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Below is a preview of the CMV (Contrarian Market View) Newsletter for November, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)
CMV’s Special Notice
The November CMV was written one day prior to Greek Prime Minister George Papandreou’s announcement that he would call for a public referendum in January 2012, on the EU bailout package approved by the 17 EU countries just days ago. A public “NO” vote which presently has support of 58.9% of Greek citizens according to a recent survey, appears headed for rejection of the bailout. The fear amongst investors is that the resultant Greek default will spread to Italy, Spain, Portugal and other EU members. Greece also faces the prospect of expulsion from the EU and the euro. Most of the October sector gains highlighted below have been erased by the overnight sell-off in the global markets. CMV will advise by SPECIAL BULLETIN if any changes should be made in any sectors.
CMV Recommendations Comparisons
YTD 52 Weeks
The CMV Portfolio -14.8% 18.8% (since 1/1/10)
Dow Jones Industrial Avg. 5.65% 10.01%
S&P 500 2.2% 8.6%
NASDAQ Composite 3.2% 9.2%
Market Overview
“A wave of euphoria swept through the global markets last Thursday in giddy response to the communiqué out of Brussels that the 17 nations in the euro zone . . . cobbled together a financial care package to rescue Greece and stave off a widely dreaded contagion of downgrades and defaults that threatened to engulf a good chunk of the continent,” said Alan Abelson in his October 31st “Up & Down Wall Street” column. It was like the world was whistling “Happy Days Are Here Again” while walking past a graveyard of deceased and dying EU nation states.
In sum, the EU leaders announced a deal with three key points:
1. Private sector banks will take a “voluntary” haircut of 50% to the principal of the Greek bonds they own which ostensibly lowers the Greek debt from 170% of GDP to 120% which still can’t be paid.
2. EU banks will be required to be re-capitalized by 106 billion euros ($150 billion USD) by June 30, 2012 with no indication where the funds will come from, and
3. The Bailout Fund, European Financial Stability Facility (EFSF) will be leveraged (5x1) to provide a one trillion euro backstop to future bond issues. The strategy when faced with massive de-leveraging is to leverage up again.
In CMV’s opinion it’s the “samo, samo, plan” – dig a deeper hole to get out of the one you’re in – Another short-term fix that sets up the EU for a more colossal failure down the road. It’s the same model that the Masters Of The Universe in the US have used for 40 years that has brought us to the brink. BUT, and it’s a big BUT, the deal has spawned a huge stock and commodity relief rally that substantially improved the CMV portfolio about 10%.
The resultant rally made October’s surge reverse most of the third quarter’s loss and move stocks to near 2011 highs. “The overall US stock market has surged 17% since October 3 and 6% from its’ 2011 peak,” says Kopin Tan in the October 31st, Barron’s. Specifically, the Dow Jones Industrial Average gained 422 points or 3.6% to 12,231. The S&P 500 closed up 3.8% to 1285 and the NASDAQ Composite Index added 100 points or 3.8% to 2737. Gold, after it reached an inter-day low of $1535 in Mid-October, closed October 29th at $1746/oz and a remarkable move of 211 points or 14%. Everyone is asking the same question. Is the rally for real? How long will it last?
There are solid reasons to have doubts and misgivings while at the same time seizing the opportunity of the moment. The US Bureau of Economic Analysis (BEA) report on Thursday, which also spurred the markets, said that the 3rd Quarter GDP gained a robust 2.5%. Before we enthuse too much, a word of caution. Every quarter after the original announcement, the BEA issues two revisions and they’re almost always downward. The 2.5% will probably end up being 1.5% 60days from now but few will notice. John Williams of Shadow Government Statistics says the 2.5% is “utter nonsense” and in truth the US economy is edging along barely positive.
Additional stats seem to support Williams’ claim. Personal income rose a mere 0.1% in September while consumer spending climbed 0.6%. Personal savings shrunk from 4.1% to 3.6% meaning people are using more plastic and reducing savings to get by. The Department of Agriculture (DOA) last week on Tuesday reported that food prices will increase 3.5% to 4.5% this year after climbing just 0.8% in 2010. As CMV pointed out last month, beef prices are going to rise substantially next year far in excess of DOA’s forecast. If CMV is accurate, all the focus next year will be on the “Inflation Jeannie” as she again pops her pretty head out of her master’s bottle.
Barron’s interviewed 9 asset managers in its October 31, 2011 issue called “The Smart Money Speaks.” Here’s what Felix Zulauf and Stephanie Pomboy, two of CMV’s favorite authorities had to say:
Felix Zulauf:
“The (EU) crisis will drag on for a number of years, with the result that countries on the periphery will remain in recession for a long time.” (Felix lives in Switzerland)
“...the US will have very low growth for a long period of time . . . investors should be defensive, look to preserve capital and prepare a list of short-sale candidates for the next leg down. And they should buy more gold on dips.”
“...commodity prices will experience a cyclical correction into the second half of next year. But oil could pop to $100 a barrel and some Exchange Traded Funds such as XLE, OIH, and HAP could be played as short-term trades.” (CMV believes that oil will go much higher in 2012.)
Stephanie Pomboy:
“We have yet to sow the seeds of a sustainable recovery, meaning employment gains.”
“Yes (QE 3 is inevitable) because we haven’t cured the disease . . . The Fed needs to keep huffing and puffing until the wealth effect eventually starts to work and creates jobs.”
“But for the long term I still like hard assets, specifically gold and oil.”
What is really interesting in that none of the “smart money” commentators or any of the journalists in the WSJ or Barron’s forecast anything resembling an inflationary period or a hyper-inflationary “Crack-up Boom.” CMV is the lonesome cowboy in the “Last Rodeo.” All of the major global economies must create growth through inflation. The EU, US and yes even China, can’t service their existing debt at present levels. How will they be able to handle another layer of IOUs? Ever since the days of the Roman Empire governments have devalued and debased their currencies in an attempt to inflate the debt and entitlement problem away. All have failed. But, there could be one last BOOM. CMV calls it the LAST RODEO. China has committed to reflating their economy and the boom has begun in the Pacific Rim. The EU bailout should provide, at a minimum, temporary relief. The US QE 3, when announced, chould propel stocks and commodities to potentially new all-time highs. Get your tickets for the LAST RODEO. It’s going to be a wild ride.
Who Stole America’s Gold From Fort Knox?
The US Government has steadfastly maintained for decades that it owns 261 million ounces of gold bullion (8,100 tons) – far more than any other nation in the world. A recent book “Good As Gold? How We Lost Our Gold Reserves And Destroyed The Dollar” by Chris Weber, debunks the myth that America’s gold reserves are safely stored at Fort Knox, Kentucky. CMV has read Weber’s meticulously researched book and it, coupled with Steve Orlowski’s (Insiders Strategy Group) supplemental updates, CMV will reveal here for you not only the biggest scandal in America’s history but it also presents to you one of the greatest opportunities.
