Marc Faber Likes U.S. Real Estate & Concubine Tenants

Gloom Boom Doom Report publisher Marc Faber was back on Fox Business, Friday, with his latest thoughts on Greece, China, stocks, U.S. real estate, and some creative ideas for male real estate investors during these troubled times.

“It’s a symptom of a wider problem that we have over-indebted governments in the Western world and Japan, and this is just a small plate, a small appetizer to much larger problems and a much larger crisis,” Faber said about strained Greece negotiations with the EU.  Sign-up for my 100% FREE Alerts

As for stocks, generally, the Swiss pony-tailed expat from Thailand believes the rally from the December lows has been too strong to jump on board, yet, especially during the seasonally weak month of February for equities.  He also has been watching the weakest sectors of the economy (home builders and banks) for clues to the overall market direction for the coming weeks.

“Basically, what has happened, the market peaked out last May in 2011, then it dropped to 1,074 on October 4th on the S&P.  Now we’re up 25 percent,” Faber explained.  “The market is very overbought right now, and any excuse for profit taking is now being taken.  And I think February is traditionally a weak seasonal month, so we’ll go down first for a while.

“I would just wait a little bit [before buying stocks] because, take for instance the home builders and the banks: the home builders, in some cases, are up 100 percent from the lows, last October [and] November; the banks are up 60 to 70 percent from the December lows.  I would just wait here a little bit because, we don’t know how bad the correction will look like—could be 100 points on the S&P, could be 200 points.”

Like Peter Schiff of Euro Pacific Capital, Faber likes high-yielding foreign stocks, especially in the area of the world that which Faber is most knowledgeable and comfortable—Asia.

“Well I bought some shares in November [and] December of last year, and I’m not going to sell them because they are high dividend shares in Asia, and I quite like the Asian markets.”

Faber especially likes “Singapore REITs and real estate related companies in Thailand, because they knocked off the industrial park companies following the flooding of the Thai … some Thai industrial states,” adding, “and some shares in Hong Kong.”

Following the lows in December, globally, stocks have move up in tandem as the so-called ‘risk-on’ trade drew investors off the sidelines back into stocks, as investors anticipated a loosening of monetary policy among the world’s dominate central banks.

Moreover, India, whose currency took a mini-crash last year of approximately 20 percent within a one-month period, has rallied back from its nearly 54 rupee level low against the U.S. dollar at the end of 2011, now trading at the 49 handle, as the risk-on trade flows back more strongly into emerging markets once again.

“Actually, what is interesting, in this rally, since early January, emerging markets have done best,” Faber pointed out.  “India is up 14 percent, and the currency has strengthened.  So you’re up almost 20 percent, in essentially, a month’s time.  So all these markets have become overbought—near term.”

Generally, Faber doesn’t like stocks in the U.S.; he likes the battered down residential real estate market, instead.

“I like real estate in the U.S…  Just buy a house,” he chuckled.

In typical Faber style, he went on to share an anecdote from his most recent destination.  This time, the vignette takes place in Phoenix, a city among the worst hit by the across-the-board U.S. residential real estate crash.

“I was in Phoenix the other day,” Faber began.  “Then, the taxi driver took me to the hotel, nice hotel, Fairmont.  And then he told me the person that I just drove before you—I drove him to a five-bedroom house.  He told me he just bought it for $120,000.  Where in the world can you buy a five-bedroom house for $120,000?  I would buy it, live in one bedroom and rent out four bedrooms to concubines.”

But he wouldn’t rent out spare rooms to any foursome of concubines, according to Faber; the concubines must pay rent to him so that the property would throw off cash.

“If you take a very bearish view of the world, then at least—if you own property, you still own it—you pay for cash and get the cash flow as I suggested [from the concubines].  And if you are very bullish about the world, it means the demand for real estate will go up.”

Faber continued, sharing his observation from his earlier stop in Miami.  There, Faber said he witnessed the ‘crane index’, firsthand.

“I was three days in Miami.  Three years ago, I counted 47 cranes, building highrises,” he said.  “This time around, I counted one crane, destroying a building.  So, the market has cleared, actually, in Miami.”

Faber noted the frustrations that foreigners across the globe face when seeking overseas bank accounts outside their native countries—which has been a growing trend since the Asian currency of 1997-8, and magnified by the current ruse by many nations disguising capital controls with ‘fighting terrorism’.

“A lot of money has come from Latin America, from Russia because, if you want to open a bank account somewhere, they ask so many questions.  But as a foreigner, you can go buy a condo,” Faber said.

Globally, Faber is less concerned with the drama playing out in Greece.  His concern focuses upon the only economy primarily responsible for driving global growth (mostly from resources purchases) since the collapse of Lehman Brothers in 2008.  That country, of course, is China.

“When we talk about Greece, the major issue for the world economy is China,” he explained.  “And China has been slowing down.  Industrial production is down; electricity consumption is down; exports were down; and cement production is down; steel production is down.  So, many indicators point to a meaningful slowdown in the [world] economy.”

