Swinging the Market - Calvin Bear

NEW 7/12/2007 4:08:50 PM
Two politically independent factors affect what happens in the share market – one is the real market price of money, and the other is the range of competitive options available for the equity dollar, in other words, comparative risk values.

Three politically dependent factors affect what happens in the market – whether or not the investment bankers who have supported their political candidates feel they have control of these politicians, whether they are individually extracting an evenhanded distribution of favours and money between their ranks from their political ‘slaves,' whether they have sufficient control over the minds and actions of the voting public.

There is only a very small handful of investment banks that exert that much control over the White House. But they control by far the largest dollar push in the equities markets virtually worldwide.

Whereas the judiciary is not politically independent in the USA, it is very very much independent in Israel – and consequently, there is a dynamic that is not much referred to even among those Jewish Banking Conspiracy ‘nutjobs' which often produces disturbances and wide differences of opinion among the operators in the bullfight ring who normally ‘should' be going along a consistent and collusive pathway; except that they don't regularly. This condition innately part of the Israel Lobby, allows for sudden dark volatility in almost every function of policy coming out of the White House, and equivalently it is the root cause of unheralded volatility within the share market collusive banking cartels who operate at the top of capital flow decisions in New York.

Although it is true that there has been for a long time a total lack of discipline surrounding the extending of money from the US Treasury to a small handful of investment banks and their associated interests – this cannot completely overcome the forces of money worldwide that really are the drivers of the interest rate; notwithstanding that it is also due to the trade currency status of the US Dollar and its link to the policy decisions of Japanese banks and the Japan Government, that the Treasury can get away with its bizarre belief in the printing press over the minting press.

Although I find it extremely odd for me to be making references to Lyndon Larouche, nevertheless he is an exact example of a brand name thinker whose printed body of recent work draws from so much excellent historical background, yet still manages to say that dead people are behind the active decisions of today's money and capital managers: it is perfectly true that there was a London City merchant base of corruption and greed that developed into a collusive trans-Atlantic elite two or three hundred years – but these people suffered just as much decimation through all the major wars since Napoleon and there is no evidence they still exist today.

In the same way, it is perfectly possible that Henry Kissinger was part of a globally powerful elite that includes Rumsfeld and Cheney – an elite that directed the current wars in the Middle East – it is not at all certain these people fully control all the complexities of US political reality and there is far more evidence that Congress is swinging brutally strongly AWAY from this clique and its interests.

The investment banks that are not aligned with the Kissinger ideologues currently running the White House, could already be operating on a long term plan to undo the present Republican ruling faction, and these banks will far prefer to create a BIG BUBBLE that can be pinned on the current Bush administrations negligence. Consequently you are more likely to see the share market withdrawals closer to the elections and not quite yet, so that the ‘problems' are fresh in the minds of voters and hot in the media AT THE TIME OF VOTING, and not sooner.

Kissinger is an old man, and Cheney is past his best aggressive years. Olmert is a political dead man walking. These people are dancing their swan songs, not their Bolero Fire Dances!

I mean career fund managers out of the establishment business schools can jump on all the bandwagons they want to but the fact will remain that they have no real access to private equity or hedge fund knowledge no matter how many new IPOs they set up.
ALL debt is supposed to have collateral supporting its downside risks – why should the phrase ‘collateralised debt obligation' suddenly imply an intrinsically self-immolating investment structure?

There is private equity that can NEVER be looked into by the SEC no matter it tries to do – there are secrets of financing and funding that simply are not in the public arena of knowledge. And there are hedge operations that can build or destroy any currency and these have nothing whatsoever to do with the types of leverage and derivative positions and the CREDIT DEFAULT SWAPS (which are totally different to CDOs in essence).

The sub-prime lenders are called sub-prime because everyone always knew they could not meet their repayment schedules – why is it surprising to the professional investor that these will default? It might be surprising that the packaged funds that sell such sub-prime bundles to pension funds collapse with such regularity – but not to me. The fact is, the pension fund contributers are not collapsing; THEY are still making payments to someone, anyone, and probably just the next risky fund that replaced the collapsed one!

