H L Quist on the Radio with Ernie Hancock

Hello World,

This morning I was a guest on the radio program "Declare Your Independence with Ernest Hancock". Click on the link below to listen to the show.

http://www.freedomsphoenix.com/Uploads/001/Media/2010-06-17-ernie-b.mp3

About Ernest Hancock and his website and radio program.

"At Freedom’s Phoenix we observe, comment and try to stay out of the way. We know Freedom will rise from the ashes, and we want to make sure that everyone's Freedom is never signed away again by those who believe they have the power to do so."

"Over a period of years, Ernest Hancock envisioned having a news and current information website where anyone could quickly and easily post news articles, opinions, and links to stories on other sites about any subject they wished to bring to people’s attention."

Hancock is currently running for the position of Chairman of the Libertarian National Party.

-- H. L. Quist

Free Preview of June CMV Newsletter

Hello World,

Here is a free preview of the June issue of the Contrarian Market View Newsletter, May issue. (Due to the format limitations of a blog, the actual newsletter is better looking.)

See the bottom for a free book offer with purchase of a subscription to the newsletter.

June, 2010 H. L. Quist's Contrarian Market View Newsletter

Market Overview
This June edition of CMV is critical because your author is forecasting a major cyclical change in the economy going forward. Since January CMV has forecasted a Pro-growth, asset inflation based economy and a Bullish outlook. Up to May this picture has remained intact with equity and commodity prices providing positive returns and precious metals enjoying exceptional double-digit returns. Despite a slight increase in interest rates our three long bond recommendations all exhibited positive returns. Real Estate seemed to be turning the corner as our recommended REIT was up 17% YTD and the Empire Residential Opportunity Fund, LLC, private placement was meeting its forecast.

That picture has now changed. A Market decline that could test the 2009 lows is a distinct possibility. Why?

1. The Greek Tragedy:
The unexpected awareness that Greece was about to default on its' sovereign debt owed to global banks, made the rest of the world painfully aware that all was not well in Euroland. Fear that four other EU members (Portugal, Ireland, Italy and Spain) were all in the same boat (Titanic II) unnerved the capital markets. Greece, the worst of the lot (which should never have been admitted to the EU), has government debt which is 124% of the country's GDP. The US is now at a 90% ratio to GDP which is a signal of future declining economic growth. More detail is discussed below but the lesson to be learned (but won't be) here is that any welfare state dominated by public unions, onerous regulations, a growing government bureaucracy, high taxes and political allocation of capital is doomed to fail. The PIIGS ‘R' US.

2. Chinese Checkers:
Most of us played the game as kids. It was easy until you lost your marbles. The Chinese had an easy game also. They manufactured cheap goods, sold them all over the world and built up fat profits and reserves. Trouble is they had their own version of the Greenspan Plan — cheap easy credit that created a speculative bubble that has now burst. The Shanghai stock market is down almost 30% YTD and their real estate bubble has also burst. China is the number one customer for EU goods. A contraction in China would further impair EU growth.

3. The Flash Crash:
On May 9,2010, CMV issued a SPECIAL BULLETIN in response to the Flash Crash suggesting to Conservative investors that they raise cash (Bonds) 80% (#1) and retain 20% in Gold & Silver (#5) and other suggestions based upon our Risk Tolerance Model. At this point the crash was an unexplained glitch and the economic fundamentals hadn't significantly changed. By May 18th, however, the equity markets penetrated the lows of the Flash Crash and it was evident to CMV that a major change was in the wind. CMV issued another SPECIAL BULLETIN on May 18th that suggested that all investors go to a minimum of 50% cash in Sectors #2 and #3 and hold on Hard Assets (#4), Precious Metals (#5), Commodities (#6), Real Estate (#7) and Special Situations (#8).

Based upon fundamental and technical data as of May 30th, CMV concluded that there is a high degree of probability that signs of Disinflation are evident which could precipitate a major market reversal beyond a 10% to 20% correction.

Is The Pro-Growth / Inflation Trade Over?

For those of you who follow The Myth Buster on Internet Radio (Gabcast) you're familiar with the "Inflation Jeannie" who (anthropomorphically) is a dead ringer for Barbara Eden from the 60s sitcom "I Dream of Jeannie" who escapes the narrow confines of her bottle at the command of her Master.

On the April 26, 2010 broadcast the evidence that Jeannie had escaped from her bottle was evident everywhere. The March Producer Price Index (PPI) had a dramatic 1.4% increase. Food prices were up year over year — Vegetables 56%, Fruits & Melons 29%, Eggs 34% and so on. Oil was up 120%, Lumber 59% and Rubber 74%. The signs of an Inflationary Trend were conspicuous. Suddenly, however, Jeannie disappeared. What happened? The Myth Buster suggested on a May 25th YouTube video that the "Deflation Devil" may have kidnaped Jeannie. Lo and behold, CMV has discovered that this seemingly odd couple who are as divergent as fire and ice have Hooked Up! Could there be such a phenomenon as an Inflationary Depression? A strange occurrence but let's look at what is happening.

The Greeks started it all in May when the country was faced with a default on its sovereign debt. Suddenly the global recovery was in question. And, the prospect of a debt default in additional Euroland countries (PIIGS — Portugal, Italy, Ireland, Greece and Spain) created a crisis of liquidity and confidence. The perception that the global economic recovery was over became the theme and Deflation became the focus. The International Monetary Fund (IMF) (to which US taxpayers contribute 17% of the capital) and the European Central Bank created a one trillion dollar bailout package to stem the crisis. The real Greek tragedy however, is that this play is written to fail. Loans made by the German and French banks to the PIIGS exceed their total capital. Once the contagion spreads to the other PIIS the European Union and the Euro are TOAST.

Like a playwrite, the Banksters and the politicians know the tragic end of this drama. They have scripted the bailout to fail. Why? The goal is a one world government and a one world currency — the WOCU. The coming financial panic and crash of the USD and Euro will usher in a cleverly-crafted script that will roll up all of the US and Euroland debt and turn the last act to FARCE.

