The Gleason Report May 2009
All stock asset classes advanced strongly in April. They recovered much of their previous year to date losses but are still down for the year. Reits were down -32% a month ago and the S&P500 was down 11%. The gains came from expectations of the recession ending this year.
The TGR stock model remains out of equities and rates the S&P500 as very over-priced. It’s very possible for the general economy to improve and for stocks to remain a poor value.
The TGR bond model is out of long bonds. Short term bonds and other issues with very short durations are acceptable.
Gold is marking time.
It will be interesting to see how this plays out during 2009 with my stock model being contrary to the swelling optimism among investors.
NOTE: This version of the newsletter is for indexing purposes and omits the graphics and formatting. To read this document properly go to the formatted newsletter.
Earnings Caution
I warned subscribers in early April to be wary of the rising stock market and promised to explain what was really going on.
The stock market is reacting to two things. First, the Leading Indicators have stopped falling. Second, investors perceive a rise in corporate earnings based on future Operating Earnings estimates.
When Wall Street touts earnings, they’re always talking about Operating Earnings and not Reported Earnings. The difference can be day and night. Reported Earnings is what accountants look at under GAAP – Generally Accepted Accounting Principles. Operating Earnings is an adjusted earnings number they say better represents their true business activity – with broad discretion to put the firm in the best light. For example, if Cheatem Corp pays $25 million in severance pay to 5000 laid off workers, they may call that expense a one-time cost. So, they’ll add it back to Reported Earnings to get Operating Earnings because it won’t happen again. Next year they’ll add back the cost of closing a division because it won’t happen again. You get it.
Operating Earnings normally runs about 10-15%higher than Reported Earnings because that’s the average of footnote amounts on the annual reports. In 2001 and 2002 the market was dropping like a stone yet Operating Earnings wasn’t doing that bad. If one bothered to look, you’d have seen that Operating Earnings was 56% higher than Reported Earnings in 2001 and 70% higher in 2002 – a tremendous disparity. They were doctoring their public earnings announcements and adding back charges in order to deceive people. It was fraud to keep the average Joe/Jane in the market. Wall Street told people to keep buying stocks.
After the 2001 crash, Standard & Poors, which tracks earnings for the S&P500 index, was embarrassed by criticism of Wall Street’s phony earnings numbers. They came up with a new measure called Core Earnings. It backed out the most egregious of Wall Street’s duplicities. S&P still publishes Core Earnings but nobody cites it anymore.
Look at the chart I’ve provided that compares Operating Earnings to Reported Earnings. The numbers prior to 2009 are actual earnings and 2009 and 2010 are estimates. What is going on here?
How can the blue Operating Earnings estimates be over twice the red Reported Earnings? Is Wall Street engaged in fraud again?
This time the federal government is helping them. Wall Street is again touting distorted numbers but with the blessing of Washington. The objective is the same as 2001 – get Joe and Jane to believe things are better than they are so they put money into the stock market. How are they scamming the numbers this time?
The IRS has passed rules that reduce taxes on corporations in a massive Treasury benefit to Wall Street says Time Magazine. In short, the rising Operating Earnings represents a tax giveaway. Corporations are getting huge tax credits for Mergers, Investment Losses, Foreign Operations, TARP freebies, and Chargeback Losses. The relief is so generous some firms will pay lower taxes for 20 years. I suspect firms are adding back the amounts to their bottom line earnings estimates.
Fortunately, we’re not totally in the dark as to real earnings. Reported Earnings still shows the income reported under GAAP standards. Firms can puff their Operating Earnings but they can’t hide the true earnings they receive from doing real business and that’s what you must pay attention to.
Based on Operating Earnings, the PE ratio of the S&P500 is 14.5 – that’s cheap. Using Reported Earnings it’s 28 – that’s crazy high. The historical average is around 17. Investors are falling for the same lies they did in 2001.
Here’s reality: S&P500 estimated Reported Earnings for the year ahead are not going up. There is no earnings recovery yet. Stock prices are far ahead of reality. This market is not cheap and you should stay out.
Many firms would have to lay off workers and close unprofitable operations without the gift of tax cuts from the Treasury. Some would go broke. Pension funds are already in big trouble and some would be insolvent if stocks prices remain low. The financial situation of America is terrible and they’re trying to prop it up while they spend trillions of deficit dollars and print money to resuscitate the consumer economy.
