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Stay Out of the Water

By Bill Bonner

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07/03/09 London, England

This week began with shrieks of joy. First, a federal court came down on Bernie Madoff like a brick on a baldhead. Madoff, convicted of lying to investors, drew a sentence that only a sea turtle or a swamp oak could complete. Then, like children playing in the sea, investors were teased by one wave of good news…and tickled by the next.

Bloomberg reported that “Wall Street’s largest bond-trading firms say the worst may be over for investors…” Then, General Electric’s CEO, Jeffrey Immelt and famous investor George Soros both said that the crisis is “behind us” and that growth will begin again next year. Finally, analyst John Dorfman opined that the stock market would be a safe place for their money at least through the end of the year.

And now comes the big American holiday – July 4th. Investors pack their suntan lotions and head off to the beach for Independence Day. With Jaws in a cage, they had judged it safe to go into the water. But then came Thursday’s news. Instead of going down as predicted, the number of job losses for June went up. Another 467,000 people became unemployed last month. The figure even surprised us; we didn’t think there were that many people who still had jobs.

And so…this weekend, investors walk along the beach deep in thought. Is it safe to go back into the water…or not? They should listen carefully. That gurgling sound they hear is not mermaids singing, it is the world economy, drowning.

As we reported in this space, the feds’ bailouts,
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Nothing Rare About Chinese Rare Earths

By The Mogambo Guru

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07/03/09 Tampa Bay, Florida

The Washington Times reports, “U.S.’s Debtor Status Worsens Dramatically”, which I initially thought referred to a recent shopping trip made by my family, but which was not, as I deduced from the subhead “Foreigners hold 50 percent”, which wouldn’t make sense in a story where the central theme was the heartrending tale of “Man sits on curb crying his eyes out because a spendthrift wife and kids spend him into the poorhouse, whereupon he realizes in a flash of enlightenment that he will never get ahead, no matter how much he works, and he is re-evaluating his life and concluding, ‘What’s the freaking point, ya know what I mean?’”

Instead of this pathetic human-interest story, the Times reports that they come to this ugly “U.S.’s Debtor Status Worsens Dramatically” conclusion because the Commerce Department reported that “At the end of 2008, America’s net international investment position was minus $3.47 trillion. That represents the difference between the value of U.S. assets owned by foreigners ($23.36 trillion) and the value of foreign assets owned by Americans ($19.89 trillion).”

The net result is that “At the end of 2007, the U.S. net international investment position was minus $2.14 trillion. Thus, America’s net indebtedness with the rest of the world increased by $1.33 trillion, or 62 percent, during 2008”, which was, they say, “by far the biggest annual increase in data that go back to 1976.”

Well, I got a Hot Mogambo Bulletin (HMB) for these Times fellas, because during that same time the national
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A Jobs Jamboree Debacle

By Chuck Butler

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07/03/09 St. Louis, Missouri

The stock market is closed today, so I have to wonder why banks are open… But, they are, so we carry on… There’s lots of talk about regarding the Jobs Jamboree that printed yesterday, so let’s get this started!

Well, well, well, what do we have here? It certainly looks like all those sounding the “all clear horn” have some egg on their collective faces this morning, eh? The egg thrower is the Jobs Jamboree that took place yesterday… Recall that I told you about how the forecasters had job losses pinned at -365,000? Well, the Bureau of Labor Statistics (BLS) reported job losses to be -467,000, which is far worse than that rose-colored glasses -365,000… But wait! If you act now, we’ll double the order! OK, I’m just having some fun with infomercials… But what I’m getting at is the fact that the BLS was at it again, folks! The BLS added 185,000 jobs to that -467,000! Again… The BLS seems to believe that there are businesses starting up in the depths of a recession that would amount to 185,000 new jobs being created! Really? Come on… Of that 185,000 jobs the BLS added, 31,000 were allocated to Construction Jobs… Which may or may not have happened, but wouldn’t it be better to wait-n-see, without affecting the markets this way?

OK… So… The “actual” real number was -652,000… I say that because, at sometime in the dark of night, when no one is paying attention, the BLS will make an adjustment to the overall unemployed number, and take all these jobs they created out of thin air, and remove them from the overall
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