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Market analyst Lynette Zang says we are headed towards an undemocratic technocratic financial system. Zang explains, “Technocrats don’t care about people, they care about systems. That’s what the most important thing is. The formulas that guide all of those systems is not how a democracy works. . . . Essentially, what they are trying to do is get all wealth held in cyberspace and the title to all wealth held in cyberspace. Then the “Smart Contract” can immediately transfer that title. You can go to the mall and spend the equity in your house.”

Zang warns that central banks could make a big mistake and lose control quickly. Zang says, “They could lose control because it’s all about confidence. Why do they keep testing all of this confidence? People have been losing a lot of confidence in the governments and central banks. Why do they need a trustless system? They could lose control.”

Zang says every fiat currency will reset against gold and silver, and if it happened today, she estimates “gold would be more than $9,300 per ounce” and “silver would be more than $625 per ounce.” Zang says, given all the unpayable debt in the world, those are conservative estimates.

Join Greg Hunter as he goes One-on-One with Lynette Zang, Chief Market Analyst at ITMTrading.com.

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Hello readers of TIP, my name is Cesar Zambrano and I’m happy to have been given the chance to share an article I’ve written with you all.
I have been interested in the stock market, investments, and spreading the word about fraudulent activities for quite a few years,
but have most recently fulfilled this passion by working for ForexFraud.com.


Ponzi schemes are proliferating in our society to such an extent these days that individual names have been assigned to each category of fraud based on the nature of each type of swindle.  One of the more shockingly evil types has been tabbed “Affinity”.  Affinity fraud entails an investment scam that preys upon members of a specific group.  Examples of these groups may be religious congregations, ethnic communities, the elderly, or even professional societies.  The swindlers frequently pretend to be a member of the group and persuade a group leader to endorse their pitches and spread the word to his faithful constituents.

When the scam unravels, law enforcement may be the last ones to be alerted since members and leaders of the group are too embarrassed to admit being duped to authorities.  Crooks know full well the human psychology traits of group thinking and how tight-knit relationships in these structures tend to be.  Since the probability of prosecution is low, the criminal element is quickly drawn to such circumstances.  However, when the word gets out, arrests can follow, as happened in these three instances.

In Miami, Luis Felipe Perez actually turned himself in to face charges for his affinity Ponzi scheme.  His investment fraud hoodwinked his fellow Hispanic community out of over $40 million.  His investors invested millions, ostensibly to be invested in his lucrative jewelry and pawn shop businesses.  In this case, the swindler used fake diamonds to allure his potential clients.  Their money was to be as safe as the jewels that were collateral behind their low-risk loans.  Mr. Perez also promised outrageous returns of as much as 10% per month, typically a tip-off of a scam, but ignored by trusting Hispanics.  According to court documents, at least $6 million went to supporting Mr. Perez’s lavish lifestyle, including a $3.2 million home, $1 million in jewelry, and exotic vacations.

Back in New York, another Affinity Ponzi scheme did its damage.  In this case, the targeted investors lived in the Caribbean and the African-American communities of Brooklyn.  Gedrey Thompson and his firm, GTF Enterprises Inc., are accused by the SEC of having raised more than $800,000 from 20 customers.  A portion of the invested funds lost money, and the balance went primarily for Mr. Thompson’s personal use.  Although the level of loss is not in the millions, the “affinity” caption is just the same.  David Rosenfeld, Associate Director of the SEC’s New York Regional Office, stated, “Thompson and his cohorts exploited members of their own community by using phony trading credentials and bogus account statements to legitimize their fraud.”

However, the “award” for the highest Affinity Ponzi scheme prosecution for the year goes to Minneapolis.  Trevor Cook recently pleaded guilty to a U.S. District Judge that he had defrauded investors out of $190 million from an elaborate Ponzi scheme involving forex trading and the use of sponsorships from a Christian broadcasting radio host named Pat Kiley.  Mr. Kiley’s radio program, “Follow the Money,” was carried on more than 200 radio stations.  Cook promised “risk-less” forex accounts as the avenue to riches and claimed to have over $4 billion under management.  A tearful Cook received a plea bargained sentence of 25 years in jail, but must assist the court in recovering whatever remaining assets can be found.  A court-appointed receiver has already begun collecting assets and implementing an approved “clawback” process to reclaim any gains that other investors may have received.  Cook’s wife is the first target.

