[ECON} Final Warning

[brkthr]

These are excerps from my current client news letter...........




Call all of your friends and love-ones
who have declined to act
and urge them to treat the current juncture as a gift
allowing them to get out of their stocks,
mutual funds, bonds, real estate, businesses, etceteras
with a semblance of dignity !!

The causes and effects of cyclic forces
are entirely psychological.



The incredibly bearish fact is that since early 2002 the continued advance of multiyear cycles has been unable to generate a net price rise. Prices got so outlandishly high in the Great Asset Mania that even this force of rising optimism cannot make them go up. This time should prove to be the orgasmic conclusion of a desperate stock market optimism that has prevailed even after prices turned down again in early 2002. I believe that when this next 3.3-year cycle turns down, the market will let go of its hopes, and the massive herd of formerly devout bulls will be selling like madpeople for many months.



* * * * *

the economy



Just as the social psychology behind the soaring stock market in 1985 to 1987 produced a strong economy through early 1990, so the social mood behind a plummeting stock market in 2003 to 2004 will lead to a dramatically weakening economy. THIS IS MY LAST WARNING THAT I WILL ISSUE ON THE ECONOMY. Presumably, my readers and clients are already prepared.



* * * * *

epidemics



I forecasted spates of corporate scandal, labor-management strife, religious strife, economic contraction, increased warring and yes, even the increased probability of epidemics as results of the Grand Supercycle degree bear market that began three years ago.

It is factually to me, that epidemics and pandemics hit populations during major negative social mood trends. Perhaps it happens that way because people's psychological constitutions are weaker during bear markets. Perhaps it is because peoples personal behavior, whether involving hygiene (as in the time of the plague or in recent years with respect to hypodermic needles used to inject drugs) or sexual promiscuity, is more conducive to spreading disease during social mood retrenchments. Perhaps, it is because social mood retrenchment brings economic contraction, which make people less able to afford the creature comforts that ward off disease. Whatever, the reason, when I study the epidemics of the Dark Ages or Spanish influenza epidemic that broke out during the bear of 1917 (which year also saw intense fighting in World War I and the Communist coup in Russia), there always appears to be a bear market in force, and the extent of the epidemic tends to correlate with the size of the setback in mood.

The recent outbreak of SARS is thus no surprise. The single most useful approach to forecasting social change is the combination of the wave principle and socionomics.



I believe there are many more manifestations of the down trend to come,
as the bear market is still young.


James

[Dennis Olson]

James, so NICE to see you back again. Seriously.

(Corrected NO = SO)

[brkthr]

Thanks Dennis

Nothing like the school of hard knocks.....my debating skills needed some polishing.


James

[A.T.Hagan]

Originally posted by Dennis Olson
James, no NICE to see you back again. Seriously.

A little fraudulent slip there, Dennis?

.....Alan.

[rodeorector]

Boy Brkthr, who pooped in your Post Toasties this morning?

[snoozin]

Hi James,

How does one get to be on your newsletter mailing list? If you would rather pm me than discuss it here, then I can give you my email for off-list info.

[brkthr]

snoozin

I knew, when I said it, that question would come up.

Thanks for the acknowledgement.

The newsletter goes to those who own shares in the commodity/equity derivative funds I manage.

Those funds have been closed for several years, and to be equitable to those who have met the substantial minimum investment,I cannot disseminate the letter further.

I post exerpts here ,now and then, to show my appreciation for the opportunity to be a member of this forum.


James

[Maggie]

James, thanks for the information.

I keep thinking back to late 1999 or early 2000, when Ed Yourdon had written an article or put someone elses up on his site (not TB) about the begining of a 10 year depression.

If this has been in play since 2000, do you see it lasting that long? I know it takes awhile for the economy come apart, the major depression and then time to start to work itself back up.


Maggie

[mt4design]

james, great to see you back! as always, thanks for the info.

