Capital Concentration is Moving Out of America, Into Gold
Bob Chapman, The International Forecaster, says Depressed America is No Longer The Safe Harbor It Was For Investment.
The sanctity of contract no longer exists. There no longer is a rule of law. The law is what the President says it is. We can imagine the negative affect this is going to have on investment by foreigners in the US as well as foreigners further holding of dollars. Capital will now feel unsafe in America and you can expect capital to flee such a capricious government. America is no longer the safest harbor for capital. This capital will now begin to move elsewhere and into gold.
Investors around the world saw what happens to bond holders (like pension funds) when the US government steps in to manage a private company. When secured lenders, who should have first dibs at repayment get had, people take notice.
Anyone who believes the market rally of the past ten weeks is going to extend further upward we believe is mistaken. We are 35% off the bottom and there is no good news. In fact, it is worsening in spite of the fact that consumer confidence has risen because Wall Street, Fed, Treasury and selected elitists tell us the bottom is in and things will soon improve. V-shaped rallies always have to retest their lows. The next visit to 6,600 Dow will see panic selling and any further rally would be sold into by those sufficiently troubled by still being down 35% to 50%. Donâ€™t forget as well that more and more prime mortgages are going into foreclosure due to the worsening economy and loss of good paying jobs. Then there is the enormous overhang of ALT-A and Option-ARM resets, which will accelerate as the year moves on. These residential and commercial loan problems, as we have said before, wonâ€™t end until 2012. Any hope of a recovery during the next 8 years is wishful thinking. The fundamentals of the previous two stock market bubbles and the real estate bubble have been broken and it will take years for the markets and the economy to adjust. Just because things are not as bad as expected doesnâ€™t mean they are good.
If you’re a bull… then toro. But be prepared to get slaughtered. This is a bear market rally, and whether it turns now or the Dow Jones goes to 10,000 before a breaking point, turn it will.
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Date: May 21st, 2009
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