Remarkably, within a month the US economy has seemingly reversed from a pro-growth, asset inflation trade to a ‘double-dip' Deflationary contraction. On May 22nd the DJIA fell 376 points or 3.6% as the "Smart Money" (hedge funds and traders) began unwinding highly leveraged trading strategies. (2008 revisited?) Commodities were hit hard as oil was off 2.7% and gold also took a similar drop as fear again emerged. Investors took profits and raised cash. Reflecting the perception of deflation the 10 year T-Note yield dropped to 3.26% — a 60 basis decline from its recent high yield. On May 20th, a lead article in the Wall St. Journal headlined, "INFLATION AT 44-YEAR LOW" which cited that consumer prices had increased only 0.9% in April. In the same issue, however, the WSJ reported that beef prices were up 14% to 32% and cotton prices rose 70% in the past year which would soon be reflected in apparel prices. A mixed bag of "flations" for sure.

The strongest evidence that the US is in a calm before the storm comes in the form of the US money supply growth and the velocity (turnover) of money. The Federal Reserve discontinued a public release of M3 (a broad range of money in circulation) five years ago to obscure transparency. British and European monetarists however, have continued to track the numbers and the stock of money in the US has dropped 9.6% in the three months ending in April 2010. Tom Congdon, a Professor from International Monetary Research said, "It's frightening. The plunge in M3 has no precedent since the Great Depression." Why is this occurring when the Keynesians in Washington are deficit spending like crazy to simulate the economy? (And buy votes.) The FDIC is pressuring banks to raise capital asset ratios and shrink their risk assets by not making new loans. Absent bank lending to small businesses and real estate, the recovery will fail.

Back to the improbable "hook up" between the Inflation vixen Jeannie and the dastardly devil Deflation. Is there such a beast as an INFLATIONARY DEPRESSION? Yes! As the economy slows in the US during the second half of 2010 toward the mid-term elections, disinflation will alarm consumers, investors and the politicians who are in the majority. To counter the sudden trend change, the Fed, the US Treasury and the Keynesian-Controlled Congress will resort to creating more fiat currency and deficit spending and potentially mandate bank lending that will cause inflation and the prospect for hyper-inflation. Once the American public losses confidence in the value of its currency, the game is over. The Devaluation of the US Dollar will make almost all goods and services more expensive — thus Inflation. CMV forecasts a +50% probability that this scenario will unfold within the next year.

The Precious Metals Group

This sector has emerged as a focal point for a number of reasons, therefore warrants special consideration in this issue.

On May 18, 2010, CMV sent out a SPECIAL BULLETIN which issued a SELL recommendation on GLD and SLV — the gold and silver ETFs. As previously documented in prior issues, CMV is deeply concerned that these two ETFs trusteed by J. P. Morgan Chase and HSBC banks could conceivably NOT have 100% of the gold and silver bullion backing the outstanding shares. IF that ultimately proves to be true, the spot price of both gold and silver could increase significantly but the shares of GLD and SLV may not appreciate correspondingly. Rather than assume an additional risk that, at this point, is difficult to assess, CMV felt the best course of action is to replace these two ETFs with new shares that represent that they have 100% of the bullion. The results in the Portfolio on May 19, 2010 were as follows:

Sales Price/Share Profit/Loss YTD
GLD $119.49 11.35%
SLV 18.57 12.27%


CMV recommended new positions in PHYS (Sprott Physical Gold Trust) which was at $11.96/share on May 19, 2010. Sprott recently announced that they raised $243 million through an offering in order to purchase more bullion. The offering was dilutive to existing shareholders and the stock declined about 10%

CMV also recommended SGOL ETFs Gold Trust which is also the Trustee for PPLT and PALL on our list. (Go to www.etfsecurities.com). It was added to the CMV portfolio at $121.80/share. These shares track the spot price of the underlying metal, the shares are 100% backed by gold bullion, the bullion is stored in Switzerland and the holdings are audited twice a year. ETFs also offers silver shares SIVR and CMV has added it to the portfolio at $17.00 / share.

In order to get a grasp of the magnitude of the greatest financial scam not yet exposed, go to Adrian Douglas' www.marketforceanalysis.com and read LMBA OTC Market "Alchemists" Turn Paper Into Gold. The LMBA is the London Bullion Marketing Association which is the largest bullion exchange in the world. Douglas reports that LMBA's website shows that a net of 20 million ounces of gold are sold every day which translates to an equivalent of 25% of the annual global gold production changing hands on the LMBA each day or $5.7 trillion per year.

Bottom line — that amount of gold simply doesn't exist! With demand skyrocketing in Euroland with citizen's trading the sinking Euro for bullion and millions of Chinese hoarding the shinny metal, demand far outstrips supply. Douglas estimates that 50,000 tonnes of gold has been sold that doesn't exist and there's anecdotal evidence that LMBA is offering large premiums of cash in lieu of bullion for settlement of future contracts. Enough said?

In 1980 Au (Gold) was worth $800/oz. The DOW Jones Industrial Average was near 800 and the Au/DJIA ratio was one to one. The DOW enjoyed a ratio of 40:1 in 2000 over gold when paper (.com) assets were the most valuable. Today the ratio is 8.5:1 and some experts are forecasting that the ratio will soon return to 1:1 with Au and the DJIA at 5000. Think about that as people throughout the world are losing confidence in their fiat currency and paper assets.


Real Estate
CMV has consistently taken the position since its' first issue in January that the commercial and residential real estate markets would improve as the overall economy exhibited positive growth. The Wall St. Journal, in a May 19, 2010 feature article, "Home Prices projected to begin Rebound in 2011," cited a survey of 92 economists completed by MacroMarkets LLC. Despite a very wide divergence in five year projections in price increases from a high of 37% to a decline of 18%, the consensus was a 12% increase by 2014. The very next day (May 20th) the WSJ ran another feature article that indicated that 14% of mortgage loans were delinquent or in foreclosure process as of March 31, 2010, but that didn't include about 2.6 million households that were 90 days or more past due but weren't in the foreclosure process. The first article will elicit optimism, the second, a decidedly pessimistic view as more foreclosures would come on the market. CMV's observation is that neither of these reports takes into consideration a weakening economy and more job losses.