The mystery of America’s missing gold begins with Franklin D. Roosevelt’s Executive Order in April 1933 banning the private ownership of gold bullion by any US citizen. Under the threat of a $10,000 fine and imprisonment, all Americans were required to deliver to any Federal Reserve Bank all their gold and receive $20.66/oz in newly printed Federal Reserve Notes that were backed by nothing. In 1936 an underground bullion depository was built in Fort Knox, Kentucky to store this vast horde of gold which by 1949 amounted to more than 700 million ounces – equal to 70% of the entire world’s supply! FDR, once the gold was confiscated, “revalued” bullion at $35/oz and since the Fort Knox gold was higher than the world market price, central banks around the world were eager to trade their gold for dollars. Then, in 1961, when the shiny metal became more valuable than $35/oz the Fort Knox horde began to disappear. That’s when the US Federal Reserve Bank (Fed) and seven other central banks initiated the “London Gold Pool” – a coordinated scheme to defend the official price of $35/oz by dumping bullion on the London market. It has been established that between 1961 and 1974, 509 million ounces of gold was removed from Fort Knox. The scheme allowed wealthy investors, including US citizens, to buy gold at $35/oz and store it outside the US.
Frank Chelf, an 11 term Congressman whose home district was Fort Knox, charged that the government was secretly removing gold from Fort Knox by the truck load in the middle of the night. Edwood Durell, a businessman in Berryville, VA, was able to obtain an official document from the US Mint detailing more than 10 years of shipments from Fort Knox. He caught the Mint and US Treasury officials red-handed. They admitted that 1,762,386 ounces of gold in one shipment was a “mistake” and never entered into the official record. What we don’t know, of course, was who were the entities who acquired the bullion at $35/oz that would soon skyrocket in price to $850/oz in just a few years?
The story gets dicier.
CMV has pointed out numerous times that Robert Rubin’s (Secretary of the US Treasury) “Strong Dollar Policy” initiated in 1995, was the beginning of the demise of US manufacturing jobs but it also played a critical role in the gold market. Rubin and Federal Reserve Board Chairman, Alan Greenspan, knew that low interest rates would produce higher gold prices which would undermine their “Strong Dollar Policy.” They had to control the price of gold. What did they do? The Fed began to “lease” gold from its’ (supposed) reserves to the biggest banks on Wall St. at an interest rate of about 1% per year. The banks then would sell the leased gold bullion on the open market and invest the proceeds at a much higher rate of return. The huge amount of sales would continue to suppress the price of gold then at about $300/oz. Alan Greenspan even admitted in testimony before Congress in 1998, that the purpose of the leasing was to manipulate the price of gold. The cogent question is, where did the Fed get the gold to lease out? That’s the dirty little secret the Masters of The Universe (MOTU) didn’t want anyone to know but the cat has just been let out of the bag. The Fed leased out more gold than it owned or had access to. It was gold that only existed on paper. And, the gold at Fort Knox was US Treasury / US Taxpayer gold – not Federal Reserve gold.
China, as well as many countries around the world, sensing that the price of gold could skyrocket in price as currencies are being debased, purchased 60 metric tonnes of gold in October 2009. The Hong Kong bankers who received the gold tested the bars to guarantee their density and weight. They were shocked to discover that many of the bars had only an outer coating of gold! The centers were filled with tungsten – a cheap metal with the same weight and density of gold. The Chinese claim that the stamps on the bars showed that they originated in the US and had been stored according to Orlowski, in (you guessed it) Fort Knox. In order to perpetuate its’ price-fixing scheme and attempt to hide the fact that it was out of gold, Orlowski states that it appears that the US Fed and the Treasury have created perhaps up to a trillion dollars of counterfeit gold bars at today’s price of $1700/oz. Thus, the biggest financial scam in US history begs the simple question: If this story is true, where are the indictments? These MOTUs should be in jail.
There’s more to the story.
You probably know the story of DSK – Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF) who was accused of assaulting a hotel maid in New York City this past summer. You don’t know that Makmoud Abdel Omar, former Chairman of one of Egypt’s largest banks and a close friend of DSK, was also arrested and charged with a similar sexual attack of a hotel maid just blocks away from the DSK incident only two weeks later! What are the chances that these two men ages 62 and 74 years old would both make the unlikely decision to accost maids in their hotel rooms? Here’s the rest of the story.
While head of the IMF, DSK had required the US to deliver 191 tonnes of gold to the IMF to fund the US share (17%) of reserves necessary for the IMF’s “Special Drawing Rights.” It is revealed by Steve Orlowski in his report that “rogue elements” within the CIA informed DSK that the reason the US Treasury was repeatedly stalling on the delivery of the gold bars was because of the counterfeit gold at Fort Knox. Orlowski maintains that the charges against both DSK and Omar were contrived to keep them silent. Even Russia’s Vladimir Putin came to DSK’s defense. Obviously, a tactic was being implemented that is well-known to the KGB.
This entire sordid and mind-boggling story would be worthy of a John Grisham novel and a film at a future time. Importantly, what does all this mean to you aside from the political and legal ramifications? In CMV ‘s opinion, it validates the point that the supply of gold (and silver) simply does not exist to meet demand. As Eric Sprott said at the Casey/Sprott Summit “When Money Dies,” The demand will overwhelm the bank’s ability to control the price of bullion.”
BUY the miners who have the proven reserves in the ground and the coins that can be authenticated by a reliable dealer. CMV believes the next leg up in bullion could go parabolic.
“The Chinese Are Coming. The Chinese Are Coming!”
The National Governor’s Association Conference (NGA) was held in Salt Lake City, Utah in mid-July. Directly across the street a forum on US and China Trade, Culture & Education Conference also met. Just a coincidence? Hardly.
As most of us are aware many states in the US are deeply in debt and are desperate for funds especially since the flow of subsides from Washington, D.C. have slowed to a trickle. The Chinese are willing to help extracting a major price. The states would sell or give the Chinese land for Enterprise Zones (EZ) within the states whereby the Chinese would setup their own businesses run by Chinese workers. While the EZs would employ some US citizens, the Chinese will achieve their primary goal – colonization. The fact that some locations are in proximity of sensitive military facilities doesn’t seem to alarm the US officials.
At the end of the dual conference, four state governors signed at least 20 trade agreements with the Chinese despite the fact that Section 10 of Article I of the US Constitution prohibits states from entering into treaties. The China Daily had numerous articles and photos of governors shaking hands with Chinese officials. After all it was a major coup for the Communists. Very little, if any, news was reported in the US media and if it weren’t for the New American magazine, there probably wouldn’t have been any revelation whatsoever. The Chinese have planted their flag in the EZs. It’s their sovereign territory. The US Rule of Law no longer applies.
Occupy Wall Street
Douglas Schoen, who served as a pollster for President Bill Clinton, and is the author of “Hopelessly Divided: The New Crisis in American Politics & What It Means For 2012 & Beyond,” wrote a defining OpEd piece in the October 18, 2011 edition of the Wall St. Journal. A researcher for his firm polled 200 protesters in New York’s Zucotti Park. Some of the their observations are remarkable and instructive as we should all try to understand what is happening in America;
• 52% have participated in a political movement before.
• 98% say they would support civil disobedience to achieve their goals.
• 31% would support violence to advance their agenda.
• 15% of the protestors are unemployed.
• 51% now disapprove of the President and only
48% will vote to re-elect him in 2012, and
25% will not vote.
• 32% call themselves Democrats, while almost the same portion, 33%, say they are not represented by any political party.
Contrary to public opinion, Schoen’s research shows that this movement doesn’t represent unemployed America and is not ideologically diverse. What binds this group together according to Schoen regardless of age, socioeconomic status or education, “is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas. Sixty-five percent say that government has a moral responsibility to affordable health care, a college education and a secure retirement – no matter the cost.” In short, the OWS crowd wants exactly what the Greek and other EU citizens have and are about to lose. If the OWS crowd wins, they’ll lose but that won’t deter them.