Why is the Treasury allowing this to happen? Washington feels the economy can’t absorb the full shock of the debt contraction. It must be managed downward because there’s a risk of a financial market collapse and all the social problems that go with it.
The spending is having the desired effect. The leading economic indicators (LEI) are no longer going down like before and many commentators say the market lows are in. How could things not improve with multi trillion dollar deficits? I’d be very cautious when you see tricks and destructive transfers of the public’s money. It’s not a good sign. It seems like the way out of recession for Washington is illusion based on money printing and giveaways to the super rich.
Debt and reckless spending is not the answer but it’s all they know. The system needs time to adjust. That means accepting distortions while managing the economy into a lower growth orbit.
Influenza and the Markets
World markets are jittery over the prospect of a flu pandemic from the circulating swine influenza. President Obama says there’s no reason for panic and he’s right. This swine virus is an H1N1 variety and won’t wipe out humanity. It could be the precursor though to a hybrid virus. It could pick up and shed several genes and morph into something quite lethal. TGR has warned in the past that an avian influenza pandemic is likely and it would disrupt financial markets. How bad could it get? If we get an H5N1 variation or something of similar virulence it could kill 50% or more of those infected.
I’ve been tracking this story for several years. I have a three month supply of food and medicine at home and have consistently recommended the same to subscribers. It’s just good common sense to have provisions for whatever might happen. Get supplied now. When you most need it, the store shelves will be cleaned out in days. Get in the habit of using and rotating your stock – it costs very little to prepare ahead of time.
Visit Mormon web sites for information on planning a survival pantry and the US government site at: http://www.ready.gov/america/npm09/makeaplan.html. You can buy 50lb bags of rice and beans at Costco and many Mexican style markets. They last for years in plastic storage containers.
Did you know that there’s only a three day supply of food in the wholesale channel? At the first sign of a lethal flu pandemic people will panic and buy it all up. They’ll buy 10 jars of peanut butter rather than one. They’ll rush down the aisles with two carts and buy anything to store it in their garage. In a panic and fear situation, behavior becomes unpredictable.
There’s a panic of sorts now with guns and ammunition. It’s been difficult to buy popular handgun calibers at any store in America for the last six months. The factories are working overtime. Prices have gone up 40%. Many shooters fear tougher gun laws under Obama but it’s more than that.
What’s going on? There’s an expanding subliminal fear permeating society and a growing mistrust of the government’s ability to manage things. This fear is not irrational and has relevance to another topic I’ll discuss later in this report.
Back in the real world, it’s not a bad idea to stockpile some N95 masks or respirators. Betty Mills Company sells a box of 10 masks for $16.29 and they have an exhalation port which makes wearing it more comfortable. Wal-Mart sells basic masks too. You’ll need a mask to go out in public after a serious virus hits. Surgical masks may not work. Sick people become infected with secondary diseases so buy the best protection you can get. Above all, protect yourself and isolate your family if things get bad.
Get info straight from the CDC and don’t rely on the evening news or believe wild rumors. You need good information on personal safety.
At the first sign of a cross-border, H5N1 human transmittable virus, sell all stocks and bonds. There may not be many buyers left for your GE shares.
Strategic Failures with Big Consequences
The Gleason Report has unequivocally stated from 2004 to the present that the Global War on Terror and the Iraq War were energy wars and had little to do with terrorism. This was a very unpopular position early on but is now largely accepted by many people. The imminent threats of terrorism and weapons of mass destruction (WMD) were not true. The intent was to deceive the public into supporting the government’s war agenda. There were no weapons of mass destruction in Iraq and the wars had little to do with fighting global terrorism.
The wars were about securing huge foreign oil reserves for America’s corporations. They wanted economic access to Iraq and the profits from building out the oil infrastructure. Iraq wouldn’t let them in. Furthermore, Iraq defied Washington’s Middle East strategy by accepting payment for oil with Euros instead of dollars. It was oil and not WMD that was at the root of the war.
Likewise, Iran was a problem on more than one level. They also accepted Euros for oil and this threatened petrodollar dominance. Iran has ambitions for a Persian empire to dominate the Middle East. Washington planned to break Iran by fomenting a revolution.
Control of Afghanistan was needed so gas could be routed from the Caspian Sea via pipelines to the south rather than let Russia control it.
These facts are not seriously questioned anymore by scholars and are increasingly accepted as the truth by American society.