According to Faber, the countries of Australia and Brazil are most vulnerable to a marked decline in Chinese consumption, especially of raw materials—which has recently given rise of talk among some analysts that the Aussie dollar and Brazilian real may be due for a decline due to a China slowdown.

At the end of the interview, the two Fox Business hosts thanked Faber for his appearance and for “the information about the concubines.”

Faber replied, “Yes, yes, yes [about the concubines].  It’s most important; it’s an urgent matter.”  Sign-up for my 100% FREE Alerts

Jim Rogers Out of Step with KWN Gold Bugs

Speaking with Investment Week, Jim Rogers of Rogers Holdings said he doesn’t expect gold to surpass $2,000 in 2012, putting him on the other side of the boat of some well-known analysts.  Sign-up for my 100% FREE Alerts

“I do not think it will go to $2,000 this year, no,” said the 69-year-old American expatriate living in Singapore.  “I own it and I am not planning on selling it. It will go over $2,000 one day, but not this year.”

No elaboration on Rogers’ latest take on gold was contained in the Investment Week article of Feb. 10.

In sharp contrast to Rogers’ sentiments about the yellow metal, almost every regular guest on King World News, save Marc Faber, has come out with some bullish expectations for the gold price in 2012.  One in particular, Matterhorn Asset Management Founder Egon von Greyerz, told Eric King this week that he expects gold to reach $5,000 per ounce within 24 months, with a reasonable assumption gleaned from his forecast that he expects gold to clear $2,000 by the end of this year.  Otherwise, is von Greyerz suggesting a triple in price for gold during 2013, alone?

Rogers, who said late last year, that he would “get excited” if gold dropped to $1,200 and is hopeful that he will be smart enough to buy the yellow metal at that bargain price.

Today, the gold trades at $1,720, 16 percent from the $2,000 mark.

With Fed Chairman Ben Bernanke poising markets for a high probability of formal QE3 announcement sometime this year in his effort to combat further deflationary forces in asset markets, from where will this gold-negative event come that would exact a steep drop in the gold price?

Sharing Rogers’ concern for Europe, author of Red Alert, Stephen Leeb, said a Greek default in the Eurozone could trigger a sell off in gold, not unlike the 2008 sell off following the collapse of Lehman, though Leeb proffered the odds of Europe losing the battle with the Greek protesters as somewhat small, less than 20 percent.

“If something goes awry in Europe, that could easily lead to a very sharp and very big sell off in gold, just as was the case in 2008 when the world starting coming apart,” Leeb explained in an interview with KWN.  “People sold gold because they needed liquidity and gold went done sharply and then it went zoom, like a rocket ship on the way back.  That could happen today”

In October 2008, gold dropped to $680 per ounce during the panic following the fall of Lehman.  Four months later, in late February 2009, gold settled briefly above $1,000 again.

Leeb said another sell off in gold precipitated by a Greek tragedy would offer another stellar opportunity for investors to accumulate more of the precious metal, a suggestion echoed by Thailand’s Gloom Boom Doom publisher Marc Faber.

Though Rogers told Investment Weekly that he’s encouraged by the developments between Greece and the Troika, he believes that after Greece the restructuring and ‘austerity’ measures needed at the rest of Europe’s PIIGS won’t progress well.

“Europe needs to stop bailing out Greece,” Rogers said.  “The real issue is are they going to change their ways in future? If they do that, the situation will improve. Just sorting out Greece is not enough, if they were to address the problems in other countries then that would be exciting. But I do not think they will.”

In addition to the implied relative dollar strength against the euro in a Rogers scenario, he thinks the U.S. will muddle through 2012 without much incident.  But after 2012, the presidential election is over, and the sovereign debt problems in Europe will have moved to the United States, according to Rogers.

In the U.S., “things look better, but whether it is actually real or not is the question. I am worried about the U.S., especially in 2013 and 2014,” Rogers said, adding that, at some point the U.S. Treasury market “bubble” will pop.

“In the U.S., they are going to continue printing money and sending out good news to win votes this year,” Rogers said.

If January’s BLS jobs report serves as a prelude to a trend of outlandish propaganda about the state of the U.S. economy through to Election Day, Rogers’ case for a relatively firm dollar could very well extend into early 2013.  Then, the big reset to begin the ‘second half’ of an Obama presidency.  Gold could be the only fungible asset left standing.  Sign-up for my 100% FREE Alerts

Peter Schiff’s Critical Advice to Retirees

Speaking with Yahoo Breakout, Euro Pacific Capital CEO Peter Schiff chastised the Federal Reserve for maintaining ultra-low interest rates at the expense of retirees.  But the outspoken critic of the Fed has a strategy for older Americans to survive the crisis in the U.S. dollar without taking on unnecessary risk.  Sign-up for my 100% FREE Alerts

First, Schiff warns all investors of the trend of the U.S. dollar.  It’s down.  The Fed, in its effort to prevent a sovereign debt and banking collapse, is on course to print the dollar “into oblivion” to replace the financial hole left from bad debt still maintained on the books of the banks and at the Fed, according to him.