As a political analyst, Schoen concludes that the Obama Administration’s support for the OWS crowd will prove to be catastrophic for the Democratic Party. He says 41% of Americans define themselves as Conservative, 36% as Moderate, and only 21% as Liberal. If more radical elements of the OWS become violent, the President won’t even be (in CMV’s opinion) the nominee next November. You only have to harken back to the 1968 Democratic convention in Chicago to attest to that point.
Schoen’s observations are enlightening but CMV believes that the OWS crowd should focus more pointedly on a limited number of individual and institutions who were instrumental in creating the conditions in America that has invoked this “revolution.” After all 99% of those who are employed on Wall St. are simply carrying out the policies set by 1% or less of those at the very top. It would behoove corporate management to insist that their employees read James Owen’s Cowboy Ethics: What Wall Street Can Learn From The Code Of The West, a book CMV has highly recommended in the past.
Ever since Americans unwittingly ceded control of the nation’s banking system to private interests through the Federal Reserve Act of 1913, policy has been promulgated at all levels of government to principally serve these private interests, mostly at the expense of the American public. The history of America’s lost gold (page 3) is just one example of how a very few individuals can successfully carry out a scheme for the benefit of a few at the expense of the many through the destruction of our money. Here’s just one contemporary example of how one man and a board’s complicity effected a strategy and formulated a policy that directly led to the desperate financial chaos that gave birth to the OWS movement.
Alan Greenspan was appointed by Ronald Reagan in 1987 to serve as Chairman of the Federal Reserve. The President’s choice was not made in a vacuum and not without assistance from the banking industry that Greenspan was, principally, to serve. All Chairmen of the Fed are in effect hired guns, to make certain that the objectives of the banking industry and the Masters of the Universe (MOTU) are realized. (CMV’s opinion.) See page 10 “Coming Money Trust” which became The Federal Reserve Bank of the United States in 1913.
One of Mr. Greenspan’s primary ‘directives” was the repeal of the Glass-Steagall Act of 1933. Congress, after a long and contentious investigation in 1932-33, concluded that the commercial banks and their reckless trading and speculation were one of the major causes of the stock market crash of 1929. Glass-Steagall, amongst an array of other provisions, prohibited the commercial banks from speculating in the stock and commodity markets for their own account. The big commercial banks by the 80s, wanted to play high stakes poker like the Investment Banks and Glass-Steagall had to be repealed in order to do it. It took 12 years, but on November 12, 1999, with Greenspan’s encouragement, the Act was repealed. (Gramm–Leach-Billey Act).
In 1998 Long Term Capital Management (LTCM), a hedge fund, collapsed which created another financial global crisis. LTCM made highly leveraged bad bets using various derivatives. Greenspan, Treasury Secretary Robert Rubin and his Assistant Secretary, Larry Summers, were celebrated on the cover of TIME magazine, as the Committee Who Saved The World, for preventing a world-wide banking contagion. Congress, however, later raised the question of the use of derivatives and excessive leverage, particularly by the banks. During extensive Congressional hearings on the “hill” the principal proponent for the continued use of derivatives was none other than the Fed Chairman. At one point during the confrontation as Congress was determined to ban the use of derivatives Mr. Greenspan quipped (paraphrasing), “It won’t prevent the banks from engaging in the use of these instruments...they’ll simply take trading them offshore.” Greenspan won the argument and the next six years during the sub-prime bubble, the notional value of these leveraged bets grew five times to $600 trillion and was the primary cause of the collapse of the housing market and the bankruptcy of America’s middle class. Mr. Greenspan was referred to as the “Maestro” by pundits and the media. They were right. He orchestrated the biggest bubble in American history that served his MOTU and devastated tens of millions of homeowners. Forgotten was the fact that he and his board devised the cash-out refi strategy in 2002 as a means to get the consumer to spend. By 2004-05 when it was apparent to Ed Grandlich and other board members that the low interest rates, unlimited credit and Wall Street’s greed were getting out of control, the Maestro refused to intercede and slow the bubble train that was headed for a crash. Greenspan claimed that he was a Libertarian who believed in a “hands-off” policy. The truth was imbedded in the profit orgy that the banks were drinking from the horn of plenty and the Chairman wasn’t about to take away the punch bowl.
OWS should also focus their ire on other key characters such as:
Former Senator Chris Dodd and Representative Barney Frank
These two key policy-makers were responsible for mandating a “quota system” through the amended Community Reinvestment Act, that required lenders to make home loans to low income and poor credit borrowers. By 2007, over 50% of new loans had to be made to unqualified applicants. As a result of the carnage they helped create these two lawmakers crafted the Dodd-Frank Wall St. Reform & Consumer Protection Act of 2010 to protect consumers from the lenders who profited from their mandates just eight years earlier.
Henry Paulson
While CEO of Goldman Sachs (GS), he successfully lobbied the Securities & Exchange Commission (SEC) to allow the banks to increase their leverage from 10 x 1 to 40 x 1. While at GS he condoned the creation and sale of “synthetic” CDOs that had no underlying assets. GS sold short some of the very assets they created and marketed, knowing their value would fall to zero. As Secretary of the US Treasury, Paulson had the final say in the demise of Lehman Brothers, a principal rival of GS, which cost creditors untold billions in losses, and sent the global markets into chaos in October 2008.
Franklin Raines
The former CEO of Fannie Mae (FNM) from 1994-2004, who used the Government Sponsored Enterprise (GSE) as a vehicle to buy the mandated sub-prime debt originated by Countrywide Financial (CF) and an array of other unscrupulous lenders. He then “cooked the books” at FNM to hide $10 billion in losses which has ballooned to $150 billion that are now born by the US taxpayers. He and his fellow officers also paid themselves obscene bonuses based upon fraudulent numbers. Congress and the Justice Department refuse to connect the dots linking the criminal enterprise between the GSE, CF and Congress.
Former Senator Phil Gramm
As Chairman of the Senate Banking Committee from 1995-2000 he led the Congressional repeal of the Glass-Steagall Act. Gramm was also responsible for exempting various derivatives from regulation. Gramm’s wife served on the board of Enron and its’ use of these leveraged bets led to the firm’s collapse prior to the real estate debacle.
Kathleen Corbett
Was the head of Standard & Poors, the country’s largest bond rating agency, which affixed AAA ratings on the toxic sub-prime debt in exchange for hefty fees from the MOTU. The AAA rating enabled the debt to be sold world-wide without due diligence.
There are numerous other players that should be in the “Hall Of Shame” and the focus of the OWS crowd but you get the point. What do all these MOTU have in common? Virtually all deny any role in the financial collapse and none of them will ever serve jail time. And, all (with the exception of Frank) are comfortably retired, set for life without any fear of recourse. No accountability and obscene profits are the root cause of the continued boom and bust cycles. That must change.
CMV’s message to the OWS crowd is to turn your focus to the MOTUs and not the Capitalistic system. Set up your camp at the doorstep of Congress and the homes of the MOTU. It’s the only recourse that we can, as citizens who, to some degree, are all victims of the MOTU.
One other observation. The OWS crowd is being exploited as “useful idiots.” This revolution, like almost all others (except America’s first) are being financed and promoted by those who want to take the power from those who now possess it. Once the likes of George Soros, et al, obtain control they will cast aside those who were instrumental in bringing about the change. Even Barrack Obama is expendable if the polls show he’s unelectable. Did the proletariat thrive after the French Revolution? The Russian? And, do we really believe that the Arab Spring will foster democracy and a better life for the Middle Eastern masses? CMV doesn’t think so, but I won’t mind being proven wrong. As the chaos in Greece demonstrates, their abuse of freedom will result in the loss of freedom and the return to bondage. It can happen here.
