They were forced to do this when China and Japan slowed their purchases and began selling at a record pace.  Now think if you were in debt and issued bonds for people to invest in but nobody wanted them so you decided to buy them yourself.  How would this help?

6. Inflation

With he massive increase in the money supply the threat of inflation is looming.  We are starting to see this by the increasing price of oil even though demand is down.  Many think the price of oil has been rising since it is traded in US dollars in exchanges around the world.  Did you know that food and energy even though it is included in the Consumer Price Index (CPI) is excluded from the adjusted number which is used by the media and government.

Here is the explanation of why food and energy are not used when considering what CPI Index to announce

Which index is the “Official CPI” reported in the media?

Our broadest and most comprehensive CPI is called the All Items Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average, 1982-84 = 100.

In addition to the All Items CPI, BLS publishes thousands of other consumer price indexes. One such index is called “All items less food and energy”. Some users of CPI data use this index because food and energy prices are relatively volatile, and these users want to focus on what they perceive to be the “core” or “underlying” rate of inflation.

courtesy of Bureau of Labor Statistics

Hello? Is it just me or does this say the number is volitile (meaning high) so we would rather not include this.  Do some research on what the real inflation numbers are.

Times are tough, everybody is in debt, and everybody lives on credit…

On this particular day a rich tourist from back east is driving through town. He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.

As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmer’s Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything.

However, the whole town is now out of debt and now looks to the future with a lot more optimism.

Here is a 4 part series on how to rob a bank. In this mini documentary The Real News Network interviews William Black. Professor Black is a former bank regulator and white collar criminologist who helped uncover the Savings & Loans debacle in the 90′s.  He is also the author of “The Best Way to Rob a Bank is to Own One“.

One important point he makes is that nobody has been arrested or convicted of any wrong doing in the whole ‘mortgage fraud” disaster.

Many think the worst is behind us when referring to the US Banking crisis.  They received billions of dollars in bailout money from gov’t which was supposed to have been spent on TARP.  I thought banks started paying back some of the money they borrowed?  I guess this must mean they are making money again.

These are all things we need to consider when talking about the health of the US economy.  If you recall this economic crisis was said to have started with the sub-prime mortgage fallout which we think has ended or at least bottomed out.

A current article by Financemymoney.com courtesy the boombustreport.com show the coming wave of US mortgages that are scheduled for default reset.

Another point to consider is that traditional banks and investment banks are one entity.  After the Great Depression the Glass Steagall Act was passed in 1933 which stated that investment banks had to be seperate from tradiational banks so everydays customers were not at risk when banks made terrible investment deals.  This was repealed in 1999  by the Clinton administration which has largely been blamed as one of the reason of the near economic collapse in 2008.  Even after this close call the rules has not been put back into place.  Banks are essentially gambling with you money and are not worried about making bad decisions since the gov’t will bail them out with taxpayers money.

Here is a clip from Russia Today on the future of US Banks.

Crash Proof 2.0: How to Profit From the Economic Collapse

Providing Real Information

This past week we saw the release of numbers that show which country holds the most US treasuries. Too some surprise it was Japan not China. The question to ask Is China dumping US debt or is Japan buying? According to a Bloomberg article China sold 34 billion dollars worth of treasuries in Dec 09 and has not purchased any in the last 8 months. It appears the China has lost its lust for US debt and may seek to invest elsewhere. Does this make sense if the US is their biggest exporter?

Some would say these two countries need each other to survive while other think China could begin selling its products to its own people. Other news items shows China putting massive amounts of money into gold and silver.

Here is a video from Chinese news station pitching silver bars.

China Dumps US debt

Major Foreign Holders of US Treasuries

Japan’s US Treasury Holdings

Why is China Buying Gold?