“I think what retirees need to understand, is that when the dollar is wiped out, all dollar denominated debt instruments are going to go with it,” Schiff stated.  “So what they have to do is get out of the dollar completely.”

That means, though ‘safe’ assets denominated in U.S. dollars, such as U.S. Treasuries, municipal and corporate bonds will most likely return the face amount of the bond to maturity, the value of those bonds will drop rather rapidly over time, according to Schiff.

A return of two percent on a 10-year U.S. Treasury won’t keep up with food and energy costs, if those commodities appreciate at an average rate of, say, 6 to 8 percent per year.  In other words, Schiff believes the U.S. will continue a repeat of the ‘stagflation’ of the 1970s, but during this decade, the rate of inflation could turn out markedly worse.

Moreover, due to the low rates paid on dollar denominated bonds, Schiff sees a troubling trend by some fund managers who offer retirees ‘higher yielding’ U.S. Treasury funds.  These higher yields can only be achieved by ‘leveraging up’ the fund, a risky proposition to retirees, according to him.

“A lot of them [retirees] are buying longer-term U.S. Treasuries, you know, maybe 30 years to get extra yield.  In so doing, they’re taking enormous risk,” Schiff explained.  “In fact, many of the funds that are out there are actually levering up longer-term debt.  That’s incredible risk.  Other people are buying overpriced stocks.”

Schiff outlines the dilemma presently facing retirees (and other investors), that the financial media refers to as ‘financial repression’, a term used to describe Federal Reserve policy of coaxing investors into assets as a potential means of achieving a meaningful yield by taking on more risk.

Schiff thinks Fed policy is wrong, but he also believes there is a way out for retirees.

“So retirees need to buy gold and silver,” he said, a recommendation also made by famed author Richard Russell of Dow Theory Letters.  “If they want more current income, they need to look toward foreign sources.  I particularly like high-dividend paying foreign stocks.

“But if you can’t take that risk, you can still buy bonds denominated in foreign currencies.  But what you don’t want to do is make the mistake of buying long-term U.S. dollar denominated bonds, because I think the biggest losses in this financial collapse are going to be absorbed by ,felt by, the bondholders.  Even those who own U.S. government bonds or municipal bonds, bonds that are thought to be low risk are still going to be wiped out as the dollar collapses.”

As a summation of the Schiff strategy for retirees, he suggests that the techniques of wealth preservation today differs from a more ‘normal’ investing environment in that assets held should be denominated in foreign currencies, not U.S. dollars.

Allocations between stocks and bonds may not necessarily need to vary from a typical retiree portfolio of investments; it’s the currency in which the assets are denominated that matters in a Schiff strategy.

He likes the currencies Swiss franc, Australian dollar, Norwegian krone, Singapore dollar and Canadian dollar.

Additionally, Schiff suggests that gold and silver should be held as a hedge against all currency risks to a portfolio allocation between foreign stocks and bonds.  Sign-up for my 100% FREE Alerts

Source: Yahoo Breakout

Top Russian General: Russia Defends World from Fascism

In a roundtable discussion aired by Russia Today, former member of the Russian Joint Chiefs of Staff Colonel-General Leonid Ivashov asserted that Russia must take over the roll from America of defending the world from Fascism—with the focus of that threat projected by . . . well . . . America.  Sign-up for my 100% FREE Alerts

Eerily reminiscent of a statement made by the head of the U.S. Consulate in Nazi Germany (1938), George S. Messersmith (1883-1960), America is today accused by foreign leaders of the very same political and military atrocities associated with Adolf Hitler and the Nazi Party in Germany more than 70 years ago.

In 1938, Messersmith stated:

The National Socialist regime in Germany is really based on a program of ruthless force, which program has for its aim, first, the enslavement of the German population to a National Socialist social and political program, and then to use the force of these 67 million people for the extension of German political and economic sovereignty over South-Eastern Europe — thus putting it into a position to dominate Europe completely.

With the signing of the NDAA on New Years Day by the U.S. Commander and Chief on top of a multi-year-long barrage of off-the-wall Homeland Security creeping roll out initiatives, politically offensive and oppressive Congressional legislation, bizarre presidential executive orders, FBI warnings of Constitutionalists turned Terrorists, invasions of nations under false pretenses, and now the threat of attack of more Middle east countries, it’s no wonder that a Russian general would come to the conclusion that America just might be that evil threat to the entire world.

Below, the transcript of Russian Colonel-General Leonid Ivashov (retired) on RT provided by MEMRI TV translation, uploaded on

Q: Dr. Leonid, do you think that these preparations and very large maneuvers, which will soon be conducted by Russia, are meant as preparation for war, or rather, a military strike against Iran?