The FBI estimates that annual losses from investment fraud are $400 billion.  Ponzi schemes continue to account for a considerable portion of these frauds, in spite of frequent news articles covering these deceits.  All investments involve risk, especially forex trading.  Fraud prevention starts with skeptical investors.  However, as long as greed trumps caution in our society, it appears that Ponzi schemes will persist.

ALL RIGHTS RESERVED: Cesar Zambrano

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U.S. Tax-Exempt Funds Aid Jewish Settlements in West Bank 06 Jul 2010 As the American government seeks to end the four-decade Jewish settlement enterprise and foster a Palestinian state in the West Bank, the American Treasury helps sustain the settlements through tax breaks on donations to support them. A New York Times examination of public records in the United States and Israel identified at least 40 American groups that have collected more than $200 million in tax-deductible gifts for Jewish settlement in the West Bank and East Jerusalem over the last decade. The money goes mostly to… legitimate expenditures under the tax law. But it has also paid for more legally questionable commodities: housing as well as guard dogs, bulletproof vests, rifle scopes and vehicles to secure outposts deep in occupied areas.

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The financial reform bill passed by the Senate last week is notable for what it has left to still be done

CONTINUED HERE

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THIS IS NO SURPRISE HERE..AJ has been warning for several months that the recovery was BS. Kiss those 401k retirement plans good by. THIS IS JUST THE BEGINNING. There is no credibility in wall street.

CONTINUED HERE

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Mid-November of last year, Ambrose Evans-Pritchard, the financial writer and blogger for the UK Telegraph, asked if $6300 is the fair value for gold? He was sure to report, not advocate. So he cited a source: Dylan Grice from Société Générale, a European financial services company.

Most economic observers missed the importance of Evans-Pritchard’s report that day. Oh, this headline should have been front page, but it was buried on his blog page. The Financial Timesalso aired Dylan Grice’s comment, but also chose to cloak it on a back page.

After all, if gold were valued at $6300, then our paper money would be worth what? Best to hide what Dylan Grice said on a blog page, my friend. You see Mr. Grice looks back into recent history to recall when France’s central bank started to convert dollars into gold in 1965. That led to the closure of the US gold window under Nixon. So Grice asks if India’s recent central bank purchase of half of the IMF’s entire offering of gold wasn’t history repeating itself?

Dylan Grice’s simple equation: the US owns 263 million ounces of gold while the Fed’s monetary base is $1.7 trillion = $6300 an ounce. This means the U.S. could restore confidence in the dollar any day it chooses. Just back its currency with gold.

But doing that would wreak havoc on Wall Street as investors flee stocks for that shiny metal, which is why gold stocks become Wall Street’s hedge against a complete collapse. A single strong sector in the stock market can carry the Dow Jones average, a relied-upon index that measures stock market performance.

Bankers detest gold because it can’t enter their fractional banking scheme. But gold does stabilize the value of paper money. And therein you have it – banksters have intentionally opted for a more volatile economy than a stable one. The remaining objective then is to leave someone else holding an empty bag. First it was devalued real estate, next will be worthless stocks in companies that can’t even service their debt, and finally, who will be left to hold the devalued or worthless paper money?

via Stocks, Bonds, Real Estate, Paper Money, Gold by Bill Sardi.

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May 04, 2007

Since MoneyWeek grew keen on it in 2004, silver – both an industrial and a precious metal – has risen from under $8 to almost $14 an ounce. And the long-term outlook remains compelling. The market is extremely tight. Sixty-five years of consumption exceeding production has “decimated world silver inventories”, says Ted Butler in Investment Rarities. With mined silver undershooting demand for the past 15 years, government stockpiles have fallen from 2.2 billion ounces in 1990 to around 300 million. Experts reckon that, by 2010, inventories will be “critically low”, says Kevin Kerr on Marketwatch.com. Moreover, it’s hard to boost production rapidly as silver is largely a by-product in other metal mines.

