The
truth will set you free, As the editor of the Silver Bear Cafe, I spend most of my time researching current events. I explore the markets, the war, precious metals, the Federal Reserve and energy. In this weekly column I will attempt to condense the week's events and examine how the news might affect your pocketbook. JSB Financial Markets Already, dollar bears warn of the implications of a dollar dump by China or Japan - such action would send the U.S. currency into a hopelessly downward spiral, literally flooding the market with unwanted greenbacks and deeply depressing the dollar. Why would countries that have been shoring up their forex reserves with dollars want to get rid of them? The economic answer: to hedge against a falling dollar by selling forward, and, at the same time, taking some profits due to extremely low short-term U.S. interest rates. The political answer: to deliberately trash the U.S. economy, challenging America's position as a world superpower. On the war front The Iranians are about to commit an offense far greater than Saddam Hussein's conversion to the euro for his oil exports back in the fall of 2000. In March 2005 Iran is going to start competing with New York's NYMEX and London's IPE with respect to international oil trades - using a euro-based international oil-trading mechanism. What does that mean? It means that without some sort of US intervention (likely covert, but possibly overt), the euro is going to establish a firm foothold in the international oil trade in 2005 - which given U.S. debt levels and the neoconservative desire for U.S. global domination - provides a rather problematic situation. Indeed, numerous articles have revealed Pentagon planning for operations against Iran in 2005. The publicly stated reasons will be over Iran's nuclear ambitions, but the unspoken macroeconomic issues explain the Real Reasons regarding the 2nd stage of petrodollar warfare - Iran's upcoming oil Bourse. China has deployed up to 150,000 troops on its border with North Korea to deter Pyongyang's nuclear build-up and to stifle mounting violence from rogue North Korean soldiers, a report said Sunday. Hong Kong's Sunday Morning Post cited an unidentified security source in China as saying five divisions of Chinese People's Liberation Army (PLA) troops had been deployed in Yanbian Korean Autonomous Prefecture, bordering North Korea, since last month. Precious Metals There is a little-known way to hold gold and other precious metals overseas, privately. It's called the Perth Mint Certificate Program (PMCP), and it is an excellent way to ensure your wealth securely, discreetly, flexibly and inexpensively. When you buy precious metals in the PMCP, you get a certificate of ownership. The certificate represents a specific item -- the bullion or coins you purchased. The document simply shows "ounce for ounce" what you own that the Perth Mint is holding for you. The PMCP is an extremely private way to own precious metals. The PMCP is not considered a monetary instrument, since it is non-negotiable and does not provide a payment of a "sum certain" in dollars. Your assets and any related documents are stored offshore (in Perth). You retain the ownership certificates, which are transferable but non-negotiable. In case of an economic catastrophe, you simply use the documents to request delivery from Perth to any number of major financial centers, such as Zurich, London, or Singapore. Some countries have restrictions on gold ownership, but you may remove your assets from the Perth Mint whenever you wish. There are no import or export duties on precious metals in Australia. Coins purchased in the PMCP enjoy worldwide recognition you can liquidate them in any major financial market (subject to import restrictions). The
program also allows you your choice of gold, silver, platinum and
palladium. No other certificate program we've
researched offers all four
metals. And,
you can sell all or part of your holdings and receive your proceeds
in a variety of currencies: U.S. dollars, Australian dollars, Swiss
francs,
or
other major
foreign currencies. Speaking of Energy How long will the
world's oil last?