The TGR Position Hasn’t Wavered
TGR was early in deciphering the real reasons for the wars and in making the facts known. It wasn’t difficult. The wars were illogical if based on the almost non-existent evidence of Iraqi WMD. Since I understood Peak Oil Theory and also knew that Iran and Iraq together possessed about 20% of the world’s remaining oil reserves, I formed my own theory and published it for my subscribers.
The important fact readers must understand is that the wars had their genesis in the attacks on the World Trade Center buildings in September 2001. The public rage at this event only needed an outlet. The Bush administration focused the anger on Iraq.
There was never any true threat from Iraq to justify an invasion. They created a threat. Bush claimed Saddam was connected to 9/11. The public was ready to believe anything after 9/11 and the response exceeded expectations. It gave the green light to the wars.
After 2001, the Bush administration doubled the US national debt from $5 trillion to $10 trillion in only eight years. TGR foresaw the financial consequences of the wars immediately. The spending boom led to a surging stock market and TGR jumped on in early 2003.
The Present
As we look around at the economic rubble that used to be our economy, it’s clear that America has been badly managed and is a nation on the edge. Let’s briefly list what has happened and what is coming.
The stage is set. Considering our banks, our low savings rate and the unwillingness of other nations to buy our bonds, and the blatant money printing, a reasonable person would conclude that America is bankrupt.
President Obama wants to increase the national debt to $20 trillion. This level of spending will certainly juice up the economy but may lead to worse outcomes in the future. Success would hopefully mean a new America but, near term, we won’t have a normal and healthy economic recovery. It’s critical to think beyond short term market action and understand the structural changes needed to transition the economy in an era of more expensive energy and resources.
Financial Implications
Let’s talk personal finance. The wind- down in the Iraq war and olive branches to Iran, Cuba and Venezuela mean the Bush war/oil agenda and intimidation politics have failed. These three nations each has large oil reserves or controls offshore oil potential. The economics of oil is causing a political turn. America’s relations with Israel are cooling and the natural course of political evolution in the Middle East will resume.
The government’s decision to monetize debt (print money) means it can no longer sell all of it overseas. The Chinese are using their dollar hoard to buy vast amounts of commodities. The US, without the ability to issue increasing amounts of debt, will have to contract its military. We’re already seeing this in the cancellation of large defense programs. The Saudis may look around for a backup protector – perhaps China.
Our spending and bailout policies place this nation on a collision course with insolvency. It’s foolish to believe the government can resuscitate the borrow-and-spend economy. Yes, the economy is no longer sinking like a rock but the debt expansion will have severe consequences. Longer term, it’s not going back to the way it was.
The American style capitalist system has broken down globally. It’s dead. The massive spending and debt programs are the flies and maggots swarming the corpse. Observers predicting a resuscitation of the old ways are wrong. A systemic breakdown doesn’t lead to repair and a return to health. It leads to a rebirth. The steps are fragmentation, reformation and finally initiation of a new global model. This process will take a long time. Park some liquid assets in things of true value during the evolution. Own a house, own gold, own a business to generate income, own skills and things of universal value.
America has far too many banks and too much retail. Perhaps 25% of the S&P500 won’t be around in ten years – bankrupt or merged away. People who continue to follow the olds songs Wall Street’s Pied Pipers will lose purchasing power over the next decade. There will be opportunities for hit and run profits in stocks and bonds but buy and hold forever won’t be a good idea.
An investor could place some assets into liquid foreign currencies and certainly gold to mitigate risk. This is preferable to having all your cash in US treasury bills. My gold model indicates the precious metals remain a timely investment. Another option is the fund MERKX which invests in currencies of countries with better financial policies (www.merkfunds.com). It’s like a global money market fund with a gold kicker. There’s also currency ETFs like FXE, FXA, etc. This diversification idea isn’t about making money but about protecting some capital from a possible large decline in the dollar’s purchasing power.
I’m avoiding the US stock market at this time. My stock model shows the level of over-valuation is high with the S&P500 at 860 (April 2009). The public is drawn to rising markets. I can’t explain why any competent investor would buy the S&P500 with the PE ratio already in the stratosphere. I’ll regularly update my market perspective for subscribers and will advise you when it’s safe to get into stocks.
These are dangerous times for investors. Our economy is contracting because it ran out of fuel for growth and it will keep falling under its own weight until it reaches a point of sustainable equilibrium. By the government’s own admission, they’re holding down interest rates by buying their own bonds with funny money. We have no idea where all the money printing is going. Monetization is the smoking gun of financial manipulation.