A: These maneuvers and training will demonstrate Russia’s readiness to use military power to defend its national interests, and to bolster its political position.   The maneuvers will show that Russia does not want any military operations to be waged against Iran or Syria.

I assume that the people in the West and in Israel who design the schemes for a large geopolitical operation in the greater Middle East region draw a direct connection between the situation in Syria and in Iran.

Indeed, these two countries are allies, and both are considered guaranteed partners of Russia.  The only question therefore, is who they will try to destroy first a stable country: Syria or Iran.

A strike against Syria or Iran is an indirect strike against Russia and its interests.  Russia would lose important positions and allies in the Arab world.  Therefore, by defending Syria, Russia is defending its own interests.

In addition, Russia is thus defending the entire world from Fascism.  Everyone should acknowledge that Fascism is making strides on the planet.  What they did in Libya is nearly identical to what Hitler and his armies did against Poland and then Russia.  Today, therefore, Russia is defending the entire world from Fascism.

Several new media outlets on the Web suggested that the big news from the RT interview with the retired Russian general was his thoughts on what the Russian intentions would be in the Middle East if the U.S. or Israel attacked Iran or Syria.  The real news here is the public admission that Russia, maybe even a good part of the world, looks at America as the next Third Reich.

Apparently, a retired Russian general has no problem connecting the dots from actions taken by Washington through the years.  But, it appears that 49 percent of Americans cannot seem to connect the dots like an outsider, looking in, can.

According to a The Hill poll, 49 percent of Americans thinks it’s a good idea to attack Iran if the U.S. comes to an impasse with Iran regarding its nuclear energy program.

Would The Hill conduct the same poll, but this time replace Iran with North Korea?  Pakistan?  Both have plenty of nuclear weapons—right now.

Here’s what Winston Churchill said in Parliament in 1938, calling out Prime Minister Chamberlain’s policy of appeasing Hitler:

Many people, no doubt, honestly believe that they are only giving away the interests of Czechoslovakia, whereas I fear we shall find that we have deeply compromised, and perhaps fatally endangered, the safety and even the independence of Great Britain and France…. I foresee and foretell that the policy of submission will carry with it restrictions upon the freedom of speech and debate in Parliament, on public platforms, and discussions in the Press. Emphasis added.

Replace Winston Churchill with Ron Paul, and it’s ‘deja vu all over again.’  In fact, in this case, history doesn’t rhythm, as Mark Twain famously said, history has been outright plagiarized by a group of unimaginative hooligans.

Isn’t that what Vladimir Putin called Washington: a bunch of hooligans?

Vladimir Putin Thinks We’re Hooligans, economist Paul Krugman penned as a title in his blog entry of April 20, 2011.  He goes on to spew more economics voodoo and mythology as a retort to Putin’s comment regarding Fed profligacy.  But Krugman, known for his sophomoric political rhetoric, ends his post in a typical Krugmanism:

What’s really weird, of course, is the large number of U.S. analysts who are taking the side of China and Russia in this business. Why do they hate America?

It may have not occurred to Krugman that there were German citizens who actually hated the Nazi Party in the 1930s.  If he was living in Germany at that time, maybe he could answer his reckless question of today.  Isn’t Krugman aware of the weapon of U.S. dollar hegemony?  Didn’t France’s Charles de Gaulle warn of the potential abuse of a reserve currency held by a single nation?

Though, acting like a fool (or operative in return for Nobel Prize), Krugman’s liberties and childlike behavior must be protected as well.  And there is a man looking out for Krugman, whether the shameless economist likes it, or not.

That man, of course, is Ron Paul, who stunningly trails Mitt Romney in the Republican primaries with a message and warning of the exact same threats confronting Americans, today.

Russia, too, must wonder what’s happened to the American people, but cannot wait for the post-hibernation, begrudgingly taken on the role of resistance to the Fascist threat to the world once championed by America.

It is us today. It will be you tomorrow.

—Haile Selassie I, after the end of the Second Italo-Abyssinian War and the subsequent rise to power of Bunito Mussolini  Sign-up for my 100% FREE Alerts

Jim Rickards: “Chaos” to Dollar Endgame “Most Likely”

Currency Wars author and adviser to the U.S. Department of Defense, Jim Rickards, said the most likely endgame to the currency war between the U.S. dollar, euro and Chinese renminbi is “chaos” for the U.S. dollar.  Sign-up for my 100% FREE Alerts

“I lay out four scenarios [in my book], which I call ‘The Four Horsemen of the Dollar Apocalypse’,” Rickards told Euro Pacific Capital CEO Peter Schiff (posted Feb. 7, 2012 on  “The first case is a world of multiple reserve currencies with the dollar being just one among several. . . The second case is world money in the form of Special Drawing Rights (SDRs). . . The third case is a return to the gold standard.

“My final case is chaos and a resort to emergency economic powers. I consider this the most likely because of a combination of denial, delay, and wishful thinking on the part of the monetary elites.”