Production has peaked, and the economic impacts will be dire. When the modern oil industry was born 145 years ago in Titusville, Pa., few people worried about just how long petroleum would keep flowing out of the ground. But since production peaked in the United States in 1970, a growing number of geologists, economists and industry analysts have been pondering the question of just how long worldwide supplies will keep up with growing demand. And some are predicting that global production may peak as soon as next year. The outlook is muddied by the data. Estimating oil reserves, how much is left in the ground, is a notoriously perilous endeavor. The task is complicated by the secrecy of OPEC producers, who are reluctant to dislose just how much oil they've found. This year, global demand for oil, currently at more than 80 million barrels per day and climbing, has come closer than ever to exceeding the world's known production capacity. Disruptions in oil supply due to wars or market forces like OPEC embargoes, are nothing new. But with producers pumping as fast as they can, there is little cushion for temporary supply interruptions or heightened demand from industrializing countries like China and India. "We really are close enough to the edge to have no excess capacity. Demand growth shows no sign of slowing and now it seems to be accelerating," said Matt Simmons, a Houston-based investment banker. "It's really important to know what the real story is, as bad as it may be." No one is suggesting that the world oil industry is close to pumping its last drop. But the question now being raised is whether new reserves can be discovered fast enough to both replace depleted oil fields and keep up with growing demand. Some argue that the world is rapdily approaching the point where the pace of oil depletion overtakes the growth in new supplies. "The worry is whether there is something worse than the Great Depression of the 1930s waiting for us, particularly that the United States gets heavily hurt because we burn a quarter of the world's oil," said Princeton University geologist Kenneth Deffeyes. Deffeyes is perhaps the leading proponent of the work of the late M. King Hubbert, a Shell Oil geologist who accurately predicted, in a controversial 1956 paper, that U.S. oil production would peak in 1970. Deffeyes has applied Hubbert's work to global oil supplies and has come up with his own projection for peak global production. He expects world production to peak around Thanksgiving of 2005, give or take a few weeks. But with a surge to record oil prices in recent weeks and gasoline consistently selling in the $2 a gallon range for most of the summer, energy issues have played a surprisingly low profile in the presidential campaign. The reason, experts say, are clear: There are no simple solutions. The presidential candidates aren't going to stand up and say ‘I've got bad news. They don't want to promise you blood, sweat and tears. So it's not being debated as an issue on the presidential campaign. Oil industry officials say there are still promising regions that have not been fully developed, including areas of Alaska and the Atlantic and Pacific coasts of the U.S. that are currently off limits. But they generally agree that the days of major new finds of cheap oil are over. New spending has been constrained, in part, by political instability in parts of the world believed to hold vast potential, such as Venezuela, Iran, Iraq and parts of Africa. But Big Oil is gun shy for other reasons. The sting is still fresh from a major investment boom in the 1990s, when the industry lost heavily when it bet on an oil price run-up that collapsed following a global recession. By 1998, the price of a barrel of oil had fallen to $12. The debate over oil reserve estimates and demand-production trends is not just academic; at stake is nothing less than the economic well-being of the world over the next few decades. There are numerous scenarios describing the transition from a global economy based on fossil fuels to whatever energy sources ultimately replace them. The most extreme pessimists foresee a kind of global return to the Stone Age as a world deprived of energy is beset by anarchy and starvation. And even the most optimistic scientists who believe world oil production will soon peak warn that the transition to a post-petroleum world will require an enormous undertaking involving breakthrough technologies and massive amounts of capital. In the meantime, many scientists are looking for those alternatives sources. Some have suggested that technologies promoting cleaner-burning coal, still in plentiful supply in the U.S., will help bridge the oil gap. Others have suggested that nuclear power will become more attractive if oil production declines too rapidly. Wind power, more widely used outside the U.S., has a proven track record. More advanced technologies , like the conversion of coal to hydrogen, also show promise, but are years from commercial production. At some stage , someone is going to have to stand up and say, ‘We have a problem here and I think we ought to go out and solve it.' But at the present moment neither of the people involved in our presidential race have found the words or the motivation to do this. The