Mike

[brkthr]

Maggie

as I have said previously......due to the approaching national election the realities of the dire situation we face will be obscurred until 2005.

The "Great Depression" was a SuperCycle decline slope in the worlds economy.

We are at the start of a "Grand SuperCycle decline slope which are magnitudes more severe than SuperCycles.

IMO 10 years is very optimistic.

James

[Curious]

James,

Nice to see you back ... particularly since you may be the only person who actually reads the economic drivel nonsense that I post on occaission .....

(even my spouse's eyes glaze over within about 10 seconds of me trying to say something in that vein )

Curious

[someone]

nice to have you back baby!

[lynnie]

yup, thanks for the post.

[brkthr]

Curious

you contribute much to expanding the POV of this forum.and I learn something from each of your posts.

And I know the "glazed eyes" syndrome very well.


someone....DUDE!!

[Coast Watcher]

Good to see you back, James. You've mentioned in the past that you expect to see the administration juice the market this summer (IIRC) to avoid another "It's the economy, stupid" election. Do you still see that happening, given the 2003-2004 timeframe for a plummeting stock market that you mention above?

For that matter, can we even count on having a 2004 election?

Coast Watcher

[brkthr]

Coast Watcher

The speculation I made on the "juicing" by the incumbent administration this summer, is based on experience from previous elections and the fact, that following the next drop to new lows in the stock market and the $ by this summer, there will be another significant bear market rally that will be pumped for all it is worth to neutralize the "it's the economy" tactic........and the recent highs will not be seen again.....at least not in the years I have left.

Hmmm "no election"........ tis a possibility if the pump handle falls off.


James

[Dennis Olson]

Corrected my egregious misspelling above....

[Trivium Pursuit]

Thanks also James for sharing this info.

James, you've talked about a 'juicing' of the market this summer. Do you see this juicing extending to the mortage market? That is, I know that cutting the discount rate via the Fed doesn't affect mortgage rates, rather the 10 year Treasury bond does. I ask as I am right on the edge of a refinance of the home; I can have 4.875% fixed for 15 years. Do you think the general juicing would cause rates to go lower than that, or will various crises, debt, etc., require the rates of 10 year T's to go up, such that mortgage rates will go up(i.e., we are at the historic low right now). I would have pm'd you this, but your box is full, and I suspect many others would like to hear your thoughts as well.

Thanks.

[brkthr]

Trivium Pursuit

I closed the PM box on purpose,as I get a lot of specific questions I ethically can't answer.

My work shows increasing volatility in the bond markets as the move away from FRNs continues.

At some point in time, the rate of return on U,S, debt, which the mortgage rates follow, will have to be raised to protect the dollar.

I see a top in the Bond market cycle forming about the same time as the next bottom in equities and $s, which indicates rising rates in the fall/winter time period.

Trying to time interest rate decisions at these low rates and volatility is very difficult.


James

[zeda1]

Hey James, I recognize that "Man keeps looking for the truth" phrase you finish with and I was wondering if you are an ESThole??????

[brkthr]

zeda 1

Yep .... 100 %

(SF Staff....participated in the charter training)

That aphorism has been there for a long time with no acknowledgement.

James

[fredkc]

I'm curious, since J P Morgan is, for all intents and purposes, in a bankrupt position, and such a large member of the Fed. Do you think it possible, as some have said, that there will be an attempt at us getting a "new money" even more worthless and devaluated than the stuff we have, rather than deal with the panic and such of their closing? (and in the process, bail them out, of course)

I notice too that J P Morgan has also set up their positions such that, magically, they position in gold is nearly equal to their stockholder's equity in the firm.

I know... just a coincidence

Fred

[brkthr]

fredkc

Heh...my what a coincidence....leveraged to da max!......

got to keep that gold market in the corner as long as possible.......

Speaking of which.....as this plays out ,I see them holding on until just after the election.....then the Hyperinflation Genie comes out of the bottle....and gold breaks loose of the current strangle hold.