In the case of the U.S. returning to a gold standard, tomorrow, Rickards believes a gold price of $7,000 would adequately back the dollar from hyper-inflating.  But as time moves on along with expanding Fed balance sheets, that price tag climb, which, according to his previous analysis falls in a “range of between $5,000 to $11,000 per ounce of gold.”  See Jan. 6, 2012 KWN interview.

However, Rickards doesn’t expect the Fed to go quietly into the night.  “An honest debate about a gold standard is the last thing Bernanke wants.” Rickards said in the Jan. 6 KWN interview.

Instead, the Fed intends to fight for its survival until either the markets discipline the Bernanke Fed—as was the case of the bond vigilantes smack down of Paul Volker in 1980—or when Congress moves to limit Federal Reserve powers.

As to the former, Bernanke cannot respond by aggressively raising short-term interest rates without turning trillion dollar U.S. budget deficits into two trillion dollar deficits (without draconian budget cuts), which most assuredly would lead to a Greece-like run on the dollar.  To the latter, the litmus test of a Reagan-like Revolution remains lukewarm among Republicans toward the presidential candidacy of Congressman Ron Paul, the man whose track record for fighting the entrenched Keynesian mindset in Washington is legendary.

In addition to reining in a profligate Fed, the Congress and president must undertake politically unsavory measures to reign in its profligacy and coziness with banks, as well, which, according to Rickards include:

ñ Breaking up banks

ñ Banning derivatives

ñ Raising interest rates

ñ Cutting government spending

ñ Eliminating capital gains and corporate income taxes

ñ Institute a flat tax

ñ Reduce regulation to job creation

Those steeped in not only economics, but also U.S. politics, are keenly aware that any one of these issues creates a political firestorm for both parties, not to mention powerful forces behind the banking cartel of the U.S who would seek to torpedo any legislator it deems a threat to its 100-year-old money printing factory.  Assuredly, the blackballing of Congressman Paul hasn’t gone unnoticed by Washington politicians.

Could even ‘Rough and Ready’ Teddy Roosevelt undo the madness of the banking cartel’s grip on Washington?

Today, anyway, Rickards sees no tough man on a horse lighting a fire under the body politic like a Teddy Roosevelt once did in 1900; he thinks, instead, the course to a dollar devaluation is inevitable.  There’s too much reform and too little time to alter the course of the U.S. dollar’s debasement.

In fact, Rickards anticipates that the euro will end up much better off than the U.S. dollar.  That’s quite a statement.

At least, in Europe, there’s a shred of infighting about spending cuts, according to Rickards.  In contrast, in the U.S., not a peep about tackling entitlements and an overhaul of the tax system, from either party.  Simpson-Bowles has so far been all but completely rejected by an experimental Super Committee.

“I expect Europe and the euro will emerge the strongest after this currency war by doing the most to maintain the value of its currency while focusing on economic fundamentals, rather than quick fixes through devaluation,” Rickards explained.  “This is because the U.S. and China are both currency manipulators out to reduce the value of their currencies. In the zero-sum world of currency wars, if the dollar and yuan are both down or flat, the euro must be going up. This is why the euro has not acted in accord with market expectations of its collapse.

“The other reason the euro is strong and getting stronger is because it is backed by 10,000 tons of gold – even more than the U.S. This is a source of strength for the euro.”

Rickards recommends investors hold 20 percent of their assets in gold bullion, with another five percent held in silver.  He anticipates the currency war (to see who can debase the most) between the dollar, euro and renminbi to last an additional five years, at least.  Sign-up for my 100% FREE Alerts

Bizarre Market Action Explodes Following Super Tuesday

2012 may turn out to be the year that, when it comes to a close, Americans will feel like they were under the influence of some kind of psychedelic drug.

Massive disconnects between the course Washington is taking us and the vote tallies at the polls and in the markets cannot be much more stark.  It appears that a grand set up for a catastrophe lurks ahead. Sign-up for my 100% FREE Alerts

Take for instance the past two data points from the Bureau of Labor Statistics (BLS).  On Friday, the BLS reported 240,000 new jobs were created for the month of January.  For the prior month, the BLS reported 200,000 jobs were created, for a total of 440,000 jobs for the two months.

It suffices to say, government statistics should be taken with a grain of salt, or, as Greenlight Capital’s David Einhorn had said more bluntly last year: government statistics should be viewed as “propaganda.”

But the latest two reporting months by the BLS go much, much further than the usual propaganda.  These figures from the BLS are truly bizarre.

“Actual jobs, not seasonally adjusted, are down 2.9 million over the past two months,” stated TrimTabs CEO Charles Biderman in a video posted on  “It is only after seasonal adjustments—made at the sole discretion of the Bureau of Labor Statistics economists—that 2.9 million fewer jobs gets translated into 446,000 new seasonally adjusted jobs.”