The Black Swan of Truth
Once he has amassed a large body of evidence and deduced a number of possible explanations, Holmes proceeds to find the one explanation that fits all the facts of the case to produce a solution. As Holmes explains to Watson, "When you have eliminated the impossible, whatever remains, however improbable, must be the truth." – A. Conan Doyle on his character, Sherlock Holmes
Sherlock Holmes used what we today call the “scientific method”. Since 2004 the Gleason Report has published this monthly financial newsletter discussing financial market timing and geopolitical events that influence financial events. My approach is similar. I gather facts proven to correlate with early market cycle moves and ignore the short term emotional volatility bounces.
TGR market timing models avoided the 2001-2002 bear market, caught the bull market move in early 2003 and exited the stock market in early 2008 and thus avoided the 50% decline that followed. The timing models have consistently outperformed buy and hold. I’ve never been afraid to take unpopular positions. The truth is not a path for cowards.
TGR understands that political events and stock market events are not disassociated. My goal is to be ahead of the markets by using logic and mathematical models to predict the market’s direction.
Many outcomes are predictable if you have enough inputs to form a theory. That’s because events that can be modeled usually lie within two standard deviations of the average. This is represented by the famous Bell Curve shown below. Rarer outcomes reside in the blue at the edges. At the extremes we have the outliers, events that are unpredictable or very hard to place into a model.
A Black Swan is a term used to refer to a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations. It refers only to events of large consequence and their dominant role in history. The occurrence of a rare Black Swan means the seemingly impossible has happened. Economist John Stuart Mill first used the Black Swan narrative to discuss falsification and that has relevance to what follows in this report. A black swan was considered impossible since everyone knew they were white. That is, until black swans were discovered in Australia.
TGR believes a Black Swan event could hit the US if two current issues merge in the public consciousness.
A significant percentage of the nation’s population believes that the 9/11 attack in New York was suspicious. New scientific evidence released this month supports the view that the attacks of 9/11 were an ‘inside job”. Solid evidence of explosives as the cause for the twin tower collapse has surfaced. This will accelerate suspicion of the government and could undermine political confidence in the nation’s leadership structure and lead to a political transformation.
The ongoing financial disasters have caused an enormous loss of middle class wealth. This undermines financial confidence in America’s capitalist system and, if prolonged, could lead to a changed economic system.
A convergence of financial turmoil and 9/11 revelations could cause a broad breakdown in public trust of government and markets. The US government could fall or lose the ability to govern. That’s unthinkable but not impossible.
A prolonged economic recession provides a gestation environment for a critical linkage to form.
The linkage has 3 steps:
Point #1 is at least 70% accomplished. Point #2 is above 30%. A shift is occurring to #3.
A Black Swan is Circling the White House.
Let’s consider, what would it take for a Black Swan event to occur. The public would need to link the financial failures to a moral crisis resulting in a loss of faith in those who lead this country. The moral crisis is 9/11.
crashing airplanes. The evidence, if not scientifically refuted, indicates that the collapse was done with explosives. In particular, it shows that thermite explosives were present.
A scientific paper published on April 5, 2009 in a peer reviewed science journal says that large volumes of nano thermite explosive were in the twin tower debris.
Here’s the link to the paper published in the Open Chemical Physics Journal in April 2009. Active Thermitic Material Discovered in Dust from the 9/11 World Trade Center Catastrophe (http://www.bentham-open.org/pages/content.php?TOCPJ/2009/00000002/00000001/7TOCPJ.SGM)
Regular thermite is a pyrotechnic composition of a metal powder and a metal oxide. It is man- made and not naturally occurring. It burns very fast and very hot. Thermite is used in welding and fireworks and is used to cut steel.
Nano Thermite (super thermite) means the particles approach atomic in size. This is a high tech explosive. It is illegal to manufacture it or to own it. It is for military use and has no other application. Al Qaeda doesn’t have it and it wasn’t on the airplanes. It was first documented at the Los Alamos lab in 1999. It burns 300 times faster than normal thermite and quickly melts steel. It can be sprayed onto surfaces or shaped and when ignited reacts explosively with a tremendous destructive force.
The authors state:
The collapses of the three tallest WTC buildings were remarkable for their completeness, their near free-fall speed [11] their striking radial symmetry [1, 12] and the surprisingly large volume of fine toxic dust [13] that was generated. In order to better understand these features of the destruction, the authors initiated an examination of this dust.