The "New Currency"(probably electronic) will be the answer to the flood of FRNs that come flying back to the U.S..

You can bet the conversion rate will dissolve a lot of debt and stick the rest of the world with devalued Greenbacks.

James

[Hiding Bear]

brkthr - I missed what ever got you temporarily excommunicated but glad to have you back.

With your opinions, plus some surpising good economic thoughts from other posters being mixed up in the great political debate here, it will help keep me focused on what's really happening.

I became very negative on the market in 1998, and luckily did not loss anything because of this view in 1998 and 1999 in the mid-year crisises. We are overdue for a new crisis now. Who knows, maybe fredkc is right and they are just better at hiding the crisis.
I make no claim that I can time any cycles, but the market still seems to be in some type of long term down trend. Only hyper-inflation or something close to it may help us out in the market.

Anyway, interest rates will be under upward pressure - although I do not see any quick rise just yet. The Fed pulls back from pumping the money supply every time rates head up, but eventually the impact of huge budget deficits and higher inflation will prod rates ever higher.

[Lee P. Lapin]

James,

Many thanks for the insights from your letter. I am grateful you share what you feel you can and appreciate that part of your work that is given here as a gift. I have some small understanding of its value to your clients given my own limited experience in the market. I wish I could afford to 'hire' you myself.

But I am building capital, and given enough care and good decisions on my part- perhaps someday I will.

Lee

[Curious]

No matter how you cut it or whatever method you use, the Dollar looks awful as one projects out on an intermediate time scale. A collapsing dollar of course has many many remifications ... from inflation, to government spending, to our defense postures overseas, to recession/depression etc.. Let your imagination run on this issue ... and it will create many bad scenarios and few good ones for the US.

Curious

[Ed]

brkthr,

Have you read any of the late Dr. Franz Pick's stuff.
He saw this coming. He suggested that debts would
have to be cancelled and a new hard currency issued
at 100 to 1, 1000 to 1 or some such.

To pretend that current debt can be repaid is sheer
lunacy. Lets just take credit card debt for example.
Common sense says the majority of it can not be
repaid. Same for federal, state and city debt. Same
for many corps.

There is a limit to how high taxes can be raised. Same
for insurance. At some point the result is open revolt.
Open revolt ends political careers. Homeland security
would be of no use in this situation. To survive Bush
will have to break eggs.

No matter what the future holds there will be at least
some things that will be very worthwhile to hold. What
do you see as the best investments for the future?

Thanks in advance,
Ed

[blindhog]

So.....is the timing right to sink all extra FRN's into hard gold/siver bullion?

Will the HyperInflation cause any such holdings to exponentially profit?

I'm all ears.

[Troke]

Good Grief~

Forgive debts? Forgedaboutit!

FIRST, you inflate 1000% and pay off those $ denominated debts with $ worth !/1000 what they were when the debt was first incurred.

Then you issue a new currency.

That is so elemental, I wonder about the thought processes that miss it.

[buttie]

Hello James,

Good to read you here. Does mean that this time we truely are at the point of inflection?

[fredkc]

Incidentally, in case anyone's forgotten, J P Morgan is "fully protected" by FDIC. (Keep in mind that "FDIC" really means "Me and Thee", fellow citizen)

What reaction do you suppose the people who are uncomfortable with our current $7 trillion dollar debt will have if JPM's almost $43 trillion (yes that's trillion, with a "T") in debt is lightly laced on top of that when their day comes due? (remember that the stock-holders, the only people they are legally required to protect, are fully protected by a position in gold.)

JP Morgan closes the doors, gives the gold to their stockholders, hands the keys to the FDIC, and says, "Here ya go, and mind how you open the door, there's a large hungry critter waitin' inside, askin about you."

How marketable will US Bonds become then? What reaction will the average citizen have to becoming sudden;y this much in debt? If you're worried about your Soc. Sec. now, this should remove all doubt.
_____________________________________


I come at this, not from any kind of knowledge about the way the stock market DOES work, and just a simplistic view of how it SHOULD work.

