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

On the war front

According to Dr. Paul Craig Roberts,

In December, I posted Mr. Roberts essay entitled How Americans Were Seduced by War. I believe his essay to be a "must read" for all concerned patriots.

Financial Markets

Interesting developments in the markets....The nation's largest mortgage player Fannie Mae (FNM) is now circling the drain. Over the last 6 months FNM has dropped over 31%. Thats a $23 Billion dollar loss.

Fannie is not merely the second largest financial entity in the country, after Citibank. Via her mortgage securitization, she's the engine of Real Estate Asset Inflation, the motor of Bubble II.

With a balance sheet larger than the Federal Reserve's, Fannie is arguably a larger creator of money and credit than the Fed itself.

Make no mistake: Fannie is a vital keystone of the US Ponzi Pyramid economy. If this Engine of Asset Inflation is shut down, the Fed will face grim choices in replacing Fannie's firehose-like credit creation.

But the Fannie collapse is only the beginning, not the end, of a dismal process.

Fannie is SCREAMING DANGER to anyone who will listen.

Either there's an endless supply of "Greater Fools" stepping into this market or the dam is about to burst.

Precious Metals and The Fed

I believe that the economy is out of the Fed's control and they have realized that they can no longer artificially hold the markets up. As the markets deflate, there will be a migration to alternative investment instruments.

The Real Estate Markets are already melting down in some of the more extreme bubble areas, like San Diego, San Francisco, Manhatten and Miami. This will continue to occur on a regional basis. The stock market is, by its nature, an international entity, and whatever happens, it will happen everywhere at the same time.

So, what does this have to do with precious metals, you ask? When the markets start to deflate there is a traditional move to other asset classes. Usually these include real estate and bonds. This time, real estate is obviously a dicey choice, and the bond market is getting hammered because of rising interest rates. If you, as an investor are considering investing in precious metals, you would see that metals are currently being hammered, as are the mining issues.

The last thing the "Dark Side" wants to happen is for investors to move their capital into gold and silver because that is one of the first places that they will lose all control of. When you invest in PMs, you are opting out of their fiat monopoly.

I look for the Fed's desperate actions to continue to push metals lower. This, is done (as you probably already understand) through the naked shorts on the COMEX.

Silver could go below $6.00 and gold below $400. Have no fear, they both will come roaring back and acheive highs far beyond most investors expectations.

Picking the bottom is almost as difficult as picking the top (if not more so). When they hit bottom, they will both take off like rockets, so consider any time in the next couple of weeks, as an outstanding buying opportunity. If you are already in, I would just sit tight as the market will remain extremely volatile until "lift off".

Energy

A report by Goldman Sachs’ oil analysts predicting a super spike in oil prices to $105 a barrel is making waves in international oil markets.
The report predicts that oil markets may have entered the early stages of a “super spike” period, which is a multi-year trading band of prices high enough to reduce energy consumption and recreate spare capacity. Lower energy prices will be restored after this phase, the report predicts.

Goldman Sachs has upped its ‘05 and ‘06 forecasts for WTI spot oil prices to $50 a barrel and $55 a barrel, respectively, up from $41 a barrel and $40 a barrel.
World oil prices have more than doubled since early ‘02. Adjusted for inflation, however, they remain far below levels reached in the wake of the 1979 Iranian revolution when prices surged upwards of $80/barrel in today’s money.

The higher forecasts are being made because of a combination of oil demand growth, and a premium for light sweet crudes relative to heavy sour crudes. The increase in the industry cost structure is also being cited as a factor.

An average return of 80 percent on shares of oil and gas companies may be possible as oil prices climb to their peak. The firm didn't change its top picks, which include Exxon Mobil Corp. (XOM), Amerada Hess Corp. (AHC), Murphy Oil Corp. (MUR), Suncor Energy Inc. (SU), and Devon Energy Inc. (DVN)

 

Financial Survival

Health-care costs are rising 300% faster than wages. Explaining away the impact upon the “Real Economy’s” participants is quickly becoming far less palatable to America’s Working Class. I use that term very loosely to include all Americans not feeding at the top tier of first abuser privilege granted to those with immediate access to "Bubble's“ Liquidity Trough.”

Houses in most locations are not presently a good buy. If you can't buy a house, rent it out, and cover your costs, then it is over priced. As you already know, today, there aren't many houses out there that pass this test. In other words, it's far cheaper to rent a home than it is to buy one.

We are entering a period of civilization where the keyword is sustainability, not growth.

In a world of $100/barrel oil, the weak die and the strong survive.

Very soon, as early as June, a lot of people here will be glad they held gold and silver

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.