The commercial real estate market, at least in the Phoenix Metropolitan area, represents a more ominous picture. A feature article that appeared in the May 30, 2010 Arizona Republic entitled "Brokers Project Cascade of Failure" featured prominent Real Estate professionals who maintain that both commercial lenders and borrowers are continuing "to live a lie" by refusing to respond to billions of dollars of bad loans. They call this approach to the problem as "Extend and Pretend" which means lenders continue to renew the delinquent loans in hopes that the market will improve. Banks do not want the property back because "They don't want to sell it for $.25 on the dollar," one Broker said.

The Metro-Phoenix vacancy rates have climbed to 12% and the average rent has dropped to $16.61/sq. ft.. The article said that 25% of the existing loans are doomed to foreclosure and another 50% could go either way. Again, this outlook is ‘considering' an improving economy. If CMV's current assessment of a second recession is correct, this market will worsen and property values will decline significantly. CMV recommends a Sell on all shares of the Vanguard REIT (VNQ) which locks in a gain of 10.66%.

The Coming Break-Up of the United States?

While all the angst and turmoil has been focused on Arizona's Senate Bill 1070, racial profiling and amnesty, there's a much larger issue at stake in the immigration debate. Let's look at a historical perspective that most readers won't have in focus.

There are various anti-American Irredentists groups (Mexican) that are strongly advocating the return of Southwestern lands (including a portion of Arizona) unjustly taken by the US after the Mexican-American War.

The following summary of these anti-American groups is taken from Allan Wall's website VDARE.com. Wall is an American citizen living legally in Mexico and is married to a Mexican citizen.

Reconquista: Calls for the formal return of Mexico's lost territories to Mexico. As early as 1982 a Mexican columnist, Carlos Loret de Mola, visiting Los Angeles (even then) saw massive emigration as an opportunity for re-conquest. He wrote a column entitled "The Great Invasion: Mexico Recovers Its Own." By shear demographics de Mola believed Mexicans would control the Southwestern US.

Aztlán: Chicano activists living in the US created this movement. The Chicanos believe that Aztlán was the homeland of the Aztec people but there's no consensus over where Aztlán was located. The activists claim that their origins can be traced linguistically to various American Indian tribes but at least one Mexican archaeologist believes Aztlán was in Central Mexico in the state of Nayarit. The principal organization teaching the Aztlán doctrine is MECH a or Movimiento Estudiantil de Chicanos de Aztlán. They strongly believe that it's their destiny to reclaim the territories of their forefathers taken by "the Brutal ‘gringo' invasion." The Mayor of Los Angeles, Antonio Villariagosa is a Mechista. One could argue that the Mayor has already achieved the Mechista's goal.

Rebubulica del Norte: This movement which advocates the break-up of the US is the creation of the University of New Mexico Chicano Studies Professor Charles Truxillo. He wants the Southwest to secede from the US and form the Republica del Norte with its capital in Los Angeles. This probability is not as far-fetched as you may think. There is presently a bill in Congress to grant indigenous Hawaiians their own territory. And, the Virgin Islands are an "insular" territory of the US which has self-rule but the islanders are US citizens.

Why is this important to CMV? Your author has an ability to see mega-trends that could effect all aspects of our lives. It is our view that there is emerging a convergence of a major economic crisis with the above immigration/reconquista issue which could have dramatic political, social and economic ramifications for our city, state and our country.

Politically, the right and left are becoming polarized over this issue — particularly in Arizona and the Southwest. Watch the recent YouTube video where the Deputies in Maricopa County Sheriff's Office told Mayor Phil Gordon (who favors a "Sanctuary City"), to "Shut up and don't call us racists!" There is an inevitable ugly and violent confrontation ahead unless reason and debate intercede. What most Arizonans don't know is that Gov. Jan Brewer has also signed HB2281 which bans ethnic studies in Arizona schools that are race-based, radical, separatist or revolutionary and promote the overthrow of the US which Wall asserts on his website.

Financially, the cost of welfare, food stamps, school lunches, medical, education, border control and imprisonment for illegal aliens is bankrupting states and the country. One estimate indicates that the cost is $338 billion per year. The problem is certain to become more acute as the states and the US enters a second recession.

The above figure is not adjusted for the estimated $428 billion paid by illegal immigrants in various taxes and purchase of goods - GDP. Since the numbers of either side of the issue can't be accurately verified, states and the US will look to the economic impact of laws like SB1070 either through enforcement or reaction to the laws.

The convergence of these two issues will in CMV's opinion occur within a year. Incidentally, CMV has read SB1070 in its entirety, as everyone should.


Free Books Offer! Click here to subscribe to the CMV monthly newsletter for one year - only $99.00 AND receive a copy of The Aftermath of Greed: Get Ready For The Coming Inflationary Boom and How To Profit From The Coming Inflationary Boom and Avoid the Next Crash, Free with free shipping - This free book offer is open to US residents. Both books are shipped to a single address. Please remember to include your mailing address to receive the books when clicking on the link.

-- H. L. Quist

SEE ALSO, my youtube video on the Deflation Devil on the side bar.

Free Preview of May CMV Newsletter

Hello World,

Here is a free preview of the May issue of the Contrarian Market View Newsletter, May issue. (Due to the format limitations of a blog, the actual newsletter is better looking.)

See the bottom for a free book offer with purchase of a subscription to the newsletter.

May, 2010
H. L. Quist's
Contrarian Market View
Newsletter

Market Overview

Three major events have recently occurred that directly impact the markets: The PIIGS Debt crisis in Euroland, the oil disaster in the gulf and President Obama's declaration of war against Goldman Sachs. In CMV's opinion the confrontation with Goldman and the New Regulatory Legislation signals a shift in power from Wall St. to Washington. There is the prospect of a new MOTU — Master of the Universe and he resides in the White House. The Banksters are getting their "just desserts" but will unleash a counteroffensive to retain their turf. This is a cogent moment in US history. Understand its significance!

