Discussion in 'Wall St. News' started by trendy, Jul 22, 2009.
A worthy read from Sprott Asset Management
Aren't these the same guys that came out with the expose' on the PPT?
I love it when these fund managers come out with 30 page "white papers" trying to prove their "economic theses" (read "Help I am on the wrong side of the market.")
These look like the same guys who wrote the "white paper" why China's growth would keep the October 2007 booming way above 14,000.
How come it is hard to predict what the market will close at tomorrow at 4:00PM ?
Alex L. Wasilewski
Co-Founder & Head Trader
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For those of you who are interested, this is extremely bearish, but you may find interesting points nonetheless, even if you're neutral, or even bullish on equity markets.
Just so you have a taste as to how bearish a thesis this is, here's the very first selection:
We are now in the early stages of a depression. The economic indicators we follow to track real economic activity are all signaling a slowdown of massive proportions. You wouldnât know it reading the mainstream papers of course â they all focus on the relative decline in the slowdownâs intensity. Reading about the slowdown âslowing downâ is not the same as growth however, and does not warrant excitement in our opinion.
Who the hell is Sprott? What are their returns? Do they make their investors any money?
I read the "report" and was shocked by its lack of vigor. They produced a series of charts/data series that show employment is historically weak, capacity utilization is historically low, and housing sucks ... HELLO. Is there a soul on the planet (other than Brian Wesbury) that does not know this and has not known this for months.
What they did not show was ANYTHING that could possibly be a forward looking indicator of where things are going. As some of us invest and or speculate in markets, this is not just the key question, but the only question.
These guys make David Rosenberg seem like Stan Drukenmiller.
Good chance Sprott is generally right. And this rally phase is a "false hope" one much like the ones Japan had from about '92-'99... before plunging to the depths.
The USA may experience a similar pattern.
The US is Insolvent (and headed toward bankruptcy)
Motley Fool - ‎10 hours ago‎
July 22, 2009 â Comments (7) | RELATED TICKERS: USA , DEA , D
It's not like that title would come as a surprise to any Fools out there : ) Here is Chris Martenson's latest take on this national crisis. Link and excerpt:
The US is Insolvent (and headed toward bankruptcy)
I originally wrote about this unpleasant fact back in 2006 in a Martenson Report entitled The United States Is Insolvent. And today, unfortunately, the situation has only deteriorated. I want to revisit that topic because there is really nothing more onerous to the future prosperity of a country than going bankrupt. If you care about the future prosperity of the US, you need to understand this situation.
Yesterday, my jaw literally dropped when I read this statement made by Vice President Joe Biden:
âWeâre going to go bankrupt as a nation,â Biden said.
âNow, people when I say that look at me and say, âWhat are you talking about, Joe? Youâre telling me we have to go spend money to keep from going bankrupt?ââ Biden said. âThe answer is yes, that's what Iâm telling you.â
What surprised me was not the admission by a sitting US Vice President that the nation is headed towards bankruptcy. I suppose that's pretty clear to everybody by now, so why not just tell it like it is? What got me was that the statement, as expressed, displays an unbelievable ignorance of finance and economics. The claim boils down to the idea that the way to avoid bankruptcy is by spending money.
If this is somehow possible, I sincerely hope that Mr. Biden sees fit to share the secret with the millions of people that entered bankruptcy this year. Otherwise, it will have to stand as a jaw-droppingly inane comment.
But it clues us in to the mindset of at least some of the DC leadership and gives us some sense of how much faith we should place in their efforts to centrally manage everything from car companies to secretive trillions handed out to untrustworthy bankers.
Instead of blind faith, we might prefer to trust in our own ability to look at the data and ask, âHow is this going to work?â
This morning I finally read an exceptional document put out by Sprott Asset Management (Toronto, Can.) which exactly and precisely lays bare the magnificent funding problems that DC has created for itself. Titled âThe Solutionâ¦Is The Problemâ it opens with a statement of fact, âIn fiscal 2009, the United States must find buyers for almost three times the debt that was issued last year.â
Three times, or 300% more debt sales by the US government this year compared to last year. How will that happen? Rather than just sort of assume that this will somehow get done, this report breaks down the potential purchases of US debt by specific classes of purchasers and provides a mid-year report card on how each one is doing in their quest to buy 300% more than last year.
The results are not encouraging.
We begin with the largest buyers of debt outside of the United States â âForeign and International Holdersâ (#2). This group accounts for the largest source of external capital for US debt purchases and represents a very important group to float the deficit. They collectively purchased $564 billion last year, and the US will require them to increase their purchases to $1.6 trillion in 2009. Thus far, they have only purchased $465 billion to March 2009, which is halfway through US fiscal year - and well behind the pace needed to triple last yearâs purchases. Current data does not bode well for further purchases either. In fact, April Treasury data revealed that âForeign and International Holdersâ were net sellers of US debt from March to April 2009. This is not surprising given the public comments from officials in China, Japan, Russia and Brazil concerning the level of debt issuance by the United States and its potential impact on the US dollar.
The report continues on covering all ten classes of purchasers and it turns out that only one, âOther Purchasersâ is on track to triple their purchases over last year. The other nine? Most are well off of the pace needed to cover up a massive gap.
How will the shortfall be covered? In reality there is only one option, and it is the reason I own gold. As the Sprott paper concludes:
As we hope the breakdown above has revealed, the future solvency of the United States as a nation state is currently in jeopardy. It is in far deeper trouble than the mainstream press cares to admit. There are simply not enough new buyers of debt on this planet to support the spending programs of the United States government - and it appears that current holders of debt are beginning to sell. Because it is impossible to balance the budget from outside sources of capital, the only source of funds left for the US, in all reality, is continued money printing.
Such money printing represents a breach of the public trust required to operate a fiat money system. We trust that they will operate the money machine responsibly and they trust that we will go about our daily lives and be productive. Instead the Fed is aiding and abetting the largest printing operation in history and is steadfastly refusing to be audited in any way shape or form. If confidence and transparency are required elements for the sustainable continuation of a fiat money system, the US dollar is in for a rough ride.
While the short term wiggles and jiggles of the markets, and their attendant mouthpieces in the media, do their best to confuse us, it is the larger trends that will illuminate the way.
There can be no doubt that the US government is financially insolvent. While we may not know the exact timing (this year, next?) or the exact mechanisms (Raise taxes hugely? Renege on entitlement benefits?), we can be sure that past profligacy will translate into future hardship and reduced prosperity.
And the shame of it all is that it did not have to be this way. History is thoroughly unambiguous on this matter; spending beyond ones means inevitably ends in tears. No exceptions. How did we manage to forget this?
As I probe further into this countryâs recent past, the time of my grandfather and great-grandfather, I am reading of people who understood that prosperity resulted from a combination of productivity and living well within ones means. I wonder what changed. I wonder how we so completely forgot the lessons of the (very) recent past that today it is possible for a Vice President of the United States to assert that spending is the key to avoiding bankruptcy and then walk out of the room with his head held high.
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