. . .
This “not so funny” cartoon appeared in an unknown periodical in 1912 prior to the Federal Reserve Act of 1913. The artist used the name National Reserve Association. This depiction of the Fed as an octopus with its’ tentacles controlling all government and private enterprise through a “private syndicate” (Cartel) accurately forecasted the inevitable destruction of the US monetary system 100 years later.
The “Aldrich Plan” was written by Senator Nelson W. Aldrich (whose maternal grandfather was Nelson A. Rockefeller) to form a new central bank that promised financial stability and an end to bank panics. The crash of 1929 occurred only 16 years later and an on-going series of boom and bust cycles has continued since. CMV strongly recommends that you read “The Creature From Jekyll Island” by G. Edward Griffin. You will understand why we’re about to experience the collapse of the US monetary system. And, those who control the Fed will soon propose a solution to its’ demise.
September 21, 2011
An Open Letter To Warren Buffet
You are presently celebrated in the US as an iconic epitome of American Capitalism. Under your direction and guidance Bershire Hathaway Inc. (BRK.A), which is a cross-section of American enterprise for a half a century, has employed millions of workers and has produced admirable returns for its shareholders.
Now, however, you have made the mind-boggling decision to not only support President Barrack Obama, an anti-capitalist, for re-election but to lead an effort to help him raise one billion dollars for his campaign. Please tell us, Mr. Buffet, given the freedom and opportunity to excel in your career under an economic system that is the envy of the world, how you can reconcile your success with your decision to support a man who has lived up to his campaign promise, “We are five days away from fundamentally transforming the United States of America.”? A promise to destroy capitalism. It’s a given that there are those Capitalists who have abused the present system and they need to be held accountable. We shouldn’t, however, destroy the goose that lays the Golden Egg.
You are a man whose success and reputation was, in part, a result of comprehensive due diligence before BRK.A made an acquisition of a company as an investment. Certainly you must have investigated the close association that Barrack Obama has had with the blasphemous hater of America, Jeremiah Wright, the convicted and unrepentant terrorist Bill Ayers and his childhood mentorship by Frank Marshall Davis, a die-hard communist? Perhaps you didn’t know that Saul Alinsky’s son, L. David Alinsky, has recently stated that Barrack Obama has followed his father’s “Rules For Radicals” to a tee ever since he moved to Chicago and President Obama helped fund the Alinsky Academy. Why would you align yourself with those who openly advocate the overthrow of the U.S. Government?
We got a mirror into your change in mind recently when you revealed that the IRS was “coddling” the rich, such as yourself, and that you should be paying more taxes – a Populist theme by the left. Since we assume that most of your income is from dividends and your rate is 15%, are you advocating that all savers pay more? We understand that BRK.A is currently in dispute with the IRS over unpaid taxes. Given your stance, we would think that you will gladly acquiesce and pay your fair share to avoid any assertion of hypocrisy.
In event you are successful and the President is re-elected next year, you should expect BRK.A to also undergo a “fundamental change.” Your “A” shares are now down about 25% from the post-crash high. Within four years you could expect your share value to drop an additional 50%, your shareholders should revolt and remove you and your board. In the end, the Marxists will turn on you and all their benefactors. They will be in power and this country will be in chaos.
Please Mr. Buffet – change your mind!
Signed:
H. L. Quist
Quist is an author and economic forecaster who resides in Phoenix, Arizona
Submitted to the Wall St. Journal but not published.
Athens, California
There isn’t a more fitting microcosmic example of how the over burden of debt will ultimately crash the economy and a lifestyle than is present in the State of California. In Michael Lewis’ recently released book “Boomerang,” the author interviews Arnold Schwarzenegger, the former governor. The “Governator” came into office in 2003 with an approval rating of 70% with a mandate to fix California and left in 2011 with a rating below 25% with little or nothing accomplished. Even an iconic film actor with macho muscle failed. The answer to why, is the most instructive and forecasts the inevitable.
Lewis quotes from “California Crackup” written by two non-partisan journalists, Joe Mathews and Mark Paul who answer this critical question:
“...he (Schwarzenegger) was never going to win. California had organized itself, not accidentally, into highly partisan legislature districts. It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or muddle with spending decisions . . . Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them . . . the system is very good at giving Californians what they want . . . people want services and not pay for them. And that’s exactly what they’ve now got.”
Schwarzenegger came into office with boundless faith in the American people and given his image and popularity he felt that he could appeal directly to them to do what had to be done to save the state. In November 2005 he called a special election that sought approval on four reforms:
• Limit state spending
• End Gerry-Mandering of legislative districts.
• Limit public employee union spending on elections
• Lengthen the time for public school leaders to get tenure.
All four propositions were designed to address the state’s looming financial crisis. All four were defeated soundly. They weren’t even close. As just one example, pensions of state employees doubled from the time Schwarzenegger came into office to when he left which now has a shortfall of about $200 billion. In 2010, the state spent $6 billion on 30,000 prison guards who could retire after only five years of service (after age 45) at almost full pay. The head parole psychiatrist for the prison system made a salary of $838,705 in 2010. The system became unsustainable and most of the prisoners have been released. That coupled with the reduction of state and city police officers presents an opportunity for career criminals to continue their trade and the public’s growing need to protect itself. In Oakland, California, the police will not respond to a 911 emergency call unless there’s a risk of homicide. During the recent Occupy Wall Street protests in that city, officers were called in from the entire Bay area to assist to control the mob. It wouldn’t take much for the mob to overwhelm the police in just about any city in the US.
California, like many other states, have been receiving billions of federal government stimulus funds and proceeds from Build America Bonds to pay the salaries and entitlements of state and municipal employees for the past three years. (Note: The funds weren’t intended for investment to create jobs.) Those funds are no longer available as the President’s American Jobs Act, has been defeated in the Senate. The crisis that has been postponed is now upon them. Californians, like the Greeks, have come to expect that there’s no limit to the amount of money available to perpetuate their lifestyle. As Lewis says, “The richest society the world has ever seen has grown rich by devising better and better ways to give people what they want.” Now, it’s over. Pensions of state and municipal employees will be cut from 25% to 50% or more in many jurisdictions.
On October 27, 2011, California Governor Jerry Brown, unveiled what is considered one of the nation’s widest-reaching pension overhauls raising the retirement age to 67 from 55, and increasing the pension contributions by future employees through the use of 401(k) plans. Brown’s proposal was immediately attacked by Dave Low, Chairman of Californians for Retirement Security, a group representing dozens of unions in the state. Mike Genst, of California Pension Reform, taking the opposing view said, “It (Brown’s plan) doesn’t go nearly far enough” because it wouldn’t apply to current employees.
Reality will come hard on the left coast. Will Californians and all Americans recognize the problem and work together to solve it or will we add another chapter to the Greek tragedy and continue to riot and protest that will destroy our culture and our country?
Greece, the birthplace of democracy is toast if they vote “NO” on the referendum and reject cuts in employment, salaries and entitlements. All of us are witness to a political and cultural event of historic proportions – a failure of democracy due to the over-empowerment of the people. As CMV has reiterated many times, the abuse of freedom will result in the loss of freedom. The Greeks are about to experience it and its’ aftermath. May we learn from their experience.