MORE……..

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I have been warning everyone about corporate bonds specifically because of rising default risk and rollover risk for quite some time. And indeed Corporate bonds are getting crushed. Here is a chart of Moody’s Seasoned Baa Corporate Bond Yield.

Baa Corporate Bond Yields

click on chart for sharper image

Moody’s tries to include bonds with remaining maturities as close as possible to 30 years. Moody’s drops bonds if the remaining life falls below 20 years, if the bond is susceptible to redemption, or if the rating changes.

Chart and text courtesy of St. Louis Fed and Moody’s.

Armageddon Prices Fail to Lure Buyers

Bloomberg is reporting ‘Armageddon’ Prices Fail to Lure Buyers Amid Selling

Credit markets have fallen so far that they are providing a “once in a lifetime opportunity,” and investors are still selling.

Prices of loans rated below investment grade declined to a record low 66.1 cents on the dollar, virtually guaranteeing investors get their money back, based on historical recovery rates, according to data compiled by Standard & Poor’s. Yields on corporate bonds show investors expect 5.6 percent of the market to go bust, the highest default rate since the Great Depression, according to Christopher Garman, chief executive officer of debt research firm Garman Research LLC in Orinda, California.

“There has been widespread liquidation of assets that has nothing to do with fundamentals,” said Scott D’Orsi, a partner at Boston-based Feingold O’Keeffe Capital, a hedge fund which has $1.3 billion in assets. “Investors in bank debt are being presented with a vast number of extraordinary opportunities; opportunities that I would characterize as once in a lifetime.”

About 90 percent of the market trades like high-yield, high- risk, or junk, debt, Garman said in an Oct. 3 report to clients. Prices imply a 5.6 percent default rate, the most since the record 8.4 percent in 1933, he said. Junk bonds are rated below BBB- by S&P and Baa3 at Moody’s Investors Service.

“It’s quite possible that we had priced in Armageddon,” said Robert Gahagan, head of taxable fixed-income in Mountain View, California at American Century Investment Management, which oversees $23 billion in fixed-income assets.

Once In A Lifetime Opportunity

There was indeed a once in a lifetime opportunity, with the key word being was. A quick look at the above Baa chart shows there was a once in a lifetime opportunity to sell when risk premiums for junk shrunk to insanely low levels. That opportunity occurred between 2005 and 2007. Everyone was foolishly chasing yield then, at ever ridiculous risk spreads in spite of rapidly deteriorating fundamentals in housing, commercial real estate, and the global economy.

In terms of buying corporate bonds, the Baa chart above is back where it was in 2001, essentially where it was 7 years ago. We will take a look at fundamentals in just a bit but first let’s consider performance along the yield curve.

Corporate Bond Performance Along the Yield Curve

Brett Steenbarger at Trader Feed has an interesting post Corporate Bonds: Year-to-Date Price Performance Along the Yield Curve that is well worth a look.

Corporate Bond Performance

click on chart for sharper image

Above we see year-to-date price performance for four corporate bond funds in the Vanguard family: short-term investment grade (VFSTX); intermediate-term investment grade (VFICX); long-term investment grade (VWESX); and high yield (VWEHX).

What we see is that, as the yield curve has steepened, longer-term bonds have dramatically underperformed shorter-term ones.

Even more dramatic is the way that high-yield bonds have underperformed investment grade offerings. The bonds in VWEHX are roughly the same in maturity as those in VFICX, yet it has been almost twice as weak in price performance. Safety has ruled the roost for 2008; this remains an excellent market sentiment indicator.

A Lesson In Fundamentals

Scott D’Orsi, at Feingold O’Keeffe Capital stated “There has been widespread liquidation of assets that has nothing to do with fundamentals.” I disagree. I believe there is a very valid fundamental reason for safety to be ruling the roost. Here is how I see it.