The Paper Concludes:
Based on these observations, we conclude that the red layer of the red/gray chips we have discovered in the WTC dust is active, unreacted thermitic material, incorporating nanotechnology, and is a highly energetic pyrotechnic or explosive material. – Source: Open Chemical Physics Journal
How much nano thermite was originally present? According to the scientists, over 10 tons of thermite and possibly much more.
A Reasonable Person Must at Least Consider the Demolition Evidence
The evidence for demolition is there. This isn’t conspiracy crazy talk – it’s science. Let’s briefly list the evidence for demolition presented by people who don’t accept the official story.
Consider these points and the then view the videos provided below.
Here are a few short videos that explain things in plain language.
Architect Richard Gage explains the facts of the WTC destruction in this 20 minute video.
http://www.ae911truth.org/omnitv_interview.htm
A seven minute video by a physicist explains freefall. He states that the government explanation is impossible. (Note: You may have a slow time connecting to these videos due to heavy access.)
WTC 7 was a controlled demolition and the building fell at freefall speed – a physical impossibility except under demolition conditions. (http://www.youtube.com/watch?v=Vz43hcKYBm4&feature=related)
The science article published in the Open Physics Journal is not a conspiracy theory rant. It is a scholarly report published by eight scientific experts. It is peer reviewed. That means the journal editor selects other experts unknown to the authors to review the science and approve it prior to publication.
This paper delivers evidence that on 9/11 explosives brought down the buildings. If true, it raises implications that are horrifying. It forces us to ask: Why was nano thermite in the WTC buildings and how did it get there?
This 10 minute video with Niels Harrit is important. He is one of the report authors and here talks on Danish television. http://www.youtube.com/watch?v=8_tf25lx_3o
Alternative video site: http://agenda911.dk/article.php?story=nanothermite_tv2news
Thousands of Americans died on 9/11. Thousands more died in the Iraq and Afghan wars. Many people will develop illnesses from exposure to asbestos and toxins in the WTC dust. Over a million people have died in the Bush/Cheney wars since 2003.
Implications if the Report is Correct
Consider the Risks
The US Government has diminished credibility because of the wars and our financial problems. Let’s look at the implications.
Let’s discuss the financial system. The dollar reserve currency system is under assault. The American public views the banking bailouts as giveaways to the rich and the well connected. The US stock market is selling at a PE of 28 based on reported earnings – a level not seen since the pre-crash year of 1999. In addition, according to an April report from Credit Suisse, the wealthy and large institutions are buying gold at a rate four times that of 2008. The main generators of American prosperity are failing. Unemployment is rising, house prices are falling, stock markets are down over 40% since 2007 and the banks are broke. Massive government deficit spending will improve economic conditions in the short term but how long will it last and how will our foreign creditors respond?
Let’s discuss the social environment: Fringe groups are expanding in America. Anger is growing towards immigrants and taxation. We have Minutemen and Tea Parties. Mistrust in congress is very high and there’s a pervasive animosity towards Wall Street. People are buying lots of guns. Homeland Security head Janet Napolitano issued warnings to state police departments to watch out for potential troublemakers like Iraq veterans, people strongly opposed to illegal immigration, abortion or other single issues, and citizens who quote the constitution or who have Ron Paul bumper stickers. Hey Janet, you’re talking about most of America!
The Patriot Act and various legislations allow the government to circumvent the constitution and imprison people without trials, label dissenters as terrorists and spy on the public to gather evidence of terrorist activity – whatever than now means. Regular army units have been assigned to domestic security. Something is up. It has become increasingly clear that it’s not terrorists but “we the people” the government fears.
The Soviet Experience
If public confidence in the leadership falters along with more damage to the financial markets, then the US government could experience a crisis and a subsequent diminished ability to govern. It happened once before when a Black Swan landed in the Soviet Union. In that case, severe financial problems merged with the loss of Eastern Bloc nations causing a loss of confidence in the Soviet system.
In 1985 Mikhail Gorbachev was a new type of leader for Russia and a reformer. Faced with economic stagnation and corruption, he tried to change the nation’s centralized power structure and planned economy. He opened channels to the West. The changes he started released the nation’s coiled energy. The Berlin Wall fell in the late 80’s after Moscow loosened its control over its satellite nations like East Germany and Ukraine. In 1991 the Soviet government fell. It surprised the world. To change the country, its institutions had to first collapse and then rebuild.
