"Fortescue Metals Group which rose from last Friday's close of $1.66 to
as high as $3.33 today on
the back of binding contracts with Chinese companies to build
infrastructure and participate in local iron ore mines."
China is developing - they have publicly stated they are building a
nationwide highway complex "more extensive than that of the USA" by 2015.
The US built their system after 1957, projected at a cost of some $20
billion back then - it sent the stock market ballistic in 1958 as firms
salivated at the prospect of the govt letting out contracts to buy
bitumen, steel, concrete and on it went. Build build build. Not to
mention the land value effect.
Hallibaba and the 40 thieves...
money for nothin' and your bay views for free
always pay attention to land tax news -
just quietly, i have found this THE best way to work out where you are
in the real estate cycle. Such news as this comes out in the second half
when the taxes start to hurt. About four to five years from the top
Note, it is the only tax an opposition ever considers refunding to
payers. Now why would that be ? Note too, the solution being offered
here, if implemented, will push up land price - and at the second half
of the cycle helps push prices right over the top and you know what
then. Repeat pattern - same as last two cycles.
Attention to dates, and what happens
15th nov, seemed a heavy day in the markets also
lines up with 60 degrees mid January....
happens every cycle as land price starts to warm up
plane crash October - this time in China - again on one of our monthly
gann dates. Most of them are.
Doing research for the 1974 real estate led downturn - the big fraud and
scam at that time was the equity funding fraud - you can find plenty on
the net about it, try
check out the 'fraud parties' these guys used to hold !!!
interesting, this ran over 1973/74. 30 years later we have Elliot
Spizter tackling the same industry and current fraud patterns. Maybe
coincidence, but i see it often
some comments from greenspan
my take on the thing:
It seems to me Greenspan has made a deliberate political comment here,
which might be more for his master's digestion than anything else. Anyway…
As far as I can understand it, here is the scenario:
The US dollar is declining in purchasing power against other currencies,
especially the Euro. (Currencies trend the longest time by the way, of
all markets - the trend once underway normally runs for some years. This
trend started in Feb of 2002, shortly after Bush announced much higher
steel tariffs) What should this US dollar decline do ? In theory, a fall
in the US dollar ought to make imports into the US more expensive, and
its exports cheaper, so the US will sell more overseas of what it makes.
This would be a policy to follow if the government wanted to increase
domestic employment or at least lower unemployment if it is high. This,
the US is doing. (Or should I say allowing.)
Government and the bankers would have you believe that what is happening
is a process that they control, and one that they allow to happen. I
would urge you to think more appropriately: the decline is simply a
matter of supply and demand. More dollars are being sold than bought -
price declines. It is doing so because markets have recognized the US
fundamentals are out of balance. The US debt is too high, and the low
rates have put a bubble into US real estate. Greenspan knows it but
cannot say anything in public about it, that would give the game away.
Hence he will make a political statement to say yes we are on top of the
situation, and will ensure a decline in an orderly fashion. (More on
that topic in just a minute)
The price of gold should rise as this occurs, which it is doing. Banks /
speculators will trade this trend. As a by-product of such a policy, the
US trade deficit, at record levels, ought to improve. The US government
would be happy to see this improve in my view, without having to do
anything else about it, like pay off the debt - always a politically
The scenario I have alluded to in the past, if gold went through its 440
barrier, is now in play.
As ever, the thing to watch is interest rates and land price. US bond
holders, and future bond buyers - and the US is issuing a lot of
government paper to pay its way at present - may start to demand higher
interest rates as all this takes place (is unrelated to the dollar
decline); or if the US wishes to continue to finance its spending, may
have to start offering higher rates to attract investors, or the US
could choose to start paying its debts. Either choice is contractionary
in its effect.
More on that topic:
US debt levels are a dangerous situation only if those financing the
debt were ever to demand a higher price for doing so, for some reason
that at present is not there. That would see a dollar flight, interest
rates spike upwards, and as a corollary, the stock market tank - and a
recession. Hence, the bankers are desperate for an orderly decline in
the dollar to help put US fundamentals back in line. This is a dog
chasing its tail really. If land price never capitalised, none of this
would happen, however, it is happening, so:
Now, the second half of the real estate cycle is historically normally
more volatile. I have shown those in a Gann class how the calendar day
chart really can help forecast future action. See how volatile the chart
was 1997 to 2002, well this is going to repeat, 2004 to 2012, but at
higher expansion multiples, aka more volatility. Past highs and lows to
future highs and lows.
Presently though, there is too much war related spending and credit
expansion going on to see US rates rise much, if at all. War spending on;
- Fixing the bullet shortage
- Putting satellites and spies in place, and delivering the resulting
imagery and maps to where they are most deeded (involves super large
hardware capacity and trillions of CD's)
- Keep the million or so soldiers so far called up for military duty
(not all at once) happy fighting chappies,
and a million other things. Hence the commodity mini-boom in addition to
what China is doing
One thing we can be sure of, the US will do whatever is in its own
interests, utterly regardless of the interests of anyone else to ensure
its dominance. History confirms this policy and it will not change in
the near future. So it doesn't want a recession. And since bankers
believe they can control the cycle, they will do things to try and avoid
A classic set up is building: should there be a bank collapse once land
prices peak and then decline, (remember any land price decline puts
pressure on the banks real estate lending portfolio), it could see fears
of a US default on its debt obligations, as per 1893, 1932, and 1974.
Keep an eye on the 1893 events, for those who have done the cycles
class. (Possibly the hardest cycle to come to grips with as it had a lot
to do with bonds and international lending.)
Note, as in all past cycles, rising rates impact first on interest rate
sensitive areas, houses, things that go in houses, and car buying. But
not yet, it is too early. Banks are presently full of liquidity.
But keep in mind, any event, whilst it is being feared, like the US debt
is at present, as referred to by Greenspan, rarely comes to fruition,
since it is being feared, money is kept on the sidelines out of fear. At
the top, we have to be all in, with few fears on the horizon. Whilst
there is fear in the air, (or at least reservations and hesitations)
markets keep climbing - this is known in the trade as markets climbing a
wall of worry. And this they will continue to do for a while. Perverse I
know, but it is what happens.
For all this to come to fruition, and the cycle to turn downwards, land
price has to go over the top, peak, and then an event to occur to cause
buyers to stop buying. Historically this event has always been bank and
credit related - I see no reason why this should change this cycle. Stay
What to watch for some hints. Try the US charts of
FNM Fannie May, FRE Freddie Mac, LEND Associated home lenders, or The
As to gold, see www.gold-eagle.com/editorials_04/swanson101804pv.html
for what I thought was a very good article.
To the indicators:
jury is out on the yield curve barometer, don't know, implies non
expansion at present, though our stock market is pricing in better
earnings next year.
bliss index, we are still happy - can't recall a government ever
changing at those levels.
rule of 20. now here's a thing. A case of the E in the P/E ratio rising
faster than the P (eg, if price is 100 cents, and earnings are 5 cents,
p/e of 20; if price rises to 110 but earnings rise to 7 cents per share,
p/e comes down to 16) So as our market has risen, shares have actually
become cheaper on a fundamentals basis (on average), ie you are buying
the average at 16 times earnings, not twenty, despite the price rise.
(Inflation did not move for the period) So the recent market rise is on
solid ground. This is good to know. Good little chart this one.
That is all for this year. I/we return in the new year after having
learnt that the French need a good course in English manners, though
they can actually put together a decent meal. Hope you all have a good
new year and i do sincerely look forward to seeing everyone again soon.