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Below is a preview of the CMV (Contrarian Market View) Newsletter for November, 2011. See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)CMV’s Special Notice
The November CMV was written one day prior to Greek Prime Minister George Papandreou’s announcement that he would call for a public referendum in January 2012, on the EU bailout package approved by the 17 EU countries just days ago. A public “NO” vote which presently has support of 58.9% of Greek citizens according to a recent survey, appears headed for rejection of the bailout. The fear amongst investors is that the resultant Greek default will spread to Italy, Spain, Portugal and other EU members. Greece also faces the prospect of expulsion from the EU and the euro. Most of the October sector gains highlighted below have been erased by the overnight sell-off in the global markets. CMV will advise by SPECIAL BULLETIN if any changes should be made in any sectors.
CMV Recommendations Comparisons
YTD 52 Weeks
The CMV Portfolio -14.8% 18.8% (since 1/1/10)
Dow Jones Industrial Avg. 5.65% 10.01%
S&P 500 2.2% 8.6%
NASDAQ Composite 3.2% 9.2%
Market Overview
“A wave of euphoria swept through the global markets last Thursday in giddy response to the communiqué out of Brussels that the 17 nations in the euro zone . . . cobbled together a financial care package to rescue Greece and stave off a widely dreaded contagion of downgrades and defaults that threatened to engulf a good chunk of the continent,” said Alan Abelson in his October 31st “Up & Down Wall Street” column. It was like the world was whistling “Happy Days Are Here Again” while walking past a graveyard of deceased and dying EU nation states.
In sum, the EU leaders announced a deal with three key points:
1. Private sector banks will take a “voluntary” haircut of 50% to the principal of the Greek bonds they own which ostensibly lowers the Greek debt from 170% of GDP to 120% which still can’t be paid.
2. EU banks will be required to be re-capitalized by 106 billion euros ($150 billion USD) by June 30, 2012 with no indication where the funds will come from, and
3. The Bailout Fund, European Financial Stability Facility (EFSF) will be leveraged (5x1) to provide a one trillion euro backstop to future bond issues. The strategy when faced with massive de-leveraging is to leverage up again.
In CMV’s opinion it’s the “samo, samo, plan” – dig a deeper hole to get out of the one you’re in – Another short-term fix that sets up the EU for a more colossal failure down the road. It’s the same model that the Masters Of The Universe in the US have used for 40 years that has brought us to the brink. BUT, and it’s a big BUT, the deal has spawned a huge stock and commodity relief rally that substantially improved the CMV portfolio about 10%.
The resultant rally made October’s surge reverse most of the third quarter’s loss and move stocks to near 2011 highs. “The overall US stock market has surged 17% since October 3 and 6% from its’ 2011 peak,” says Kopin Tan in the October 31st, Barron’s. Specifically, the Dow Jones Industrial Average gained 422 points or 3.6% to 12,231. The S&P 500 closed up 3.8% to 1285 and the NASDAQ Composite Index added 100 points or 3.8% to 2737. Gold, after it reached an inter-day low of $1535 in Mid-October, closed October 29th at $1746/oz and a remarkable move of 211 points or 14%. Everyone is asking the same question. Is the rally for real? How long will it last?
There are solid reasons to have doubts and misgivings while at the same time seizing the opportunity of the moment. The US Bureau of Economic Analysis (BEA) report on Thursday, which also spurred the markets, said that the 3rd Quarter GDP gained a robust 2.5%. Before we enthuse too much, a word of caution. Every quarter after the original announcement, the BEA issues two revisions and they’re almost always downward. The 2.5% will probably end up being 1.5% 60days from now but few will notice. John Williams of Shadow Government Statistics says the 2.5% is “utter nonsense” and in truth the US economy is edging along barely positive.
Additional stats seem to support Williams’ claim. Personal income rose a mere 0.1% in September while consumer spending climbed 0.6%. Personal savings shrunk from 4.1% to 3.6% meaning people are using more plastic and reducing savings to get by. The Department of Agriculture (DOA) last week on Tuesday reported that food prices will increase 3.5% to 4.5% this year after climbing just 0.8% in 2010. As CMV pointed out last month, beef prices are going to rise substantially next year far in excess of DOA’s forecast. If CMV is accurate, all the focus next year will be on the “Inflation Jeannie” as she again pops her pretty head out of her master’s bottle.
Barron’s interviewed 9 asset managers in its October 31, 2011 issue called “The Smart Money Speaks.” Here’s what Felix Zulauf and Stephanie Pomboy, two of CMV’s favorite authorities had to say:
Felix Zulauf:
“The (EU) crisis will drag on for a number of years, with the result that countries on the periphery will remain in recession for a long time.” (Felix lives in Switzerland)
“...the US will have very low growth for a long period of time . . . investors should be defensive, look to preserve capital and prepare a list of short-sale candidates for the next leg down. And they should buy more gold on dips.”
“...commodity prices will experience a cyclical correction into the second half of next year. But oil could pop to $100 a barrel and some Exchange Traded Funds such as XLE, OIH, and HAP could be played as short-term trades.” (CMV believes that oil will go much higher in 2012.)
Stephanie Pomboy:
“We have yet to sow the seeds of a sustainable recovery, meaning employment gains.”
“Yes (QE 3 is inevitable) because we haven’t cured the disease . . . The Fed needs to keep huffing and puffing until the wealth effect eventually starts to work and creates jobs.”
“But for the long term I still like hard assets, specifically gold and oil.”
What is really interesting in that none of the “smart money” commentators or any of the journalists in the WSJ or Barron’s forecast anything resembling an inflationary period or a hyper-inflationary “Crack-up Boom.” CMV is the lonesome cowboy in the “Last Rodeo.” All of the major global economies must create growth through inflation. The EU, US and yes even China, can’t service their existing debt at present levels. How will they be able to handle another layer of IOUs? Ever since the days of the Roman Empire governments have devalued and debased their currencies in an attempt to inflate the debt and entitlement problem away. All have failed. But, there could be one last BOOM. CMV calls it the LAST RODEO. China has committed to reflating their economy and the boom has begun in the Pacific Rim. The EU bailout should provide, at a minimum, temporary relief. The US QE 3, when announced, chould propel stocks and commodities to potentially new all-time highs. Get your tickets for the LAST RODEO. It’s going to be a wild ride.
Who Stole America’s Gold From Fort Knox?
The US Government has steadfastly maintained for decades that it owns 261 million ounces of gold bullion (8,100 tons) – far more than any other nation in the world. A recent book “Good As Gold? How We Lost Our Gold Reserves And Destroyed The Dollar” by Chris Weber, debunks the myth that America’s gold reserves are safely stored at Fort Knox, Kentucky. CMV has read Weber’s meticulously researched book and it, coupled with Steve Orlowski’s (Insiders Strategy Group) supplemental updates, CMV will reveal here for you not only the biggest scandal in America’s history but it also presents to you one of the greatest opportunities.