Barron's which is a reliable source of data for CMV, compiles a quarterly consensus of "Big Money Managers" as to their outlook for the stock market going forward in 2010 and 2011. Here's what the Pros are thinking this spring.

--Only 46% of the Pros consider themselves bullish or very bullish down from 59% in the fall survey.

--16% of the Pros consider themselves bearish compared with 13% last fall.

--38% of the Pros consider themselves neutral compared to 28% in November.

The bottom line? After a blistering 14 month rally off the March 9, 2009 lows, the experts are saying the market is showing signs of "buyer's fatigue." Caution is the by-word.

Some of their other majority consensus of note:

Where will the DJIA be at the end of 2010:

Bulls 11,285 (no upside this year)

Bears 9,825 (an 11% correction)

Predictions Dec. 2010 Dec. 2011
GDP Growth Rate 3.05% 2.39%
S&P Profit Growth 19.2% 8.6%
US Inflation Rate 2.47% 2.87%
10 Yr T-Note Yield 4.19% 4.67%
Oil $83.23 $85.38
Gold $1,150.12 $1,193.92

CMV finds the above predictions, barring a double dip recession, bordering on the absurd. As indicated in this issue the "Inflation Jeannie is Out of the Bottle". It's a given that inflation rates (CPI) as stated by the Bureau of Labor Statistics (which historically grossly understates true inflation) will in fact be two or three times greater than the "official" rate used above. CMV, however, forecasts a rate closer to 8% to 10% for the true CPI. Closely tied to inflation, of course, is the 10 Yr T-Note Yield. CMV sees a yield closer to 6% or more by the end of 2011. To forecast a gold price of $1,193/oz by the end of 2011 represents an inability to comprehend the supply and demand fundamentals and the potential collapse of the global fiat money system. In short, it's CMV's opinion that this select group of institutional investors who probably manage trillions of capital, are stating what results they want and require of the market and not what is reality. Do you want these folks managing your money? CMV will re-visit these "predictions" in January, 2011. If we're wrong, we'll acknowledge it!

Real Estate
There's a well-worn cliche that says "follow the money" usually in reference to financial malfeasance. CMV prefers "follow the Smart Money" when it comes to investment opportunities. Here are some examples that reinforce CMV's position that "the bottom is in" in real estate.

Scott Rechler sold his real estate company, RXR Realty at the top of the market in 2007 for $4.1 billion. Rechler is now acquiring commercial properties on Long Island, NY which are in default on their debt or in foreclosure. The Wall St. Journal reported on April 28, 2010, that pension funds and other large institutions will pour $34 billion into real estate in 2010, double the 2009 amount.

What is remarkable in this instance is that this is the group of investors that took some of the biggest hits during the meltdown. Re-igniting a fire where you've been burned is solid evidence that fear is dissipating.

A more graphic story of the rebound in this industry is General Growth Properties, Inc. When the nation's second largest landlord filed for bankruptcy last year, it's stock collapsed to a low of $.33/share! The stock is now $15/share — a very nice gain for Contrarians. Other REITS have substantially outperformed most sectors in the equity market. And, perhaps the best anecdotal evidence of recovery is that Astrella Pharma, Inc. is building a new $150 million, 425,000 square foot, two-building office complex near Chicago. And, the mega player in hospitality, Starwood Capital, has raised $2.8 billion to buy distressed hotel properties world-wide.

On the residential side the S&P Case-Shiller home price index for 20 metro areas showed some very positive results vs. one year ago. Cleveland +3.2%; Dallas +2.6%; Minneapolis +3.0%; Los Angeles +5.3%; and San Francisco +11.9%. When your author delivered two talks to real estate investors in November 2009 in the Bay area, attendees were already reporting full price offers. As expressed under the heading Inflation, the (potentially) greatest impact on all real property values to the upside is coming with the anticipated devaluation of the USD accompanied by inflation. The coming real estate boom could be quite dramatic but of relatively short duration. If you're an investor or are contemplating a purchase, think exit strategy as you buy. More on that later.

Goldman Sucks
For years Goldman Sachs, has arguably claimed the title of Grand Master of the Masters of the Universe (MOTU) which this author featured in this newsletter and two books that chronicled the root cause of the recent global financial meltdown. Given that the firm has had not one but two of its recent former chairmen serve as Secretary of the US Treasury, and alumni serve on the Federal Reserve Board and other influential government positions, it should come to no one's surprise that GS's continual conflicts of interest would ultimately result in allegations of fraud. Your author revealed the "side bets" or as they're now called "Synthetic CDO's" as "Avatars" or virtual CDOs that had no underlying real estate assets which was such a critical component of the market collapse.

Of all the transgressions, actual or perceived, by GS, the most damaging is that they may have killed the goose that laid the golden egg. GS with the other MOTUs, became the ENABLERS. They branded capitalism and capitalists as the bad guys whose insatiable greed robbed the middle class. The Enablers allowed the "fundamental change in America" to take place and with it a new MOTU -- The federal government. Yes, Goldman will take a hit, but the real "hittee" will be America's real source of strength, small business and the middle class.

This piece warrants another GS success story that appeared in Business News on April 21, 2010.