The only time there will be a market crisis is when the pension holders start making large scale capital calls… But this might conceivably be actuarily defeated as a ‘problem' if a lot of pensioners simply die. Which they inevitably will at some point.

No. The equity market will not fall just because idiot hedge fund managers or CDOs fail the investor. The equity market will only start to become a slide downwards when the quiet private equity investment bankers sell their equity positions in large scale in order to take up a position in a more competitive investing position. And this will require interest rates closer to 7 per cent than to 5.

Calvin J. Bear

Stocks are dead, long live commodities, says Rogers

Investment guru Jim Rogers says the rise of China and the change in the status of the US dollar as a reserve currency is having a profound impact on global demand.

Investment guru Jim Rogers believes that the bull market for stock and bond markets is over and says investors should get into commodities. There is a long-term bull market in commodities which will extend to 2014-2022, he told the Credit Suisse Asian Investment Conference in a keynote speech yesterday.

Rogers started the Quantum Fund with George Soros in 1973 and went on to make a fortune by the age of 37 before giving it up to become a best-selling author, lecturer and commentator, while maintaining his interest in investing.

His research indicated that the shortest commodity bull market lasted for 15 years while the longest was 23 years. advertisement



His own commodity fund index which he set up on August 1, 1998 has increased by 243% since then, whereas the S&P index over the same period has risen 43%. Furthermore he asserted that whenever commodities were in the ascendancy stocks and bonds were in decline, and vice versa.

He reckoned that the big bull market for bonds in the 1980s and 1990s peaked out in 2003 and "has been in the process of making a big top ever since".

"So I would urge all of you to go home and sell all your bonds. I know some of you are bond managers - I would go home and look for another job," he advised the audience.

It was the same for stocks, at least in the West. By all the classic valuations that had stood the test of time - price earnings ratios, dividend yields, price to book ratios – stock markets were overvalued. The current stock market environment is similar to that of the 1970s with big trading ranges, which some people were able to exploit successfully.

"But most people are not very good at this. They need to have a secular bull market when markets are rising all the time to make a lot of money," he warned.

There is widespread ignorance of commodities, according to Rogers, which is reminiscent of attitudes towards stocks and mutual funds some 30 years ago, This is reflected in the 70,000 mutual funds available to the public to invest in stocks and bonds compared with fewer than 50 commodity funds.

The changes in global demand were taking place against a backdrop of the rise of China and the change in the status of the US dollar as the world’s reserve currency.

"It is amazing how many people do not understand the rise of China - China is the next great country in the world," he said. "I know they tell you that they call themselves communists in China - but I tell you they are among the world’s best capitalists right now," he said.

China had come along way since Deng Xiaopings’s open door initiative in 1978, "but this has a long way to go," he said.

"If you see problems in China – get on the phone and buy as much of it as you can," he urged his audience.

Adding "it's something we need to understand because it is going to affect demand for lots of things and change the world as we know it."

The growth in demand for commodities, particularly oil, was due to the demand from mainly China followed by India. "This is just the beginning. The demand by Asia hasn’t even started yet," he said noting that China’s per capita consumption of oil was a fourteenth of that of the US and one tenth that of South Korea and Japan.

With many of the world’s major oilfields in decline, supply was tightening. Faced with the potentially huge increase in demand from China and India prices were destined to rise.

"If the price of oil goes to $150 they’ll be drilling for oil on the White House lawn," he quipped.

The shift in the US from being a creditor nation in 1987 to being the biggest debtor nation in history with debts of $13 trillion would also have major repercussions for global demand.

"What is terrifying to me is that our foreign debt increases at the rate of one trillion every 15 months," Rogers said. The upheaval that would accompany the change in the dollar’s reserve status would be similar to that which accompanied sterling’s change in status some 60 years ago.

Rogers said that as it was US policy to debase the currency there would come a time when Asian countries, which were among the world’s biggest creditors, would start to get out of dollars and put them into real assets that stood to appreciate such as oil, gold and other commodities.

The US dollar was currently being propped up by Asian central banks, which continued their support partly because it was government policy to do so, and partly from bureaucratic inertia.