Wednesday, April 30, 2008

I got one right!

This is what I hope will the first of many "I told you so" posts for the year.

Today’s note is in response to the Feds action today lowering interest rates again by a more modest .25% bringing the prime rate down to my predicted 2% for the year. This makes me something like 2 for 20 on my predictions so far this year. 2% prime rate and a major bank failure (Bear Stearns), that's 10% probably better than Bernanke:)

One thing I can’t understand however is the recent strength in the U.S. dollar, $160 billion or so for stimulus package, 2% interest rates a full quarter before I expected them, banks taking loses weekly, another 3 billion loss for GM the list goes on and on. A full ½ of American’s trade deficit is now based on energy imports and with no chance of a 200 billion barrel oil field being found under the White House, this is not going to change anytime soon.

The fundamentals say the dollar should be weaker but since the Canadian and British Central banks have decided to hold hands with Bernanke as he skips down the path of currency debasement the weakness is camouflaged.

It still looks however that a crunch is coming as treasury auctions continue to be under subscribed, if they can’t borrow it they will have to print it. The U.S. has a large leaking wound which is draining its blood, the blood bank has been emptied and now they just keep topping it up with more and more saline solution watering down what little blood is left. Eventually the body will die!

James Turk of Gold Money is calling for a “Major Dollar Crisis” within 3 to 6 months and a return to $1000+ gold and silver over $20. When smarter people than me still see problems I think my $1200/$25 prediction for the year has hope.

The only other tidbit of U.S. dollar news is Iran claims that all transactions for oil are now non dollar denominated, Euros in Europe and Yen in Asia. While they announced this last year I appears to have taken some time to get everyone onboard with the idea.

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