Barrack Obama is trying to repair America’s relations with Iran and move the nation away from the Bush-Cheney requirement of a single superpower. He’s investigating Bush era torture and talking of prosecuting criminal actions of Bush’s subordinates. In effect, we’re seeing a moderation of the prior management model. This is at odds with the aggressive military-industrial agenda that has characterized American foreign policy.
There was a reason for the excess and madness of the Bush-Cheney regime. It was necessary to overpower weak nations possessing oil reserves in the Middle East before they could politically align themselves or link to China. Without cheap oil, America’s growth rate would falter. Aggression maintained control.
What will happen if Obama’s financial plan fails or there’s a sudden exposé from insiders about 9/11? Washington could suffer a catastrophic loss of control. Could we experience a sudden financial collapse or large scale political dissent?
Only in the rear view mirror was the festering rot and corruption in Gorbachev’s Russia the obvious cause of its collapse. Is it much different today in America where for twenty five years rampant debt and political malfeasance has permeated our society? The deceitful wars, the corruption of congress and the sequential financial market collapses are symptoms of serious and perhaps fatal problems.
The Black Swan is public opinion of 9/11 linking with financial fears and finding someone to blame it on. If our economy crosses the Swan’s path while in a weakened state, Obama may be the last elected president of the United States.
The Political Problem
President Obama is walking an economic tightrope while trying to balance his actions for the greater good. Hopefully, he understands the fate of Mikail Gorbachov, a man who also inherited a government in deep trouble and sought a better society.
Obama’s need to reform America may be outrun by economic and social forces. At some point, the public mood could get ahead of his ability to shape events and he will appear weak and reactive.
He could try to refute the accuracy of the thermite scientific paper. There’s plenty of angry debunkers on the Internet blogs ready to attack anyone who presents unsettling facts. Trouble is, maybe it’s good science and quite true – then what. Obama’s policy makers better keep a close watch on public opinion regarding 9/11.
We can’t dismiss the stories we hear from the 9/11 Truth Movement and sometimes even the press. For example:
Former Italian President Francesco Cossiga, who revealed the existence of Operation Gladio, has told Italy’s oldest and most widely read newspaper that the 9-11 terrorist attacks were run by the CIA and Mossad, and that this was common knowledge among global intelligence agencies.
Cossiga’s tendency to be outspoken upset the Italian political establishment, and he was forced to resign after revealing the existence of, and his part in setting up, Operation Gladio. This was a rogue intelligence network under NATO auspices that carried out bombings across Europe in the 1960s, 1970s and ’80s. Gladio’s specialty was to carry out what they termed “false flag” operations — terror attacks that were blamed on their domestic and geopolitical opposition.
In March 2001, Gladio agent Vincenzo Vinciguerra stated, in sworn testimony, “You had to attack civilians, the people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple: to force … the public to turn to the state to ask for greater security.”
– Source: http://www.americanfreepress.net/html/9-11_solved118.html
The CIA and Mossad are common targets but this is coming from a former head of state. If president Cossiga is accurate and truthful about foreign governments knowing it was an inside job, then the thermite story might become a real problem. What if a foreign government officially breaks with Washington on 9/11? Does Obama push back on the story or get ahead of it?
If nano-thermite brought down the buildings on 9/11 then delaying justice will only make things worse. If the US government is innocent then it needs to act quickly to refute the story and offer a plausible and honest explanation.
Consciousness Resistance
Political strategists state that the government must act on a growing issue once 40% of population believes it to be true. As of late 2007 according to two polls, about 30% of Americans said they didn’t believe the official story on 9/11. (http://www.slate.com/id/2215703/). A 2007 Zogby poll had 51% stating that George Bush and Dick Cheney should be investigated for the 9/11 attacks. – (Source: http://www.911truth.org/article.php?story=20070906103632686 )
I’ve been tracking the penetration of the thermite story within the US media and abroad since the science paper was published in early April 2009. It has been very slow moving. There has been no mention of it in the mainstream press (as of 4/30/2009) but it is spreading slowly on alternative news sites and the internet. The story could take longer to pop than you might think.
I’ve performed selective tests on well educated people including an engineer and an architect and have found an extreme reluctance to even look at the disconcerting facts. People will get quiet, or angry or they’ll accuse me of spreading conspiracy theories but they won’t look at the science article or read the facts. It’s amazing!
