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By Roger Wiegand Dec 19 2007 11:30AM
Yesterday, news of a massive central bank cash injection of over $500,000,000,000 was announced to realign Euro-Libor rates and those of other key player countries. This was met with a huge yawn followed by naked fear in the eyes of these knowing bankers. Market youngsters in New York, living high on the hog the past few years think this great game goes on forever. Meanwhile, in trading pits of both New York and Chicago, graybeards, having seen this stuff before, are openly frightened. We know of one very prominent trader and former senior vice president of a big five brokerage house who quietly retired, quite young, to escape forthcoming mayhem. This guy was barely 50 and in charge of millions in retail stock business. Today he is spending time with his children and is far away from trading responsibilities. He resigned a multi-million income position as he knows markets simply will not be manageable in coming months. This man is one of the best gold traders I have ever seen.
Central banksters are too late in the game and they know it. The inevitable is on its way and will not stopped. Chopper Ben Bernanke, while trying to appease and walk a thin line has fallen off the Federal Reserve bus and got run-over months ago. You can throw billions at the Sheeple but if they do not borrow, buy nor spend, the toast is burnt. That's our position today. Most consumers are just tapped out. Credit has evaporated. The Federal Reserve's band-aid efforts are irrelevant without effect. Interbank lending has stopped. They do not trust each other to repay big loans. These markets are frozen in time as fear escalates.The first really hard and nasty market slap arrives during spring of 2008 when sell in "May and Go Away" will, for all intents and purposed have the appearances of "Lay Down and Die." If you think those bankers are scared now watch what happens when this baby cracks markets. Our Plunge Protection Team will do handstands using every crummy tool in their box while markets take hits not responding to any more Pollyanna news or, other phony, authoritative-like announcements.
When sharks smell blood in the water they detect it miles away circling for the kill. Our trading partners and current and former friends now view the U.S. as a weak sister, a paper tiger getting weaker by the moment. While they should not underestimate American world power, they sense weaknesses and have become emboldened. Putin in Russia is flexing his political and economic muscles and so is China. Other friends, non-friends and substantial trading partners like Japan and the Saudis are backing away from American finance, trade, and our money in an effort to diversify and not sink with the U.S. economic ship. America will soon find itself out in a terrible wind. When a subject is beaten down, has bad luck or, has more than annoyed too many in the world, they are treated openly as with leprosy. First this gets worse then it gets better and then finally it ends.
Russia, of all the world players, has a larger dominant position and would be in the best spot to wreak havoc. China's rudeness toward the American Navy recently, as they were turned away from ports after being given permission to dock on two occasions, is an example of this flexing. We would politely suggest they are missing some very important parts of the larger picture and do not hold all the cards they think they have. We shall expound on this point at another time.
America appears vulnerable for now but we know of other ideas that quietly and quickly shift the global balance of power back to America when implemented. The U.S. is a badly wounded dog for all outward appearances at this time, but big dogs when hurt, bite viciously hard and with ferocious speed when attacked. Some serious and tragic mistakes were made but the United States will be around for a very long time.
Recent estimates tell us the American government has to borrow $2 Billion each day on Asian welfare credit to keep this ship afloat. We suspect that for now, the number is approaching $3 Billion per day and strain is evident everywhere. When the shoe shine boy and store clerks throughout foreign lands prefer Euros or, something else in non-U.S. Dollars, red lights are flashing and warning bells are ringing. We heard this past week about carriage drivers in New York's Central Park making change for European tourists in Euros.
Trading for the rest of 2007 in most markets including our favorites should be mostly year-end house-keeping and wrap-ups. Traders in larger funds are brushing-up portfolios to gain a maximum annual bonus. Most of this is complete as these funds either have a year-end close-out date of November 31 or, December 31. They tossed out their dogs and bought a few new positions. Expectations are for a good rally after New Year's Day in 2008. We expect so too, as that's where all the big-push-equity-money should be going.
Trader Tracks Newsletter is preparing a newly recommended, smaller portfolio for our new readers and smaller accounts. Some of these ideas can apply to larger, existing accounts as well. However, we strongly encourage everyone with hard-earned cash on the line to play defense more than ever in the first half of 2008. Do not be afraid to be in the market and be active. But, be careful about containing potential losses. There are several tools available, many not used by our trading audience.
We recommend all traders tighten-up the number of differing companies they hold. Portfolios with pages upon pages of companies are just too difficult to manage. Some of the best traders in the world hold only five to ten. Others prefer a more scattergun approach for the mining juniors holding 15-25 knowing full well some will be duds but their truly big winners will deliver for the selected grouping.
Our forecast says the world will not end in the near future but could become exceedingly difficult for investors and traders. We like gold and silver and the several trading vehicles available to trade-manage these markets. Energy offers an equally positive situation but a recession could dampen some of these ideas as national economies slow down in later 2008.