How Goldman Sachs Screwed Ghana

In 1998, Ashanti Gold was the 3rd largest Gold Mining company in the world. The first "black"
company on the London Stock Exchange, Ashanti had just purchased the Geita mine in Tanzania,
positioning Ashanti to become even larger. But in May 1999, the Treasury of the United Kingdom
decided to sell off 415 tons of its gold reserves. With all that gold flooding the world market, the
price of gold began to decline. By August 1999, the price of gold had fallen to $252/ounce, the
lowest it had been in 20 years.
Ashanti turned to its Financial Advisors - Goldman Sachs - for advice. Goldman Sachs
recommeded [sic] that Ashanti purchase enormous hedge contracts - "bets" on the price of gold.
. . . Goldman recommeded that Ashanti enter agreements to sell gold at a 'locked-in' price, and
suggested that the price of gold would continue to fall.
But Goldman was more than just Ashanti's advisors. They were also sellers of these Hedge
contracts, and stood to make money simply by selling them. And they were also world-wide sellers
of Gold itself.
In September 1999 (one month later), 15 European Banks with whom Goldman had
professional relationships made a unanimous surprise announcement that all 15 would stop selling
gold on world markets for 5 years. The announcement immediately drove up gold prices to
$307/ounce ,and by October 6, it had risen to $362/ounce.
Ashanti was in trouble. At Goldman's advice, they had bet that gold prices would continue
to drop, and had entered into contracts to sell gold at lower prices. These contracts were held by
a group of 17 other world banks. Ashanti found themselves being forced to buy gold at high world
prices and sell it at the low contract prices to make good on the contracts. The result? In a few
weeks time, Ashanti found itself with 570 million dollars worth of losses. It had to beg the 17 banks
not to force the execution of the contracts.
Who served as the negotiator for the 17 banks and Ashanti? Goldman Sachs. The same
company that designed the contracts for Ashanti (making a profit in their sale).
The basic bankruptcy of Ashanti drove its stock price from an all time high of $25 per share
to a paltry $4.62 per share. Thousands of investors -your blogger among them - lost their
investments almost overnight as Ashanti was declared insolvent.
In the end (2003), Ashanti was purchased by their largest African competitor, AngloGold,
a British company headquartered in South Africa, who bought them for a song. The Financial
Advisors to AngloGold? You guessed it: Goldman Sachs.
The destruction of Ashanti Gold by Goldman Sachs was saturated with fraud and conflicts
of interest: Goldman Sachs served as Ashanti's Financial Advisors; profitted [sic] form [from] the
contracts they designed and marketed for Ashanti; was involved in the manipulation of the gold
prices on which the contracts depended; represented Ashanti's creditors when the contracts went
bad; and profitted as the Financial Advisors to the company that picked up the Ashanti corpse for
pennies on the dollar.
— http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=180487

And, of course GS was the advisor to the now bankrupt nation of Greece. Historians fifty years from now will pinpoint this era of greed and the marks left by these MOTUs as the day that American Capitalism died. Thanks Goldman. You didn't follow Adam Smith's "invisible hand" to make capitalism work because you had your hand in everyone else's pocket!

Inflation
In the event you haven't heard "The Myth Buster's" podcast on the Internet or seen his video on YouTube (hlquist), the Inflation Jeannie is out of the Bottle. On April 22, 2010, the National Inflation Association reported that US food inflation was spiraling out of control.

The Bureau of Labor Statistics (BLS) released their Producer Price Index (PPI) report for March and food prices rose 2.4% which was the sixth consecutive monthly increase and the largest increase in 26 years! Readers may recall that CMV made the forecast in the February issue that food shortages could be the trigger point for inflation. Here are some of the price increases year over year that consumers are now experiencing:

Fresh & Dry Vegetables +56.1%
Fresh Fruits & Melons +28.8%
Eggs +33.6%
Pork +19.1%
Beef & Veal +10.7%
Dairy Products + 9.7%

In addition, the price of cocoa has reached an all-time high. Chocoholics (which includes your author) will see the price of chocolate treats rise significantly or in the case of Hershey bars, you'll see the size of the bar diminish. The company has a multitude of molds that vary in size depending on the price of cocoa. The price remains the same but the unit cost rises. Same technology used by other manufacturers.

In the past year oil has more than doubled from a low of $34/bbl to $84. With the summer driving season about to begin expect gas to go to over $3.00/gallon — again.

Unnoticed by most everyone was a $20 billion loan made by China to Venezuela and Hugo Chavez. China covets Venezuela's oil production which will deliberately eliminate the US as its import customer. CMV is aware that the US has one of the few refineries that can handle Venezuela's sour crude. That's where the $20 billion comes into play. Couple that with an almost inevitable conflict in the mid-east over Iran's nuclear facility and oil goes to $200/bbl.

Business Insider.com recently reported that the "ISM Manufacturing Report Screams Inflation." The ISM Manufacturing Prices Index jumped 8 points in March with 17 industries paying higher prices for raw goods and zero reporting lower prices. These increases will soon show up in the rigged Consumer Price Index (CPI). Other notable raw material price increases since January 1, 2010, were:

Rubber +74%
Lumber +59%
Palladium +39%

Just as the residential real estate market and the home builders show signs of recovery, the price of lumber skyrockets. The National Homebuilders Association indicates that this 59% rise in lumber prices will translate to a $2,400 increase in a medium priced home. Consensus thinking in the real estate industry is that recovery will be slow and the time factor protracted. These folks aren't factoring in the sudden change that this monetary phenomenon called inflation can have on the entire industry.

CMV was early to the party when we issued the battle cry, "Get Ready For the Coming Inflationary Boom and Avoid The Next Crash! It's time to have a love affair with Jeannie before she becomes a naughty girl!

Tax Day
April 15th has passed but 47% of Americans didn't pay any federal income taxes. Either their incomes were too low or, in many cases, they qualified for enough credits, deductions and exemptions to eliminate their liability. On the other end of the spectrum the top 10% of earners, householders making an average of $366,000 (based upon 2006 numbers) paid about 75% of all federal income taxes. But, while almost 50% of the income earners pay zero tax, a large percentage of the population gets money back from the federal government. Under President Obama's Making Work Pay credit a couple receives as much as $800 and up to $400 for individuals. The Expanded Child Tax Credit provides $1,000 for each child under age 17 and the Earned Income Tax Credit provides up to $5,657 to low income families with at least 3 children. In short, government is creating an incentive not to work while at the same time increasing the federal debt. A trend that will surely end badly. LBJ's "Great Society" followed the same path.

When CMV forecast a mini-retail boom at Christmas and a surprising increase in consumer spending, critics said the consumer was "tapped out." What they failed to factor in is that there was a large percentage of the US population that had income that they never had previously, and by golly, we suspect they spent it!

This will all change, of course, with the prospect of a Value Added Tax (VAT) legislation that could be introduced this summer in Congress prior to the mid-term election. Think in terms of a 39% top tax bracket plus a VAT of 20% on top of the base rate. In addition, factor in a double digit inflation rate that will be a "game changer." The future isn't what it used to be!