But it concerns me as to how it's health affects our position in this un-friendly world.

I see a stock market that has completely forgotten any notion of

"Investing in the growth, viability and potential profitability of american manufacturing concerns."
(Don't laugh it really was set up for that)

It's IMO probably 70+% based on betting schemes and predicting the effects of the mood of the investor. They forget:
"Mood's a thing for cattle and loveplay" - Frank Herbert

And the whole country seems to have forgotten something else that my father taught me:
"Manufacturing and construction is the only thing that builds true wealth. Everything else just re-arranges the money."

so now we have companies like Boeing that haved moved what, almost 35% of it's manufacturing capacity to China? In this much de-flated economy to come, where would they get the capitol required to re-build said capacity here at home?

While China grows fat on the manufacturing sector they've built at our expense, we have supposedly been moving to some information economy. But while we've retrained ourselves for that the computer industry has anticipated us and moved their business off shore as well.

You don't put your kids thru college workin' at McDuck's and the government can't build Carrier Groups off your taxes, either. Add to that a debt structure that is potentially 8 times larger than it is now, and no ability to sell US Bonds to anyone, and you have the US right where the Chinese have been trying to manuever us for 20 years.
_____________________________

Now, this is where I get a li'l scared.

Given this scenario, America has few choices. And the one that will probably look the most attractive at the time, given the current mood in the country, etc. will be to become exactly what the rest of the world fears now: Empire America.

An ever-growing American Empire would probably seem the most attractive way to give the Chinese a run for their (used to be our) money. This leaves the rest of the world little choice but to either choose an American Empire, a Chinese Empire, or somehow stay neutral in it all. Should this battle devolve into a military one, considering the consequences, how many will side with us?

How will we manage to compete with China if we don't make this change? And How will America change to accomodate this new directive?

Incidently, in case you think I've made up this rivalry between the US and China:
Consider that the Premier, in a public speech before their assembly and top military leaders told his country to be prepared for war with the US no later than the year 2008.

Additionally they've noticed the mood swing in this country that might change this timeline, and/or make us more confrontational in our demeanor:
http://www.cnn.com/2003/WORLD/asiapc.../willy.column/

[brkthr]

OK I'll wade into this......

Lee ...


Ed ....I'm familiar with Pick's stuff and.....Troke is correct ...no need to cancel or forgive debt....hyperinflation will take care of that. The key will be.... NOT holding any debt instruments denominated in FRNs, when conversion occurs.

Best no risk invesrments?? Deeds,Tools,Food

Risky?? PMs, unless you are a nimble market timer,(reason below).



blind hog.....as gold continues to drop....I'm buying it it all the way down.
(I still see sub $200 as the bottom of the cycle)

Yes,gold will eventually rise exponetially relative to the FRN.....the risk is.....PMs will not be able to be legally exchanged for the "New Currency" and the barter value is unknown.

James

[brkthr]

Hi Tom

Yep..... that appears to be the case.....although most folks won't know it until late 04,early 05, I suspect. We won't see these valuations in assets again for a long time.

The worst of all scenarios is approaching ..... devaluation of assets with concurrent devaluation of the medium of exchange.

We are see the first signs now.....falling prices of items purchased with debt and rising prices for items purchased with cash.

James

[end game]

James,
I'm no expert so indulge me a bit here. I'm with you on the deeds, tools, food issue and hold no debt. However what to do with extra FRN's before the conversion? Maybe you or others can point me in the right direction without compromising your stategies. Please don't tell me PM's, they don't have the conversion value needed if the scenario spoken of pans out.

[buttie]

Thanks James,

I think that's even simple enough for me to under stand "Best no risk invesrments?? Deeds,Tools,Food"

I'm holding FRN's I'm planning to convert to a deed as a primary residence. Hopefully soon. What is your current thinking on the local housing market. If wait where is the safest place for the FRN's.