What would happen to the stock market if the BLS fudged a little—as it does from time to time—and reported, say, a drop of only a million jobs in December and another million in January?  Two million jobs lost surely beats nearly three million lost.

Along with Biderman’s analysis comes an old hand at the markets, Richard Russell.

Famed stock market newsletter publisher Richard Russell has seen it all, the Depression, WWII and all the recessions post-WWII.  He’s been writing for as long as some baby boomers have been alive.  Last week, KWN’s Eric King posted highlights of Russell’s most expressive piece he’s penned in quite some time.

“If you listen carefully, you can hear the heart-beat of the market.  It’s a slow, heavy beat, as if the market is waiting for something, stated Russell.  “That something is going to be BIG.  Bigger than what anyone is expecting.

“The sheer size of this still-forming top is scary.  I think this top will be followed by a phenomenon known as the Kondratief bear cycle, a cycle that can endure for as long as 20 years.  The other name for it is the nuclear winter, a rare and dangerous phenomenon that can last for a generation.”

Either the world is fooled by phony U.S. employment data or the Exchange Stability Fund (ESF) is working overtime.  The disconnect between commerce and the stock market is becoming quite exaggerated.

But an index that gives us a clue to how ridiculous the jobs data have become is the Baltic Dry Index (BDI).  The BDI has crashed.

Below, is a graph of the BDI superimposed on the S&P 500.  Except for the divergence between mid-2005 and mid-2006—a period during which new vessels were entering the market to satisfy crazy GDP growths worldwide from central banking induced global housing boom—the two indexes positively correlate rather well.

But, starting in Q2 of 2010, the BDI headed south while the S&P 500 continued to soar off its March 2009 low.  I appears that U.S. stocks have been ‘pumped’ while the world economy disintegrates in the background.  And according to the BDI, the global economic situation is looking as bad as it was in 2009.

Of course, the S&P 500 pump to match grossly inflated employment statistics from the BLS are politically motivated.  Something must give, but the timing of the reset in the financial markets lies in the hands of Washington—for now.

As long as stocks remain elevated, President Obama may become the favorite against a Mitt Romney candidacy.  Biderman alludes to this obvious ploy.

But if the market crashed tomorrow and the U.S. goes to war with Iran the next day, Republic candidate for president Ron Paul would most likely receive a huge boost to his campaign, as Americans wake up to Paul’s message of peace and liberty from the banker cartel.  Washington fears Paul, but also know its shelf life is limited.  Congressman Paul is 76 years old.

Today, those who believe Paul is off the wall with his message of reality would most likely resonate with millions of more Americans who suddenly began to live in the world of reality.  To them, Paul would make much more sense, and Romney would appear to the voter as another foolish warmonger, especially as the reality of a war with Iran doesn’t jibe with the confident posture of the U.S. hawks.  Iran is no Iraq.

According to The Hill, 49 percent of Americans still think the U.S. should use military force against Iran.

In-the-know geopolitical analysts suggest an attack on Iran would kickoff WWIII.  How many Americans would vote for a WWIII candidate to support Israel?  49 percent?  Not likely.

What percentage of those 49 percent know that a war with Iran is really a proxy war with Russia and China?—maybe the same percentage who still believe Iraq is hiding those WMDs, and still believe the U.S. economy is on the mend?

If The Hill rephrased the question and asked if going to war with Russia and China to do Israel’s bidding is consistent with American values, not many would think the idea was a sane one.

But it may be too late.

Historically, a candidate with a sizable lead following the avalanche of presidential primaries on Super Tuesday ends up getting the nomination to take on a sitting president.  Super Tuesday falls on March 6, with 24 states chiming in, representing 41 percent of Republican delegates.

Coincidentally, in March, the fate of Greece hangs in the balance.  That, too, could be a catalyst for another stock market meltdown and the final nail in the coffin of the U.S. economy—though that nail is coming at some point anyway.  It’s the timing of the event that’s suggested here.

In early January, Gerald Celente issued his 2012 Trends Research forecast.  The gist of the report is: The global financial system could “spiral out of control” some time “by the first quarter of 2012.”  Maybe soon after March 6?  Could Celente have nailed this one?  Sign-up for my 100% FREE Alerts

U.S. States Prepare for Hyperinflation

CNN reports that 13 states seek approval to issue money in preparation for a U.S. dollar collapse.

“In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System … the State’s governmental finances and private economy will be thrown into chaos,” stated North Carolina Representative Glen Bradley in a bill he drafted in 2011.   Sign-up for my 100% FREE Alerts

Sensing that the Europe’s crisis has bought the Fed and U.S. Treasury some time, for now, State legislators have already begun to prepare for the eventual rejection of the U.S. dollar as a viable means for exchanging goods and services.

According to the U.S. Constitution, Article 10, Clause 1 (Contract Clause), States can issue their own money as long as they are in the form of gold and silver coins.