Obama's Fannie
In a recent April radio address, President Obama stated that his financial regulatory proposals were struggling in the Senate because, "the financial industry and its powerful lobby have opposed modest safeguards against the kinds of reckless risks and bad practices that led to this very crisis." (Wall St. Journal April 20, 2010). Like all politicians who master the art of prevarication and hypocracy, it was Senator Obama that voted against tough regulatory legislation to rein in the lending practices of Fannie Mae and Freddie Mac in July, 2005. A very critical moment! You'll recall that it was the "evil twins" under quota mandates by Congress to make sub-prime loans to unqualified home buyers that has left taxpayers on the hook for about $400 billion in GSE losses. What the President fails to disclose is that he, as Senator, was the third largest recipient of Campaign contributions from Fannie and Freddie. According to recent Pew Polling, 80% of American's don't trust the federal government to solve the country's problems. As Ronald Reagan once said, "Government is not the solution to the problem, government is the problem."

Free Books Offer! Click here to subscribe to the CMV monthly newsletter for one year - only $99.00 AND receive a copy of The Aftermath of Greed: Get Ready For The Coming Inflationary Boom and How To Profit From The Coming Inflationary Boom and Avoid the Next Crash, Free with free shipping - This free book offer is open to US residents. Both books are shipped to a single address. Please remember to include your mailing address to receive the books when clicking on the link.

-- H. L. Quist

P.S. If you have not caught my youtube video or podcast on the Inflation Jeannie is Out of the Bottle, check the sidebar here on the blog.

Inflation "Jeannie" is out of Her Bottle!

Hello World,

Well the Inflation "Jeannie" is out of the bottle and I am having a love affair and we are making money together! Watch and listen to my youtube and podcast on the opportunities to recover profits.

Both on on the sidebar here on the blog. Just click and learn.

My Contrarian Market View Newsletter will aid investors and you can realize profits of 200 - 300% this year. Subscribe today, by clicking on the sidebar here on the blog.

-- H. L. Quist

What They Are Saying About My Podcasts!

Hello World,

If you have not caught my streaming podcast weekly episodes, I thought I would pass on one of my listeners comments to you.

Buster,

You did a masterful job of making the complex and fraudulent deeds of Goldman Sucks understandable in your 4/17 audio... It will be interesting to eventually learn how much our liberal Government is involved and complacent in the greater picture. I appreciate you more each time I listen to your audio calls.

Thank You,
-- D.G.

Listen to the episodes by clicking on the side bar on the blog or click here now.


-- H. L. Quist

Need help with your asset management? Consider my CMV newsletter service. The payment link is in the upper sider bar on the blog. Click here for a brief description.

A Whistle Blower Has Blown the Lid off J P Morgan's Gold and Silver Manipulation! Read this Interview from the Daily Bell

Hello World,

The Daily Bell's interview with William Murphy

I wrote The Daily Bell:

"Thanks Daily Bell for your interview. I'm fortunate to know Bill and fully appreciate his courage and devotion to restore credibility to these markets. Ultimately the scam will be exposed when investors can't get delivery. We just don't know when the game will be up." -- H L Quist

And they responded:

Dear H L Quist ,

Thank you for sharing your comment on William Murphy Explains his Testimony at the Recent CFTC Hearing and the Future of Precious Metals Markets with readers of The Daily Bell. Insights provided by contributors such as yourself do a great deal to enrich the articles we publish. The comments add something extra that we can't get from any other source. We know our readers value them, and we appreciate the time and attention you've given us.

We hope you will be sending us more comments on The Daily Bell articles you find especially interesting.

Sincerely,

The Editors
The Daily Bell

Readers, look for my gabcast on this subject.

-- H. L. Quist

Free Preview of April CMV Newsletter

Hello World,

FREE PREVIEW of the April CMV Newsletter section. (The recommended list is available only to paid subscribers.) (The actual newsletter is better looking, due to the limitations of blog posts.)

We are repeating our offer of a free copy of "The Aftermath of Greed" and "How to Profit From The Coming Inflationary Boom" with a paid subscription to the Contrarian Market View e-Newsletter -- a $140 value for the price of $99. This offer is open to US residents (books shipped to a single address only) and will be available for a limited time only.

Here is the link to subscribe today http://bit.ly/CMVyearbook
.

April, 2010
H. L. Quist's
Contrarian Market View Newsletter

Market Overview

The Economy:

Double Dip or Skinny Dip? In market terms, is the economy headed for a second recession or is a recovery at hand and is it time to jump back into the pool? (Swimsuit or not!) Contrary to a plethora of pundits who maintain that the US is on the precipice of financial collapse, CMV believes that the economy is going to surprise on the upside. We were courageous and correct when we re-committed to the equity market on April 1, 2009, and firmly believe that the economy will continue to outperform its' most vocal critics.

There's no question that portents of gloom and doom from Conservatives — particularly since the passage of Obamacare --- have obscured the positive. Be assured, CMV has not switched allegiance and moved to the left. Our position has always been consistent — when addressing the issue of money, you must separate political ideology from economic reality. A little history to make the case in point.

1975 - 1977
The oil embargo and Nixon's self-inflicted crisis and humiliation sent the economy and the markets into a free fall. The Dow fell 50% and the real estate market gave your writer the opportunity to buy a bankrupt premium residential property in Phoenix for $22/sq. Ft. Despite the election of a Trilateral Socialist as President who resurrected (again) John Maynard Keynes, we experienced a V correction within those two years. Look at the charts. The Dow rebounded 100% off its lows. And, by 1978 the real estate and commodity markets (Gold to $850/oz) were going ballistic despite rapidly rising interest rates. The prime rate rose to 21.5% and mortgage rates to 17% by 1980. Of course, the inflationary ‘crack-up boom' followed in 1980, but those investors and pundits who focused on the political and fiscal ineptitude of Jimmy Carter, missed the boat to Omaha. (Buffet discovered value investing in Omaha during this time period.)