The Fundamentals

  • This was the biggest credit bubble in the history of mankind and the bust is going to be the biggest since the great depression.
  • Unemployment is rapidly rising and is nowhere near peak. I am looking for 7.5%-8.0% unemployment in 2009 and continuing higher in 2010.
  • There is a New Age of Consumer Frugality that will affect consumers’ willingness to make purchases
  • Frugality is hitting state budgets as 22 States Face Tax Shortfalls
  • It will be impossible for corporations to roll over debt at attractive prices.

Prices imply a 5.6 percent default rate, the most since the record 8.4 percent in 1933 but here is the question on my mind: Is 5.6% that so outrageous in the wake of the biggest credit bust in history?

Whether or not corporate bonds are a buy now is debatable. The highest quality corporates might be. Yet lesser quality, especially junk, might be another story altogether. And it is a considerable stretch of the imagination to state or imply anything remotely close to “This is a once in a lifetime opportunity”.

That once in a lifetime opportunity was to sell, and that opportunity is long gone.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Somehow Paulson has gone from “Our banking system is a safe and a sound one” (See You Know The Banking System Is Unsound When….) to Paulson telling Congress “That we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”

Inquiring minds may wish to consider a recap of things that have happened since Paulson made his “Our banking system is a safe and a sound one” speech.

The implications are twofold.

1) Paulson and Bernanke are liars
2) Paulson and Bernanke are incompetent

There are no other choices except “both of the above”

Shouldn’t Paulson and Bernanke have the obligation to explain how that happened, and most important what the Fed’s role and Congress’s roll in that was?

Yet somehow Congress is supposed to rush through a package that is arguably unconstitutional, because two known liars and/or incompetents say there is an urgent need to do so.

Sadly, Congress is more concerned about getting something done quickly than getting something done right. In the corporate world one would expect to see overtime hours. Here we are in a global financial emergency and Congress is concerned about getting something done before recess.

Everyone Wants A Bailout

Mortgage lenders, banks, the auto industry, home builders, broker-dealers all are asking for handouts. Today I see Paulson saying Foreign banks may get help.

In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.

Treasury Secretary Henry Paulson confirmed the change on ABC’s “This Week,” telling George Stephanopoulos that coverage of foreign-based banks is “a distinction without a difference to the American people.”

On “Fox News Sunday,” Paulson told Chris Wallace that he would resist the Democrats’ desired limits on executive compensation.

“If we design it so it’s punitive and institutions aren’t going to participate, this won’t work the way we need it to work,” Paulson said. “Let’s talk executive salaries: There have been excesses there. I agree with the American people. Pay should be for performance, not for failure. We’ve got work to do in that regard. We need to do that work. But we need this system to work. And so reforms need to come afterwards.

Participation Not Voluntary

The proposed bill virtually give the Treasury dictatorial powers, yet Paulson has the gall to say
“If we design it so it’s punitive and institutions aren’t going to participate, this won’t work the way we need it to work”!

That is yet another lie from Paulson.

Paulson resists calls for added help in bailout

It’s interesting to note that Paulson resists calls for added help in bailout.

“The credit markets are still very fragile right now and frozen,” Paulson said in an interview on NBC’s Meet the Press. “We need to deal with this and deal with it quickly.”

Paulson made the rounds of the television talk shows to stress the need for speed in getting the bailout package approved. The administration spent the weekend negotiating the details of the proposal with members of Congress with the expectation that it can be passed in the next week.

Paulson said that “it pains me tremendously to have the American taxpayer put in this position but it is better than the alternative.”

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said that what Congress was being asked to approve was the “mother of all bailouts” which Shelby said would end up costing more like $1 trillion rather than $700 billion when the costs of the government taking over mortgage giants Fannie Mae and Freddie Mac and insurance giant American International Group Inc. were added.

Mother Of All Bailouts Is Correct

Notice that Paulson does not want Congress adding anything to the bill, yet he is willing to bailout foreign banks. In return for what?