[wrs]

The idea that PMs wont have value in a circumstance where the money is replaced isn't credible. They will, they have always been money and they still are, they just don't circulate under Greshams Law. The bad money is getting worse by the day and the good money will come out when the bad money is worthless. You cannot replace bad money with more bad money after the confidence has collapsed. New money has to be proven to have value in order to replace the old money.

The government will lose its power completely under the scenario that is being assumed. Moreover, people aren't going to get to buy their houses with money that is devalued. Just look at Argentina for example, the people were told that they had to convert their dollar savings to pesos but their debts remained in dollars.......

Don't imagine that the people holding whatever things of value are used to back the new money, will allow debtors to get off the hook. Once a slave, always a slave. Furthermore, if you have gold and silver, you can certainly take it outside the country and spend it. If our borders are porous now, just imagine what they will be like when the government is broke and trying to issue some new replacement currency. The Argentine government tried to issue some new money and it quickly lost much of it's value. The way bankruptcies work is that stockholders lose, bondholders become stockholders and Debtor In Possesion lenders get claims on the revenues of the new company. For the US to issue a new currency there will have to be a new stockholder and a DIP creditor. The US citizen is the current stockholder that will end up with nothing and their personal debts will likely be converted to something quite onerous.

This is why I encourage people not to get into debt because a FRN dollar is meaningless and for the purpose of figuring out how to get out of debt, if the FRN dollar is replaced, you will still owe a debt but it could become anything. People in debt for dollars may well find themselves in debt for real silver dollars because the FRNs are not dollars and if they are eliminated as legal tender, then debtors will owe in dollars whatever a dollar is deemed to be.

My advice is to cancel all your dollar denominated debts now because if FRNs are gone, so is your ability to discharge your debts with them. If only real dollars remain, just keep in mind, you will have to pay in whatever dollars are and the amount of your debt will likely not change, it didn't in Argentina.

[LONEWOLF]

Wasn't the inherent value of diamonds, gold and other PM's due to their portability and resistance/invulnerability to rot and decay? Really. How is one to flee an area with all their worth caught up in machine tools, real estate, and vanloads of food? Plan on traveling far? Much practical value in having a large portion of your assets in ready, portable, and recognizeable commodities like gold and silver. Timing is everything, and I can't see having all one's assets in non-moveable items "these days". JMHO.

[Hiding Bear]

wrs, as usual always has a good point. I just might add because of the increasing intervention by our government in financial markets, that savers of US "dollars" are also losing.

Your savings interest rate of 1% is a guaranteed losing investment due to inflation at 3 or 4 % (if you exclude the escalating price of housing like the governement does).

Where does inflation come from? - at its roots are the issuance of new money by the Federal Reserve, which has become a necessity to offset the effect of huge government borrowing and prior mismanagement of the economy.

Despite the illusion that a war in Iraq is free (that is we do not have to pay a special $1000 per familiy tax for its actual costs), we will still end up paying for this indirectly through inflation and further economic mismanagement.

I recommend placing at least a significant part of one's assets in something like gold that will maintain its value with inflation. Swiss francs, with its strong ties to gold, may be the best alternative currency to the US$.

Breaking Through:
You have been spot on the gold, etc. in the past even when it was not a popular view at this forum. Thanks, for standing alone here often times.

I contemplate getting a couple hundred $K out of Oppenheimer Gold and Special Mineral, Class C and parking it temporarily (6 - 12 Mo) before investing in an alternative funeral home (smaller less expensive death care) and/or a mineral spring company back in Idaho where I know the territory. Both business are seasoned by good management (me mainly) and await a downturn in economy, to do well.

My question is: Where would you recommend temporary funds right now: money market funds, bank pass book or what?

[cipher]

Thanks James, for this thread. It's highly enlightening. I am really glad you are here....

BTW, this is what Ure is saying, too.