1983 - 1985
The Recession of 1980-82 initially was a nightmare for Ronald Reagan. Official unemployment of 10.4% was higher then than the peak experienced in 2009. Despite Paul Volker's determination to kill the inflation dragon with high interest rates, the GDP jumped to 5.1% in the first quarter of 1983, 9.3% in the second quarter and remained at an incredible 8% for the next three quarters. The Garn- St. Germain Act, Supply Side Economics, Michael Milkin and The Plaza Accord were the stimulants which led to Black Monday in 1987, and the real estate collapse of 1989. The recovery in 1983 to 1985 was indeed robust and we suspect that those liberals hoping for Reagonomics to fail also missed the boat to Omaha.

1991 - 1993
The collapse of the real estate market — primarily commercial — the enactment of FIRREA (Financial Institution Reform and Recovery Enforcement Act) which formed the Resolution Trust Corp and closed 747 banks and thrifts in the US, created a similar mind-set amongst the real estate industry that exists today. Your writer forecast a real estate boom in 1992, which proved to be the longest and most profitable period in real property value growth in US history. It also marked the beginning of the .com bubble. Another robust recovery for those that had vision and courage and took a Contrarian view in 1991. (Isn't that what this is all about?)

2002 - 2005
The bursting of the .com bubble beginning March, 2000 followed by 9-11 brought a new level of negative psyche to all markets. "The Greenspan Plan," so named by this writer, was a deliberate strategy promulgated by the Federal Reserve to stimulate consumer spending. Memories should recall that it was the RE-FI cash-out phenomenon that not only created a "shop to you drop" mentality, it also gave birth to the sub-prime residential and credit bubble and Wall Street's Master of the Universe (MOTU) highly-leveraged and speculative bets. What most observers and participants failed to see early in the fall of 2002, was the rebound opportunity for all asset classes. This writer strongly encouraged investors to get fully invested in real estate, equities and commodities in the fall of 2002. Gains in equities and commodities of 200% to 400% from 2002 to 2006 were common. The key, of course, was an exit strategy to get the hell out of Omaha in 2007.

2010 - 2011
The rebound in the equity markets from March, 2009 has been rewarding to those who had capital and courage. Your writer re-committed to equities on April 1, 2009 — one year ago. The snap-back in gold from $700/oz in November,. 2008 to $1,220 one year later was as spectacular as it was rewarding for Contrarians. Real estate has not joined in the party because of the extent of physical and psychological damage brought on by the MOTU, well-documented by this writer in both of his books. So, what is CMV's outlook for the next two years?

1. Blue Chip Economic Indicators, a poll of 50 economists, all maintain that there will NOT be a second recession in 2010 and 2011. CMV agrees. The "crash" will come later.

2. The Blue Chip consensus expects the GDP to be a little less than 3% this year and a little over 3% in 2011. They also forecast unemployment to drop to 8.8%, by the end of 2011. CMV forecasts a higher GDP in the range of 4% to 5% for both years and unemployment to dip to 8% by the end of 2011.

3. The Blue Chip consensus expects consumer spending to remain in the 1.2% to 2% gains. CMV accurately forecast a robust fourth quarter of 2009 and sees the consumer much more confident going forward. The pundits say the consumer won't spend when unemployment remains high. CMV reminds the reader that unemployment remained above 10% from January through June of 1983, yet real consumer spending soared at an annual rate of 6.1%. CMV does not expect a repeat performance of 1983, but spending could surprise on the upside. Ford's sales and profits will be the industry's leader.

A few words on REAL ESTATE. Given the volume of e-mails and the anguish expressed by Realtors and developers, capitulation must be near. One Realtor remarked, "It will take several years for the market to recover," Employment opportunities are emerging in markets like Phoenix, which created 20,000 new jobs in February. Migration will soon follow. A new "enhanced" mortgage relief plan has just been announced (March 26,2010) which will require mortgage servicers to reduce principal if homeowners owe up to 15% more than the home is worth, to reduce payments to within 31% of the income and to skip payments altogether for the unemployed. Sophisticated investors are now willing to exchange zero returns on bonds for risk assets. Your writer's Realtor spouse and daughter have had more activity in the past month than in the past two years. Deals have been made, escrows opened and closed. There is a light at the end of the tunnel and it isn't a train! Market psychology can change rapidly. It's time to get back into the pool.

The China Syndrome
Do you remember the 1979 flick starring Michael Douglas, Jack Lemmon and the appropriately cast "Pink Lady" Jane Fonda? The film dealt with a cover-up of a potential meltdown of the Ventana Nuclear plant in California. Today, the potential for a currency meltdown between China and the US looms as ominous as a nuclear version.

At issue is China's past decision to peg its currency, the Yuan, to a fixed rate of 6.83 to the US dollar. The US claim (by the Keynesians) is that the resultant undervalued Yuan or currency manipulation combined with Chinese export subsidies has resulted in burgeoning trade deficits for the US, weakening our own manufacturing base and loss of millions of American jobs while China has prospered mightily. Recently, 130 members of Congress wrote a letter to the US Treasury demanding that unless China revalues the Yuan upward, the US should impose tariffs on Chinese goods. That's just what the US needs — a trade war with its number one banker. Duh!

To the Chinese, perception is more important than reality. If they bow to US demands, they appear weak, therefore China will delay the inevitable longer and when it best serves its interests And, what will be the result to the US when China revalues? US imports from China (which just about now covers everything) will appreciate in price thereby aggravating our inflation picture. On the plus side, our exports will be more competitive thereby expanding the US manufacturing base and reduce the trade deficit. Which do you prefer?

The bigger picture, of course, is that China has accumulated $2.5 trillion in US dollar reserves. They hold the ultimate trump card and already is re-shuffling the deck to recycle the shrinking dollar. What happens when China creates sufficient internal demand for its goods and doesn't need the US market? Our children could be speaking Mandarin. The most significant Mega-trend of our lifetime has been the shift in global power from Great Britain after World War II to the US and now from the US to China.

A Showdown At The OK (Gold) Corral
CMV and The Myth Buster have often reported on the market manipulation of gold and silver suppressing the price of both metals. A formal hearing was held at the US Commodity Futures Trading Commission on March 25, 2010. The charges presented to Gary Gensler, Chairman of the Commission were:

Comex data shows that the price of gold and silver are suppressed.