The mystery of America’s missing gold begins with Franklin D. Roosevelt’s Executive Order in April 1933 banning the private ownership of gold bullion by any US citizen. Under the threat of a $10,000 fine and imprisonment, all Americans were required to deliver to any Federal Reserve Bank all their gold and receive $20.66/oz in newly printed Federal Reserve Notes that were backed by nothing. In 1936 an underground bullion depository was built in Fort Knox, Kentucky to store this vast horde of gold which by 1949 amounted to more than 700 million ounces – equal to 70% of the entire world’s supply! FDR, once the gold was confiscated, “revalued” bullion at $35/oz and since the Fort Knox gold was higher than the world market price, central banks around the world were eager to trade their gold for dollars. Then, in 1961, when the shiny metal became more valuable than $35/oz the Fort Knox horde began to disappear. That’s when the US Federal Reserve Bank (Fed) and seven other central banks initiated the “London Gold Pool” – a coordinated scheme to defend the official price of $35/oz by dumping bullion on the London market. It has been established that between 1961 and 1974, 509 million ounces of gold was removed from Fort Knox. The scheme allowed wealthy investors, including US citizens, to buy gold at $35/oz and store it outside the US.
Frank Chelf, an 11 term Congressman whose home district was Fort Knox, charged that the government was secretly removing gold from Fort Knox by the truck load in the middle of the night. Edwood Durell, a businessman in Berryville, VA, was able to obtain an official document from the US Mint detailing more than 10 years of shipments from Fort Knox. He caught the Mint and US Treasury officials red-handed. They admitted that 1,762,386 ounces of gold in one shipment was a “mistake” and never entered into the official record. What we don’t know, of course, was who were the entities who acquired the bullion at $35/oz that would soon skyrocket in price to $850/oz in just a few years?
The story gets dicier.
CMV has pointed out numerous times that Robert Rubin’s (Secretary of the US Treasury) “Strong Dollar Policy” initiated in 1995, was the beginning of the demise of US manufacturing jobs but it also played a critical role in the gold market. Rubin and Federal Reserve Board Chairman, Alan Greenspan, knew that low interest rates would produce higher gold prices which would undermine their “Strong Dollar Policy.” They had to control the price of gold. What did they do? The Fed began to “lease” gold from its’ (supposed) reserves to the biggest banks on Wall St. at an interest rate of about 1% per year. The banks then would sell the leased gold bullion on the open market and invest the proceeds at a much higher rate of return. The huge amount of sales would continue to suppress the price of gold then at about $300/oz. Alan Greenspan even admitted in testimony before Congress in 1998, that the purpose of the leasing was to manipulate the price of gold. The cogent question is, where did the Fed get the gold to lease out? That’s the dirty little secret the Masters of The Universe (MOTU) didn’t want anyone to know but the cat has just been let out of the bag. The Fed leased out more gold than it owned or had access to. It was gold that only existed on paper. And, the gold at Fort Knox was US Treasury / US Taxpayer gold – not Federal Reserve gold.
China, as well as many countries around the world, sensing that the price of gold could skyrocket in price as currencies are being debased, purchased 60 metric tonnes of gold in October 2009. The Hong Kong bankers who received the gold tested the bars to guarantee their density and weight. They were shocked to discover that many of the bars had only an outer coating of gold! The centers were filled with tungsten – a cheap metal with the same weight and density of gold. The Chinese claim that the stamps on the bars showed that they originated in the US and had been stored according to Orlowski, in (you guessed it) Fort Knox. In order to perpetuate its’ price-fixing scheme and attempt to hide the fact that it was out of gold, Orlowski states that it appears that the US Fed and the Treasury have created perhaps up to a trillion dollars of counterfeit gold bars at today’s price of $1700/oz. Thus, the biggest financial scam in US history begs the simple question: If this story is true, where are the indictments? These MOTUs should be in jail.
There’s more to the story.
You probably know the story of DSK – Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF) who was accused of assaulting a hotel maid in New York City this past summer. You don’t know that Makmoud Abdel Omar, former Chairman of one of Egypt’s largest banks and a close friend of DSK, was also arrested and charged with a similar sexual attack of a hotel maid just blocks away from the DSK incident only two weeks later! What are the chances that these two men ages 62 and 74 years old would both make the unlikely decision to accost maids in their hotel rooms? Here’s the rest of the story.
While head of the IMF, DSK had required the US to deliver 191 tonnes of gold to the IMF to fund the US share (17%) of reserves necessary for the IMF’s “Special Drawing Rights.” It is revealed by Steve Orlowski in his report that “rogue elements” within the CIA informed DSK that the reason the US Treasury was repeatedly stalling on the delivery of the gold bars was because of the counterfeit gold at Fort Knox. Orlowski maintains that the charges against both DSK and Omar were contrived to keep them silent. Even Russia’s Vladimir Putin came to DSK’s defense. Obviously, a tactic was being implemented that is well-known to the KGB.
This entire sordid and mind-boggling story would be worthy of a John Grisham novel and a film at a future time. Importantly, what does all this mean to you aside from the political and legal ramifications? In CMV ‘s opinion, it validates the point that the supply of gold (and silver) simply does not exist to meet demand. As Eric Sprott said at the Casey/Sprott Summit “When Money Dies,” The demand will overwhelm the bank’s ability to control the price of bullion.”
BUY the miners who have the proven reserves in the ground and the coins that can be authenticated by a reliable dealer. CMV believes the next leg up in bullion could go parabolic.
“The Chinese Are Coming. The Chinese Are Coming!”
The National Governor’s Association Conference (NGA) was held in Salt Lake City, Utah in mid-July. Directly across the street a forum on US and China Trade, Culture & Education Conference also met. Just a coincidence? Hardly.
As most of us are aware many states in the US are deeply in debt and are desperate for funds especially since the flow of subsides from Washington, D.C. have slowed to a trickle. The Chinese are willing to help extracting a major price. The states would sell or give the Chinese land for Enterprise Zones (EZ) within the states whereby the Chinese would setup their own businesses run by Chinese workers. While the EZs would employ some US citizens, the Chinese will achieve their primary goal – colonization. The fact that some locations are in proximity of sensitive military facilities doesn’t seem to alarm the US officials.
At the end of the dual conference, four state governors signed at least 20 trade agreements with the Chinese despite the fact that Section 10 of Article I of the US Constitution prohibits states from entering into treaties. The China Daily had numerous articles and photos of governors shaking hands with Chinese officials. After all it was a major coup for the Communists. Very little, if any, news was reported in the US media and if it weren’t for the New American magazine, there probably wouldn’t have been any revelation whatsoever. The Chinese have planted their flag in the EZs. It’s their sovereign territory. The US Rule of Law no longer applies.
Occupy Wall Street
Douglas Schoen, who served as a pollster for President Bill Clinton, and is the author of “Hopelessly Divided: The New Crisis in American Politics & What It Means For 2012 & Beyond,” wrote a defining OpEd piece in the October 18, 2011 edition of the Wall St. Journal. A researcher for his firm polled 200 protesters in New York’s Zucotti Park. Some of the their observations are remarkable and instructive as we should all try to understand what is happening in America;
• 52% have participated in a political movement before.
• 98% say they would support civil disobedience to achieve their goals.
• 31% would support violence to advance their agenda.
• 15% of the protestors are unemployed.
• 51% now disapprove of the President and only
48% will vote to re-elect him in 2012, and
25% will not vote.
• 32% call themselves Democrats, while almost the same portion, 33%, say they are not represented by any political party.
Contrary to public opinion, Schoen’s research shows that this movement doesn’t represent unemployed America and is not ideologically diverse. What binds this group together according to Schoen regardless of age, socioeconomic status or education, “is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas. Sixty-five percent say that government has a moral responsibility to affordable health care, a college education and a secure retirement – no matter the cost.” In short, the OWS crowd wants exactly what the Greek and other EU citizens have and are about to lose. If the OWS crowd wins, they’ll lose but that won’t deter them.