Fed " Imagine a place where you could spend far more than you earned for years without consequence," writes Gary Duncan in the Times of London. "Imagine a place where you could pay your way by writing cheques that nobody would bother to cash. Welcome to America, today." Americans have never had it so good. But Nature has her ways of keeping things in balance. We have been acting like a deer frozen in the headlights of an on coming truck. "Over the past decade or more," Duncan continues, "the United States has been living far beyond even the vast means commanded by the world's largest economy. America's households have spent far more than they earn, borrowing extravagantly against the rising value of their homes and other assets. The U.S. government has been no less profligate, dramatically increasing spending while making hefty cuts in taxes. " We are witnessing the biggest free lunch in modern economic history. But there's no meal quite as expensive as a free lunch. The Fed cut rates 13 times after the 2001 recession began. With the key rate as low as 1%, the Fed was willing to lend money at a negative real rate of interest. This ultra-cheap money is what stimulated a consumer-spending binge in the United States and a capital-spending binge in Asia. The effect on Americans is simple: They ruined themselves by spending money they didn't have on things they didn't need. Asians, on the other hand, built factories to produce things for people who didn't have the money to pay for them. Both trends are doomed, but not exactly in the same way. Americans' standard of living was bound to fall, compared to the rest of the world's, anyway. Wealth still comes, mostly, from producing things. Asians can now produce things more quickly and less expensively. The Fed's artificially low rates merely accelerate the process, giving Americans one last spending spree - like a condemned man's last meal - before the credit card is taken away. When will the "free lunch" come to an end? " No one can predict with certainty," writes Duncan. But a revaluation of the yuan might be the dessert course...or the coffee. Then, the bill is sure to come - denominated in yuan! " It is a tantalizing prospect, although one that will depend on China's ability to preserve political stability as its prosperity grows," Duncan concludes. "However, it is not impossible that, in our lifetimes, markets will hang, not on the words of Alan Greenspan or his successor, but on those of the chairman of China's central bank." Financial Survival American householders are making the biggest financial mistake of their lives. For half a century, from 1951-2001, house prices kept pace with inflation. Then, following the fastest rate cuts in history, real estate shot up. In certain "hot spots," houses have been gaining 30% per year. Throughout the nation as a whole, the gain has been closer to 10% - still three to four times the rate of inflation. Americans mistook this increase in house prices for wealth...and began to spend it. Last year, the amount of "equity" they "took out" of their homes came to 6% of their incomes. That, along with tax cuts, is what has allowed them to continue spending money. It is an elegant little trap, set by our own central bank...and enabled by central bankers in China and Japan. It allows Americans to believe what they want: that they are getting richer. Actually, we get poorer every year it continues; our expenses rise faster than our incomes. Wealth from house-price increases is phony. Real wealth comes from jobs, earnings, profits and savings. There are no shortcuts. No free lunches. No "adjustments" that turn consumption into savings or expenses into income. You still can't get into heaven without dying. If you are depending on Social Security, stop. Get out of debt. Figure out ways to conserve. Take up gardening. Sell everything you don't need. Follow the course opposite to custom and you will almost always do well...
More next week... If you have not yet joined "the Bear" and/or have questions, please call us, toll-free, at: 1 (877) 389-7626 May the Great Spirit be with you always,
Johnny
Silver Bear P.S. Refer two new members to the Silver Bear Cafe web site and earn twenty, (20), one troy ounce silver rounds. For more information on the Silver Bear Cafe's income opportunity, click here Bear Tracks Archive
All statements and expressions are the sole opinions of the editor and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The staff of Silver Bear Cafe are not registered investment advisors and do not purport to offer personalized investment related advice. The publisher, editor, staff, or anyone associated with, or associated to the Silver Bear Cafe may own securities mentioned in this newsletter and may buy or sell securities without notice. |
Its
not what you don't know that will screw you up, it's
what you know that is wrong. The spin you hear from the
mainstream media is intended to mislead you. Open your
eyes and face the future. If you leave your head in the
sand and ignore it, you are only leaving your butt exposed
for the world to kick. This all may sound like gloom
and doom, but when you get a handle on what is going
to happen, you will have a future filled with opportunity.
Fortune favors the Informed.