What To Do

In Bush Administration Seeks “Dictatorial Power” I noted some actions you can take. After repeating the section, I wish to add to it. First a recap.

Contact Your Senator Today!

It’s time to contact your senator. Here is contact information for Senators of the 110th Congress.

Phone or Email your Senators today. Tell them in your own words

  • Urge your senator to Filibuster any bailout legislation.
  • Emphatically state you do not want a bailout of any kind for anyone.
  • No Dictatorial power for Paulson or Bernanke
  • Taxpayers should not have to bail out banks making bad loans
  • Tell them that “The Fed” and Paulson are systemic risk”.

Email AND Phone Senators Shelby, Bunning, Kyle, Ensign, Hagel

Whether Senator Shelby is your Senator or not, flood him with calls and emails asking for a filibuster and to stop the insanity. Senators Shelby, Bunning, Ensign, and Kyle might be sympathetic to the cause, based on past statements. I am taking a stab at Hagel.

Ask For A Filibuster

Please email and phone the following. Specifically ask for a filibuster and tell them to vote no to any bailout.Tell them that anyone who votes for this bailout will never get your vote again.

 

Shelby, Richard C.- (R – AL)
110 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-5744
E-mail: senator@shelby.senate.gov

Bunning, Jim- (R – KY)
316 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4343
Web Form: http://bunning.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm

Kyl, Jon- (R – AZ)
730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4521
Web Form: kyl.senate.gov/contact.cfm

Ensign, John- (R – NV)
Washington D.C. Office
119 Russell Senate Building
Washington, D.C. 20510
Phone: (202) 224-6244
Fax: (202) 228-2193
Web Form: ensign.senate.gov/forms/email_form.cfm

Hagel, Chuck (R – NE)
248 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4224
Web Form: hagel.senate.gov/public/index.cfm?FuseAction=Contact.Home

Please email and phone both of your senators as well.

Once Is Not Enough

I want to emphasize that once is not enough. Here is what to do.

  • Flood the senators with emails and phone calls.Tell them in no uncertain terms that if they vote for this bailout they will not get your vote, ever again.
  • Send an email or call every day, preferably both.
  • Put each message in your own words.
  • Make the phone message sort and sweet.
  • Use one of the following verbs: concerned, frightened, scared, afraid, mad rush to action
  • Use one of the following themes: US dollar, unconstitutional, national debt, how do we pay for this?, printing money, lies, etc
  • Vary each message so they do not all sound alike

Send this post to 5 or 10 of your friends and have them do the same. Do it now, while you are thinking about it. 

I must be honest and state that this action is highly unlikely to work. However. It is the only shot we have.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

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The Treasury Secretary’s mortgage “RTC” plan produced a short-covering rally today. At the closing bell, the Dow soared 368 points, closing at 11,388, while the Nasdaq jumped 74 points, closing at 2,273. The S&P 500 closed 48 points higher, closing at 1,254. Oil closed $6.67 higher at $104.55 per barrel, and gold closed $32.30 lower at $864.70 an ounce.
Treasury Secretary Paulson and Fed Chairman Bernanke met with congressional leaders last night to propose an RTC entity to purchase bad debt from banking and financial firms. The entity, to be approved by Congress, would be funded initially by $500 billion. Congressional leaders approved Paulson’s plan to stop a global meltdown.

Will it work? How much will it cost? No one knows.

The SEC has banned all short selling (except for market makers) for 799 financial stocks.

Everything that is happening today (Bear Sterns, Fannie & Freddie, IndyMac Bank, Lehman Brothers, AIG) is a symptom of the real problem, which is the enormous level of defaulting debt. There is $596 trillion in derivatives debt, over $2.5 trillion in credit card debt, and $58 trillion in credit default swaps.

All of this debt is still hanging over the global financial system. The housing market is still in a downward spiral, with mortgage defaults adding to the problem everyday.

You should be 100 percent cash.

Don’t be surprised if the market moves back down to test the recent lows.
The next Hotline Update will be on Tuesday, September 23, 2008, at 6:00 p.m. EST.

 

 

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