As a political analyst, Schoen concludes that the Obama Administration’s support for the OWS crowd will prove to be catastrophic for the Democratic Party. He says 41% of Americans define themselves as Conservative, 36% as Moderate, and only 21% as Liberal. If more radical elements of the OWS become violent, the President won’t even be (in CMV’s opinion) the nominee next November. You only have to harken back to the 1968 Democratic convention in Chicago to attest to that point.
Schoen’s observations are enlightening but CMV believes that the OWS crowd should focus more pointedly on a limited number of individual and institutions who were instrumental in creating the conditions in America that has invoked this “revolution.” After all 99% of those who are employed on Wall St. are simply carrying out the policies set by 1% or less of those at the very top. It would behoove corporate management to insist that their employees read James Owen’s Cowboy Ethics: What Wall Street Can Learn From The Code Of The West, a book CMV has highly recommended in the past.
Ever since Americans unwittingly ceded control of the nation’s banking system to private interests through the Federal Reserve Act of 1913, policy has been promulgated at all levels of government to principally serve these private interests, mostly at the expense of the American public. The history of America’s lost gold (page 3) is just one example of how a very few individuals can successfully carry out a scheme for the benefit of a few at the expense of the many through the destruction of our money. Here’s just one contemporary example of how one man and a board’s complicity effected a strategy and formulated a policy that directly led to the desperate financial chaos that gave birth to the OWS movement.
Alan Greenspan was appointed by Ronald Reagan in 1987 to serve as Chairman of the Federal Reserve. The President’s choice was not made in a vacuum and not without assistance from the banking industry that Greenspan was, principally, to serve. All Chairmen of the Fed are in effect hired guns, to make certain that the objectives of the banking industry and the Masters of the Universe (MOTU) are realized. (CMV’s opinion.) See page 10 “Coming Money Trust” which became The Federal Reserve Bank of the United States in 1913.
One of Mr. Greenspan’s primary ‘directives” was the repeal of the Glass-Steagall Act of 1933. Congress, after a long and contentious investigation in 1932-33, concluded that the commercial banks and their reckless trading and speculation were one of the major causes of the stock market crash of 1929. Glass-Steagall, amongst an array of other provisions, prohibited the commercial banks from speculating in the stock and commodity markets for their own account. The big commercial banks by the 80s, wanted to play high stakes poker like the Investment Banks and Glass-Steagall had to be repealed in order to do it. It took 12 years, but on November 12, 1999, with Greenspan’s encouragement, the Act was repealed. (Gramm–Leach-Billey Act).
In 1998 Long Term Capital Management (LTCM), a hedge fund, collapsed which created another financial global crisis. LTCM made highly leveraged bad bets using various derivatives. Greenspan, Treasury Secretary Robert Rubin and his Assistant Secretary, Larry Summers, were celebrated on the cover of TIME magazine, as the Committee Who Saved The World, for preventing a world-wide banking contagion. Congress, however, later raised the question of the use of derivatives and excessive leverage, particularly by the banks. During extensive Congressional hearings on the “hill” the principal proponent for the continued use of derivatives was none other than the Fed Chairman. At one point during the confrontation as Congress was determined to ban the use of derivatives Mr. Greenspan quipped (paraphrasing), “It won’t prevent the banks from engaging in the use of these instruments...they’ll simply take trading them offshore.” Greenspan won the argument and the next six years during the sub-prime bubble, the notional value of these leveraged bets grew five times to $600 trillion and was the primary cause of the collapse of the housing market and the bankruptcy of America’s middle class. Mr. Greenspan was referred to as the “Maestro” by pundits and the media. They were right. He orchestrated the biggest bubble in American history that served his MOTU and devastated tens of millions of homeowners. Forgotten was the fact that he and his board devised the cash-out refi strategy in 2002 as a means to get the consumer to spend. By 2004-05 when it was apparent to Ed Grandlich and other board members that the low interest rates, unlimited credit and Wall Street’s greed were getting out of control, the Maestro refused to intercede and slow the bubble train that was headed for a crash. Greenspan claimed that he was a Libertarian who believed in a “hands-off” policy. The truth was imbedded in the profit orgy that the banks were drinking from the horn of plenty and the Chairman wasn’t about to take away the punch bowl.
OWS should also focus their ire on other key characters such as:
Former Senator Chris Dodd and Representative Barney Frank
These two key policy-makers were responsible for mandating a “quota system” through the amended Community Reinvestment Act, that required lenders to make home loans to low income and poor credit borrowers. By 2007, over 50% of new loans had to be made to unqualified applicants. As a result of the carnage they helped create these two lawmakers crafted the Dodd-Frank Wall St. Reform & Consumer Protection Act of 2010 to protect consumers from the lenders who profited from their mandates just eight years earlier.
Henry Paulson
While CEO of Goldman Sachs (GS), he successfully lobbied the Securities & Exchange Commission (SEC) to allow the banks to increase their leverage from 10 x 1 to 40 x 1. While at GS he condoned the creation and sale of “synthetic” CDOs that had no underlying assets. GS sold short some of the very assets they created and marketed, knowing their value would fall to zero. As Secretary of the US Treasury, Paulson had the final say in the demise of Lehman Brothers, a principal rival of GS, which cost creditors untold billions in losses, and sent the global markets into chaos in October 2008.
Franklin Raines
The former CEO of Fannie Mae (FNM) from 1994-2004, who used the Government Sponsored Enterprise (GSE) as a vehicle to buy the mandated sub-prime debt originated by Countrywide Financial (CF) and an array of other unscrupulous lenders. He then “cooked the books” at FNM to hide $10 billion in losses which has ballooned to $150 billion that are now born by the US taxpayers. He and his fellow officers also paid themselves obscene bonuses based upon fraudulent numbers. Congress and the Justice Department refuse to connect the dots linking the criminal enterprise between the GSE, CF and Congress.
Former Senator Phil Gramm
As Chairman of the Senate Banking Committee from 1995-2000 he led the Congressional repeal of the Glass-Steagall Act. Gramm was also responsible for exempting various derivatives from regulation. Gramm’s wife served on the board of Enron and its’ use of these leveraged bets led to the firm’s collapse prior to the real estate debacle.
Kathleen Corbett
Was the head of Standard & Poors, the country’s largest bond rating agency, which affixed AAA ratings on the toxic sub-prime debt in exchange for hefty fees from the MOTU. The AAA rating enabled the debt to be sold world-wide without due diligence.
There are numerous other players that should be in the “Hall Of Shame” and the focus of the OWS crowd but you get the point. What do all these MOTU have in common? Virtually all deny any role in the financial collapse and none of them will ever serve jail time. And, all (with the exception of Frank) are comfortably retired, set for life without any fear of recourse. No accountability and obscene profits are the root cause of the continued boom and bust cycles. That must change.
CMV’s message to the OWS crowd is to turn your focus to the MOTUs and not the Capitalistic system. Set up your camp at the doorstep of Congress and the homes of the MOTU. It’s the only recourse that we can, as citizens who, to some degree, are all victims of the MOTU.
One other observation. The OWS crowd is being exploited as “useful idiots.” This revolution, like almost all others (except America’s first) are being financed and promoted by those who want to take the power from those who now possess it. Once the likes of George Soros, et al, obtain control they will cast aside those who were instrumental in bringing about the change. Even Barrack Obama is expendable if the polls show he’s unelectable. Did the proletariat thrive after the French Revolution? The Russian? And, do we really believe that the Arab Spring will foster democracy and a better life for the Middle Eastern masses? CMV doesn’t think so, but I won’t mind being proven wrong. As the chaos in Greece demonstrates, their abuse of freedom will result in the loss of freedom and the return to bondage. It can happen here.