The American public doesn’t like to hear these sort of things. The typical response is a blank-faced numbness and a desire to dismiss what has been reported.
The broad population has a stupefying willingness to believe advertisements, politicians, and distorted news delivered by ‘experts’. Americans are conditioned to take truth by the spoonful; i.e. the sound bite. For this reason, I can’t predict a timeline for the 9/11 story to gel. People don’t talk about it and it’s hard to gauge public discontent. Things could change very quickly under the right circumstances. I have to believe scientists and intelligent skeptics will find it hard to explain military thermite.
The question many ask is how could the government keep a 9/11 conspiracy secret. Someone would surely talk or leak a story to the press. Maybe they have talked. One commentator said, “Until the public is ready, perhaps it’s best to appear skeptical, build sources, cooperate with like-minded reporters and closely watch events. Wait for the correct social and economic conditions to have a mass media epiphany”.
It’s conceivable that a confluence of economic and political events could cause a financial panic in America if the government appears to be faltering under a foreign crisis or domestic discord. Insiders could suddenly come forward with revelations and create a crisis. Foreign nations may take advantage of chaos within America. Chaos is possible if public discovery and anger over 9/11 coincides with a vulnerable point in the financial reconstruction. The unexpected will occur.
Can It Be True?
I’m sure to take some flak for writing about 9/11 and the markets but I can’t ignore the facts and the implications for investments.
The scientific evidence has shifted the burden of proof onto the government. I’m still open to an updated official explanation on 9/11 - and waiting. It’s not crazy to discuss demolition as the cause for the collapse of the three World Trade Center buildings. It correlates with the observed effects. What’s crazy is ignoring the laws of physics and the direct evidence of explosives. Rather than react with anger at the bearer of news, readers should look at the facts dispassionately and objectively and educate themselves. There are several websites with good science. I’d start with www.ae911truth.org.
I challenge you to explain the 47 story WTC 7 building collapse. That’s what I tried to do five years ago. It looked like a controlled demolition to me. It fell five hours after the twin towers, onto its footprint and at freefall speed. It’s impossible for small fires to cause the instantaneous collapse of a modern building with massive concrete and steel columns. It’s not possible to wire a building for demolition in five hours. That means it was done on a prior day. Even the government can’t explain it. You can’t attack the dissenters and omit WTC 7 from the discussion.
I suspect America is in the grip of a myth – a powerful social phenomenon.
We’ve become brainwashed by a fairy tale – a desire to believe a story because it makes us feel better. People who doubt the myth whisper their doubts. I’m not whispering. Having examined the 9/11 evidence, I say the official story doesn’t add up.
Most people are conformists and don’t rock the boat. That’s a great attitude for getting along in the office. It’s deadly in the investment world. The crowd is always wrong at market turning points. The crowd is always surprised by events out of the ordinary. The change factors leading to revolutionary social and economic events leave a trail. The clues to the new trend are always there when you look backwards.
9/11 was the event that started America onto the path of war, reckless deficits, a stock boom, a housing boom and all the subsequent crashes. The new facts of 9/11 are important because of our precarious financial situation. A wise investor will evaluate the evidence and decide for themselves if there’s a potential for economic and social disruption.
A faltering economy and falling living standards is a breeding ground for discontent. If anger is externalized, it could force major social and economic changes. All it would take is a startling disclosure forging the link of blame in the public’s mind. If that happens, it could greatly impact your finances. Barrack Obama is proof we’re at a turning point in American politics and he’s open to revolutionary changes.
I started this article with a quote from author A. Conan Doyle. I’ll close with a quote from an early twentieth century American newspaperman.
"The truth, indeed, is something that mankind, for some mysterious reason, instinctively dislikes. Every man who tries to tell it is unpopular, and even when, by the sheer strength of his case, he prevails, he is put down as a scoundrel." - H.L. Mencken
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Summary
The government’s economic policy actions including massive spending are lifting the economy. By the end of this year, we’ll be out of a technical recession. A depression is not a likely outcome at this point. There are huge consequences though to the massive expansion of debt they’re taking on.
Just as George Bush spent us out of the 2001 recession, it will probably work again for a short while. This time, I’m not seeing a recovery in real earnings like in 2003. So, measures of the economy may improve but stock valuations are not good.
