Tuesday, October 13, 2009

We still have a rough ride until year end.

We have about 12 weeks left to finish off 2009 and I expect this period will be a messy one with a series of events likely to hit the preverbal fan..

First of all it looks like Capmark Financial a commercial real estate made up of left overs from the crap heap once called GMAC is on the verge of bankruptcy. Now this is not huge in scale when compared to GM’s problems but it is certainly a sign of that the commercial property bubble is following the residential market down.

Even more damaging could be the expected bankruptcy filing for CIT

The impact to the U.S. economy could be huge if 1 million small businesses suddenly find themselves without a credit. Yes, some will find new banks, many however will flounder as they scramble to find new sources of credit either because banks are not lending or simply because they are so close to the edge that the very instant they loose their credit lines they will be forced to close shop. I don’t know how many people the average small business employs but if we say 10 employees each with a 10% failure rate after companies that lose their credit, we easily can add 1 million people to the unemployment rolls.

CIT has been trying to make a debt for equity swap deal with creditors but it’s starting to look more like a bankruptcy filing is imminent; today’s announcement the CEO plans to resign certainly seems like the old rat and sinking ship scenario.

The biggest issue could be Latvia’s failed attempts to meet the IMF’s austerity demands required for the more bailout money. Latvia’s foreign denominated debt makes it very hard for the Government to act in a way acceptable to their citizens, yet fulfill their IMF obligations. If they can’t sell more austerity to the populous the only other answer is to devaluate the currency, loosing EU and IMF financial aid and making default on foreign debt nearly inevitable. Recent government statements
claim they will meet the prerequisites for the international aid but how do they plan to sell more austerity when GDP is down nearly 20% and unemployment is rocketing?

A failure to make the required cuts and a forced evalution could also force Estonia and Lithuania to break their own currency pegs and endanger their planned adoption of the Euro. While the consensus says the EU and the world economy is now strong enough to weather a Baltic crisis it, other east bloc countries will face contagion and Swedish banks in particular will take some heavy hits that could dampen all the bold talk of recovery. Of course if the concensus is wrong it might plunge us back into a world wide crisis.

On top of these big stories small banks will continue to implode in the U.S. with the likelihood of reaching the 100 failed bank mark this Friday all while the FDIC struggles to deal with the losses.

So when someone comes on the TV and says commodities are over bought, gold has no real value and silver is simply a industrial metal remember that fiat money, equities, bonds, your business and even your job may only be fleeting things, but silver and gold have had real and substantial value throughout history.

I have no doubt that my $1100 and $20 target highs for the year will be attained very soon and maybe even greatly surpassed. I see that my blog hits are up, ad revenue has recovered and I’m getting more direct mail from bullion novices every week all indicating to me that the bull market in metals is certainly far from over.


k31fan said...

great site thanks for posting

you didnt even mention the Govt take over of health care and the america doing NOTHING to grow itself out of the mess.
cap and trade taxes
massive middle class healthcare taxes with the takeover
(they will not cut medicare to make the CBO numbers- they never have before)
Post 1970's
The dollar weakened, and Paul Volcker at the Fed had to raise interest rates to about 18% to defend it.
Gold crashed when it became clear that the gov't was willing to tighten money and cause a recession to defend the dollar. Good luck with that strategy this time. We made a lot of useful things back then and sold them to the rest of the world. now.....not so much

CSB said...

I don't know all the details of your new health plan but I must say to all my American readers that I don't see what you are afraid of with government health. I don't think that medicine should be a profitable endevor for HMOs , hospitals etc, it should be a public service and right. Certainly free access to GPs and neonatal care would save Billions in later costs.

With the amount the U.S. spends you should have the longest life spans in the world but surprisingly it's number 50, the infant mortality rate is 33 in the world, below Cuba.

So something in your for profit system does not work, simple, its not an idealogical arguement, its simple stats! Is this Obama plan the right model to fix it? I don't know but it certainly seems that the HMO model is defective and more about profit than logic or compasion.

Idealy you should be able to have profit and good service but inevitably profit trumps the needs of the clients in corporate culture, just look at the banking bonuses vs compasion for home owners and front line bank layoffs.

As a Canadian I must say that neither I nor my family have been hurt by or deprived of service by our system. Are waits a little long for some non life threatening surgeries yes, but no one is turned away or terminated by a death board. In fact the system sometimes goes to far the other way as we found out when my Grandfather who had a Do Not Resuscitate order on his chart was revived several times while in Provincial care because doctors felt is was their obligation to provide the best care possible. OOOHHHH,,, omminous,, doctors who care!!!!!!!

There are no death boards, you can get a second opinion, and no one is denied service, which is why we are number 8th in life expectancy. Is our's the best system no, but it works resonably well for us and I'm really tired of the bullshit misrepresentations of our system in U.S. Media.

Anyway that's my rant for the day...

Yes there are issue I did not deal with but oh well!!1
The situation is too bad to detail all the problems. The point is to scare people enough to do something and protect their wealth.

Anonymous said...

One thing never mentioned in the US is that long wait times are for very specialized treatments for generally rare conditions.

Besides that, I go to any local doctor I want. I have gone to the hospital emergency room twice in my life. Top notch service both times.

I can't imagine waking up in the hospital after a car crash, to somebody telling me that I am broke, bankrupt, and homeless because a doctor saved my life.

k31fan said...

wow great good for you. Healthcare is not a right. If one think it is then one does not understand what rights mean.

In the end this country is broke and has 66 trillion dollars in unfunded social programs already. let alone thinking we need the Govt to take over 17% of its GDP.

We cant pay for our foriegn policy either. Japan and germany are rich enough to pay for there own armies......the rest of the world can step up to the plate we are broke. The US need to seriously dial back on both domestic and foreign handouts.

(I havent started my rant bgut I will stop)