Article 10, Clause 1 (Contract Clause)

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

How much time the U.S. dollar has left as a trusted currency is unknown, but the countdown has begun.

Like the sudden collapse of sub-prime mortgage market—which spread throughout all mortgages—and Greek sovereign debt in 2010—which spread to the rest of Europe—one day Americans will wake up to a crisis in the dollar.

The man who warned of a credit bubble in the U.S. mortgage market in 2006, Doug Nolan of Prudent Bear, told Financial Sense Newshour he likens Greece to the sub-prime mortgage market and the currency dominoes the besieged nation will eventually topple across the globe.

“I refer to this [U.S. Treasuries] as the global government finance bubble and I draw parallels between Greece and sub-prime U.S. mortgage back in the Spring of 2007,” said Nolan.  “In the Spring of 2007, confidence started to falter for sub-prime.  The risk is part of mortgage debt and of course you had the aggressive policy response.  You actually had a very speculative market and you didn’t have a serious crisis until sometime later in 2008.  Now we see Europe; they had the initial Greek crisis; they responded aggressively with the bailout.  That bought them some time, but then things started to spiral out of control last year.”

Though U.S. Representative Ron Paul, TX has sponsored the “Free Competition Currency Act” in the U.S. House of Representatives, State legislators are waiting for Washington.  They have proposed varying methods of introducing gold and silver as a go-to currency in their States so that their citizens can continue to buy groceries, services and durable goods, such as cars and major appliances after the fall of the dollar.

However, logistical issues abound for the States.  Carrying around bullion coins aren’t practical and deviate grossly from ingrained habits of Americans in the use of money in a modern banking system of paper and plastic cards.  But Utah has a solution: Utah Gold & Silver Depository, where clients can continue to use plastic cards.  But instead of transferring fiat currency to a merchant with plastic cards, gold and silver grams would transfer instead to pay for goods and services.

“A Utah citizen, for example, could contract with another to sell his car for 10 one-ounce gold coins (approximately $17,000), or an independent contractor could arrange to be compensated in gold coins,” said Rich Danker, of public policy think tank American Principles Project in Washington, D.C.

Of the 13 States gearing up for its own currency, Danker told CNN he expects four States could pass legislation this year.  Those States include South Carolina, Georgia, Idaho and Indiana.

“I think we could get a couple passed in this legislative session, and that would show this is mainstream, popular and it would be a justification for more of the risk-averse states for doing this,” he said, suggesting a domino effect with other States could result across the U.S.

According to Prudent Bear’s Nolan, the time bomb ticks away on the dollar, and when it blows, the demise of the dollar could move rather quickly as we saw in both the sub-prime mortgage market in the U.S. and in Greek sovereign debt in 2010.

“All of a sudden you could see a situation where the sovereign debt problem in Europe leads to question on the solvency of European banking system, on global derivatives, counter-parties, and maybe at the point there will be concerns with other structural debt issues be it Japan or the U.S.,” said Nolan.  “Once the global community loses confidence in the capacity of policymakers to sustain credit excesses then it’s a totally different ballgame than what we see in Europe.”   Sign-up for my 100% FREE Alerts

Gold:Silver Ratio Screams BUY SILVER

If ever a chart signaled a time to buy, it’s the silver chart.  Breakouts are everywhere, with the big one at $37 still ahead of us.  Then there’s nothing between that price and $50.   Sign-up for my 100% FREE Alerts

But it may get much better, of course.  Silver investors are already aware of the explosive moves in the metal.  The chart (gold:silver ratio), below, serves as a visual reminder of how wild the runs can get when compared with the more tame precious metal cousin, gold.

Previous violent compressions of the gold:silver ratio manifested, starting on Oct. 3, 2003, when the ratio briefly touched 80 on a Friday (keep that in mind).  Silver closed at $4.80 on the day.  Six months later, on Apr. 6, 2004, the ratio bottomed at 51, for a drop of 36 percent in the ratio.  The silver price closed at $7.21, a gain of 50.2 percent for that period.

The more recent and ever more dramatic decline in the gold:silver ratio began on Jun. 4, 2010, when the ratio briefly touched 70, on a Friday.  The silver price closed at $17.41 per ounce.  Nearly 11 month later, on Apr. 29, 2011, the ratio pierced 31, for a drop of 56 percent.  Silver ended the day at $48.48, for a 178 percent gain for the 11-month hyperbolic move.

Then, of course, the raid on silver began within 30 minutes of the open of trading on Globex.  The silver price plunged nearly $6 in literally minutes, according to Kitco’s database for May 1 (May Day).

It appears that another compression rally is underway.  This time, on Dec. 30, the gold:silver ratio touched 57, again on a Friday.  Since then, the silver price has soared, taking the ratio back down to 51.  Silver closed at $27.86.  A ratio of 50, if broken, could start the avalanche to a much tighter ratio.  Everyone is watching closely.