. . .
This “not so funny” cartoon appeared in an unknown periodical in 1912 prior to the Federal Reserve Act of 1913. The artist used the name National Reserve Association. This depiction of the Fed as an octopus with its’ tentacles controlling all government and private enterprise through a “private syndicate” (Cartel) accurately forecasted the inevitable destruction of the US monetary system 100 years later.The “Aldrich Plan” was written by Senator Nelson W. Aldrich (whose maternal grandfather was Nelson A. Rockefeller) to form a new central bank that promised financial stability and an end to bank panics. The crash of 1929 occurred only 16 years later and an on-going series of boom and bust cycles has continued since. CMV strongly recommends that you read “The Creature From Jekyll Island” by G. Edward Griffin. You will understand why we’re about to experience the collapse of the US monetary system. And, those who control the Fed will soon propose a solution to its’ demise.
September 21, 2011
An Open Letter To Warren Buffet
You are presently celebrated in the US as an iconic epitome of American Capitalism. Under your direction and guidance Bershire Hathaway Inc. (BRK.A), which is a cross-section of American enterprise for a half a century, has employed millions of workers and has produced admirable returns for its shareholders.
Now, however, you have made the mind-boggling decision to not only support President Barrack Obama, an anti-capitalist, for re-election but to lead an effort to help him raise one billion dollars for his campaign. Please tell us, Mr. Buffet, given the freedom and opportunity to excel in your career under an economic system that is the envy of the world, how you can reconcile your success with your decision to support a man who has lived up to his campaign promise, “We are five days away from fundamentally transforming the United States of America.”? A promise to destroy capitalism. It’s a given that there are those Capitalists who have abused the present system and they need to be held accountable. We shouldn’t, however, destroy the goose that lays the Golden Egg.
You are a man whose success and reputation was, in part, a result of comprehensive due diligence before BRK.A made an acquisition of a company as an investment. Certainly you must have investigated the close association that Barrack Obama has had with the blasphemous hater of America, Jeremiah Wright, the convicted and unrepentant terrorist Bill Ayers and his childhood mentorship by Frank Marshall Davis, a die-hard communist? Perhaps you didn’t know that Saul Alinsky’s son, L. David Alinsky, has recently stated that Barrack Obama has followed his father’s “Rules For Radicals” to a tee ever since he moved to Chicago and President Obama helped fund the Alinsky Academy. Why would you align yourself with those who openly advocate the overthrow of the U.S. Government?
We got a mirror into your change in mind recently when you revealed that the IRS was “coddling” the rich, such as yourself, and that you should be paying more taxes – a Populist theme by the left. Since we assume that most of your income is from dividends and your rate is 15%, are you advocating that all savers pay more? We understand that BRK.A is currently in dispute with the IRS over unpaid taxes. Given your stance, we would think that you will gladly acquiesce and pay your fair share to avoid any assertion of hypocrisy.
In event you are successful and the President is re-elected next year, you should expect BRK.A to also undergo a “fundamental change.” Your “A” shares are now down about 25% from the post-crash high. Within four years you could expect your share value to drop an additional 50%, your shareholders should revolt and remove you and your board. In the end, the Marxists will turn on you and all their benefactors. They will be in power and this country will be in chaos.
Please Mr. Buffet – change your mind!
Signed:
H. L. Quist
Quist is an author and economic forecaster who resides in Phoenix, Arizona
Submitted to the Wall St. Journal but not published.
Athens, California
There isn’t a more fitting microcosmic example of how the over burden of debt will ultimately crash the economy and a lifestyle than is present in the State of California. In Michael Lewis’ recently released book “Boomerang,” the author interviews Arnold Schwarzenegger, the former governor. The “Governator” came into office in 2003 with an approval rating of 70% with a mandate to fix California and left in 2011 with a rating below 25% with little or nothing accomplished. Even an iconic film actor with macho muscle failed. The answer to why, is the most instructive and forecasts the inevitable.
Lewis quotes from “California Crackup” written by two non-partisan journalists, Joe Mathews and Mark Paul who answer this critical question:
“...he (Schwarzenegger) was never going to win. California had organized itself, not accidentally, into highly partisan legislature districts. It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or muddle with spending decisions . . . Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them . . . the system is very good at giving Californians what they want . . . people want services and not pay for them. And that’s exactly what they’ve now got.”
Schwarzenegger came into office with boundless faith in the American people and given his image and popularity he felt that he could appeal directly to them to do what had to be done to save the state. In November 2005 he called a special election that sought approval on four reforms:
• Limit state spending
• End Gerry-Mandering of legislative districts.
• Limit public employee union spending on elections
• Lengthen the time for public school leaders to get tenure.
All four propositions were designed to address the state’s looming financial crisis. All four were defeated soundly. They weren’t even close. As just one example, pensions of state employees doubled from the time Schwarzenegger came into office to when he left which now has a shortfall of about $200 billion. In 2010, the state spent $6 billion on 30,000 prison guards who could retire after only five years of service (after age 45) at almost full pay. The head parole psychiatrist for the prison system made a salary of $838,705 in 2010. The system became unsustainable and most of the prisoners have been released. That coupled with the reduction of state and city police officers presents an opportunity for career criminals to continue their trade and the public’s growing need to protect itself. In Oakland, California, the police will not respond to a 911 emergency call unless there’s a risk of homicide. During the recent Occupy Wall Street protests in that city, officers were called in from the entire Bay area to assist to control the mob. It wouldn’t take much for the mob to overwhelm the police in just about any city in the US.
California, like many other states, have been receiving billions of federal government stimulus funds and proceeds from Build America Bonds to pay the salaries and entitlements of state and municipal employees for the past three years. (Note: The funds weren’t intended for investment to create jobs.) Those funds are no longer available as the President’s American Jobs Act, has been defeated in the Senate. The crisis that has been postponed is now upon them. Californians, like the Greeks, have come to expect that there’s no limit to the amount of money available to perpetuate their lifestyle. As Lewis says, “The richest society the world has ever seen has grown rich by devising better and better ways to give people what they want.” Now, it’s over. Pensions of state and municipal employees will be cut from 25% to 50% or more in many jurisdictions.
On October 27, 2011, California Governor Jerry Brown, unveiled what is considered one of the nation’s widest-reaching pension overhauls raising the retirement age to 67 from 55, and increasing the pension contributions by future employees through the use of 401(k) plans. Brown’s proposal was immediately attacked by Dave Low, Chairman of Californians for Retirement Security, a group representing dozens of unions in the state. Mike Genst, of California Pension Reform, taking the opposing view said, “It (Brown’s plan) doesn’t go nearly far enough” because it wouldn’t apply to current employees.
Reality will come hard on the left coast. Will Californians and all Americans recognize the problem and work together to solve it or will we add another chapter to the Greek tragedy and continue to riot and protest that will destroy our culture and our country?
Greece, the birthplace of democracy is toast if they vote “NO” on the referendum and reject cuts in employment, salaries and entitlements. All of us are witness to a political and cultural event of historic proportions – a failure of democracy due to the over-empowerment of the people. As CMV has reiterated many times, the abuse of freedom will result in the loss of freedom. The Greeks are about to experience it and its’ aftermath. May we learn from their experience.
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-- H. L. Quist
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