There is a direct correlation of price suppression and the positions of two US banks.

The Bank Derivatives Reports from Treasury Department Office of the Comptroller of the Currency (OCC) indicates these two banks are JP Morgan Chase and HSBC (formerly Hong Kong Shanghai Bank).

Appropriate enforcement action is required.

This writer's friend and hero, Bill Murphy, who founded The Gold Anti-Trust Action Committee (www.gata.org) many years ago, has implicated the US Government, the Federal Reserve and the major bullion banks as the perpetrators of the illegal scheme. Their motive, GATA says, is to maintain the purchasing power of the US dollar artificially high by concealing inflation and as a result, keep interest rates artificially low. Given the backdrop of the precarious state of the US and global economy, this issue has more relevance today than ever before. CMV suggests that you go to www.marketforceanalysis.com (Adrian Douglas) for a summary of the claims. To highlight the issue, from July to November, 2008, the two banks cited above went from having just 9% of the total net short position of silver to 99% thereby representing the entire net short position which is illegal. A short position is intended to suppress the price and the holder profits at a decline in price. As CMV indicated in previous issues, JP Morgan Chase, by virtue of its short position, would have been in serious financial condition if the price of silver increased. Of critical importance to you as an investor, JP Morgan Chase is the custodian of the silver in the SLV ETF. HSBC is the custodian in the GLD ETF. It's conceivable that neither of these institutions have the metal to meet their obligations as custodians.

President Barrack Obama (BO) in appointing Mr. Gensler to Chair the CFTC has vowed to clean up the corruption and bring transparency to these markets. Question is, will Gensler look into the abyss now confronted with these facts and clean up the mess or will he retreat and the bankers will maintain their control, as they have since 1913? CMV maintains that investors could demand delivery of bullion at contract expiration which will blow the lid off this entire scheme and both metals could reach levels never envisioned.

As a side note, despite the manipulation, gold has, since 2000, appreciated 10.1% a year against an average of All currencies. Some examples are:

US Dollar 14.9%
Swiss Franc 10.1%
UK Pound 15.1%
China Yuan 12.6%

Think back to 2000 and all of the financial advisers that told their clients that gold was "too risky" and a "barbarous relic." Pretty sound advice, huh?

One very important anomaly. The USD has rebounded in March from 81.00 to a high of 82.20 on the index which normally would be negative for gold. In spite of this dollar rally, gold has risen from $1,085/oz to $1,113/oz. We may have reached the point of BIFURCATION. Just like 1977 to 1980, gold will rise despite dollar strength and a dramatic increase in interest rates.

Interest Rates
CMV reported in the March issue of the "failed" auction of US Treasuries. 11% of the bonds at the February 10th auction were purchased by the Federal Reserve due to the lack of bids. A sudden drop in investor demand in the weak March 22nd auction further highlights the scenario forecast by The Myth Buster over a year ago. The 10 year note jumped from about 3.65% to 3.89% despite the fact that it was not offered in this auction. So, what is causing rates to rise?

Concern in Europe that Greece and other countries (PIIGS) may default on their debt.

The passage of Obamacare and the prospect of higher deficits in the US.

Social Security will record its first cash flow deficit (about $29 billion) in history this year, six years before forecasts.

US Treasuries have a higher yield than some US corporate bonds — a first in US history.

Echoing this concern, Steve Rodosky, head of Treasury and Derivative Trading at bond giant PIMCO said he was increasingly worried about the US fiscal outlook. In two days, 30 year mortgages were quoted at 5.125% up from 4.875%. Rates on many mortgages are linked to the 10 year Note. For CMV readers, TBT, our bond short strategy rose sharply from about $47/ sh to almost $50. Volume on the ETF skyrocketed from 5 million shares to over 15 million. The handwriting is on the wall. Read it! TBT should be a core holding. The Bond Bear Market has begun.

Additional fiscal concerns. Charles Krauthammer, who is a brilliant political analyst and who appears nightly on FOX News, said on Bill O'Reilly's Show on March 22nd, that the BO plan to raise hundreds of millions of dollars annually to attempt to meet the President's horrific deficits is a VAT — Value Added Tax — The European's answer to the constant dilemma that the US most assuredly faces. For those of you who haven't experienced it, you'll be forced to tack on a 10% to 25% (or more) tax on every retail purchase you make. (Possibly excluding food and health care.) Add $6,000 to that car you buy. When will this happen? Immediately after the mid-term election to be effective January 1, 2011. (Germany 19%, France and Italy 20%, Scandinavia 25%).

The biggest concern facing middle class America is the real prospect of the US Government's conversion of 401(K) and IRA and other retirement accounts. Sound absurd? In H L Quist's How To Profit From The Coming Inflationary Boom And Avoid The Next Crash, (p. 23) he cited nine months ago that the House Committee on Education and Labor had reviewed a proposal by Teresa Ghilarducci, a Professor of Economic Policy Analysis at the New School for Social Research in New York, to eliminate tax breaks for 401(K), IRAs and other retirement plans and convert them into Guaranteed Retirement Accounts (GRA) managed by the Social Security Administration. Now the focus has shifted to require that these plans purchase US Treasury Debt! These Marxists are totally committed to redistribute America's wealth and they can't resist this pool of trillions of dollars of private capital — particularly now when investors are backing off the purchase of US paper. If this attempt to "fundamentally change the United States of America" doesn't create a revolt, nothing will.

President BO, is doing his best to solve the unemployment problem. It is estimated that the IRS will hire 16,000 new employees to administer Obamacare and they've set aside $10 billion dollars in start-up funding. Unemployment in Virginia in counties close to DC have only 4% unemployment prior to the expansion of the IRS. The massive and highly remunerated bureaucracy that will grow during this presidency will absolutely destroy any chance of fiscal sanity.

What does this all translate to? Where are we, as a nation and it's economy, headed?
Rising inflation, morphing into;
Hyper-inflation, which leads to;
A Crack-Up Boom, which ends in;
US default and bankruptcy.

The only thing CMV can't tell you is, WHEN.

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-- H. L. Quist