The economy is politicized and it’s evident that the powers of Wall Street are setting the tune for Washington. Doubling the national debt yet again will not be a successful strategy. This time they’re giving tax dollars directly to corporations and have abandoned any semblance of good fiscal management. Finance makes up about 40% of the US economy and should probably be half that. The banks are receiving TARP cash infusions and calling it profit thus distorting the earnings picture even more.
The debt buildup will now accelerate and set the stage for an even larger crash. It’s as if our government has turned away from balance and good governance. All they understand is the election cycle.
We have an aging America where demographic shifts make people less likely to allocate high percentages of their money to the stock market. Still, many will be drawn in despite their sense that something is very wrong with the system. President Obama is a popular guy – intelligent and articulate. He needs a pseudo economic recovery to buy time for implementing his broader agenda. The debt and printing will buy time but ultimately he’ll be seen as false prophet unless he can move America away from financial manipulations and into productivity.
A Black Swan event becomes increasingly likely as the excesses mount.
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Q&A:
Q. Is Gold Manipulated?
A. The Fed watches gold closely as a metric to measure inflation expectations. Alan Greenspan confirmed it and organizations like GATA have written extensively on it. Central banks sell gold to prevent a price run-up which would undermine confidence in paper notes. That’s the way it is. Central bankers understand the gold market. They try to promote a stable currency with 2% inflation to maintain public confidence. Mild inflation is their idea of stability.
At points in history they invariably lose control due to systemic excesses. This is such a time. I’ve said that the fair, inflation adjusted price of gold is around $800. At some point it may suddenly be re-priced as the currency systems are forced to evolve.
Q. Any perspective of using the Perth Mint as a way of holding gold as insurance (versus buying the metal through Kitco or buying GLD ETFs)?
A. Perth Mint is a good source. The mint is run by an Australian regional government. I’m not concerned about the US confiscating gold but others are and Perth Mint appears quite safe. I don’t know their exact fees. They do allow ownership in allocated or unallocated lots.
Q. There were some significant gains to be made in March, yet the [stock] timing model
did not indicate anything? In December, the timing model did go back into stocks for some quick gains. This is the reason why I subscribed to the timing service.
A. My stock timing model is out. Yes there were big gains in March/April but the market is still down year to date! Reits are also down
- asset classes I've managed to avoid. This is not a trading service. I don't know what moves the masses at any point in time. Moves outside my timing methods will not be captured. My methods are very conservative and designed for people who need to avoid losing money
on a year over year basis. I made a trade in December 2008 because it was almost a sure thing.
Q. Quick comment / observation about something I have heard / read through the years.....goes something like, you can't fight the Fed. AKA when they start printing money this money has to go somewhere and that somewhere usually ends up being the stock market. When Bernanke and then Obama got on 60 minutes and admitted this, which was obviously a sales job to help stop the slide, is this admittance of printing money, and the actual printing, fueling the market....and more importantly, will this advance continue because of it? Is this printing of money an input / consideration in your models?
A. Money printing is not directly part of my stock model but indirectly it’s detected. Monetization is part of my bond model. Yes, money printing will bubble into stock prices and other asset classes and cause speculations. Chasing prices is why small investors lose money. Printing money will also cause bond yields to rise which is bad for stock prices. All asset classes are discounted by interest rates to varying degrees!! At some point this yin and yang will offer an entry point - it always does and that's when the money is made. It requires patience.
Q. Interesting. Vangauard GNMA's duration is down to 1.4 with a yield a little over 4%. As I understand it this is backed by the government. What am I missing? Without a default risk and with interest rate risk very small this fund appears superior to short term investment grade with a similar yield, higher duration and default risk. Even if there is a blow up in mortgage rates and the fund spikes to six you only lose 3% and now you've got a 6% bond.
Could I be missing something? Am I understating the default risk?
A. I think you’ve got it right. Yes, the bonds are very safe. The SEC yield per Vanguard is 4.3%. And, with a duration of only 1.4 years the interest rate risk is next to nothing. I think the fund is taking advantage of the government’s mortgage bailout program. Looks like a winner.
Best Regards,
Southwest Ranch Financial, LLC (www.gleasonreport.com)
Tom Gleason, Manager & Researcher
Author of: How To Invest If You Can't Afford To Lose (Free download on the website)
Tom Gleason has degrees in finance and information systems. He's worked as a bullion dealer, fraud investigator, real estate appraiser and financial analyst.
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