So a compression in the gold:silver ratio to, say, the extent of the Oct. 3, 2003 – Apr. 6, 2004 rally of 36 percent, the new ratio calculates to 36.5 for this present move.  If the compression reaches the Jun. 4, 2010 – Apr. 29, 2012, rally, the ratio calculates to 25.

During the Oct. 3, 2003 – Apr. 6, 2004, silver rally, gold closed at $372.50 on Oct. 3 and $418.50, respectively, for a gain of 12.3 percent for that time period.  Silver rallied 50.2 percent during that period, or a 4.08 times more powerful move in favor of silver.

The monstrous rally in silver from Jun. 4, 2010 to Apr. 29, 2011, was a 178 percent move, against gold’s move of 28.3 percent—from $1,220 to $1565.70.  Silver’s move again trounced gold’s to the tune of 6.3 times!

Assuming gold and silver are indeed in a power move up and that Jon Nadler and Nouriel Roubini are dead wrong, the combinations of potential gold prices and ratios are too numerous to present here.

But let’s assume the 2010-11 rally in the precious metals repeats.  A 28.3 percent return on gold from the Dec. 29, 2011, close of $1,565.70 calculates to $2,009.  Taking a gold:silver ratio of 25 and dividing that number into $2,009, that calculates to a silver price of $80.36.

If to match the duration of 11 months from the 2010-11 silver rally to the present one, by year end, silver would reach $80.

But of course, after silver passes the $50 threshold, $100 is assumed to be the next target.  That’s the Stephen Leeb scenario, and it makes a lot of sense.  Traders love round number targets.  But then there’s the cartel who’s watching, too.  $100 might be their target, as well.

Richard Russell once stated that as far as the price of gold is concerned, traders will look at $2,000, $2,500, then $5,000, and then $10,000.  So, at $2,500 gold on this move and a ratio of 25 gives us that $100.  Sure makes David Morgan’s target of $60 tame, but traders would still make out like bandits.   Sign-up for my 100% FREE Alerts

Bond King Bill Gross Likes Gold

In his February newsletter, Bill Gross of PIMCO surmises that from now on central bankers will target nominal GDP growth in their fight to prevent a systemic financial collapse.  Sign-up for my 100% FREE Alerts

Nothing new there, but Gross believes the threat of stagflation could be with us for a lot longer than investors expect.

The Bond King stated he believes that the “Fed provides assurances that short and intermediate yields will not change,” which therefore invites investors fearful of a total loss into an arrangement with the U.S. Treasury whereby the return of investors’ capital is “assured” but at the cost of declining purchasing power of their capital.

And for how long will this arrangement between investor and the Fed be extended?  “We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time,” Gross wrote, as he expects 30-50 years of leveraged capital to continue to unwind for many years to come.

So the Fed’s plan is to trap fearful investors into a real loss for as long as they can tolerate it.  Then, at some point, the pain of rising living expenses and no end to sluggishness economic conditions reaches a point of investors taking action.  Austrian economist Ludwig von Mises (1881 – 1973) explains the reaction of investors to the “liquidity trap” the Fed has faced since Lehman and for an additional “long, long time.”

“Inflation can be pursued only so long as the public still does not believe it will continue,” wrote von Mises. “Once the people generally realize that the inflation will be continued on and on and that the value of the monetary unit will decline more and more, then the fate of the money is sealed. Only the belief, that the inflation will come to a stop, maintains the value of the notes.”

The endgame is a declining dollar and higher living costs, according to von mises.

Gross believes that the Fed has no options that include economic growth rates exceeding interest rates, which explains targeting ‘nominal’ GDP.

Therefore, the two options the Fed have are between allowing the financial system to painfully collapse to the point whereby capital comes out of hiding once again, while on the other hand the Fed could prop up the deleveraging process at the expense of a return on capital.

What makes matters worse is that Gross believes the Fed (and other central banks) is inadvertently promoting a liquidity trap, further hasting the process out of Treasuries by investors and more Fed monetization of those absent buyers of its debt, creating a virtuous process of no growth, higher Fed balance sheets, higher debt-to-GDP and so forth.

“When all yields approach the zero-bound, however, as in Japan for the past 10 years, and now in the U.S. and selected ‘clean dirty shirt’ sovereigns, then the dynamics may change,” he stated.  “Money can become less liquid and frozen by ‘price’ in addition to the classic liquidity trap explained by ‘risk.’”

Gross goes on to state that institutional money won’t let go of its balance sheet while an economy deleverges.  Therefore, the slack in demand will come from government spending, a Keynesian prescription that is expected to lead to higher and higher deficits and lower and lower currency rates against other currencies as well as the ‘things’ consumed on a day-to-day basis.

“Where else can one go, however? We can’t put $100 trillion of credit in a system-wide mattress, can we?” Gross asked rhetorically.  “Of course not, but we can move in that direction by delevering and refusing to extend maturities and duration … It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.”

The way out has always been to secure gold.  Sign-up for my 100% FREE Alerts