Upon my return I will instruct him to post news of my next endeavors which would include some awesome breakthroughs in the area of personal development. We are going to solve problems that are second, right next to the most important topics in humanity - health, survival and food. Remember, I will miss you. But what you will see in my next works will have an immediate impact on millions of people and transform their lives.
I really enjoyed all the conversations we had and the connections we made. You all were very special to me and let’s not at all forget about each other. With that, I will take my flag down. Wish you the best,
Lord Rob Ivanoff Wallaston

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This article shows a trend that Europe is once again collecting all the brains it lost during the WW2. Guess how many scientists would consider moving to Switzerland just to participate in these experiments. Rest assured, while Republicans are criticizing Obama for wanting too much green or scientific  progress, we, as oppose to Europe, have been making sure that ‘we loose ‘em scientists’ by prioritizing on the wrong ideas:wars. And yes, who cares about a smart immigration policy.

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Fannie and Freddie Bailout Destined to Fail as US Debt Doubles - 9th Sept 08 - Martin D. Weiss

09/08 Six Situations to Monitor for the Rest of 2008 by Michael Kosares
09/08 Fannie Mae and Freddie Mac Bailout has Begun by Paul Nolte
09/08 This Week: Global Downshift by Peter Navarro, Ph.D.
09/08 Gold Thoughts by Ned Schmidt

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http://www.cnn.com/2008/WORLD/europe/08/29/putin.transcript/

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Dr Doom: ‘Let us just assume the financial system blows up…’

Gold — and the division of assets - is on the mind of Marc  Faber this week in a special interim note to his subscribers. It’s not a particularly attractive trade right now, he notes, although personally, he’s hooked. And anyway, people have been asking …..

For investors with all their assets in US dollar cash (and no other holdings), Faber suggests accumulating gold from here on down to possibly $600/oz. While not necessarily forecasting such a drop (from the current level of about $820/oz), he notes the metal could decline to that level.

Those with “99 per cent of their assets in gold and no cash flow” should hold for now, says Faber, as the gold chart looks “truly horrible” since prices fell below the key support levels of around $850.

For traders, however, gold may have some short-term appeal right now because it is becoming oversold. But what, then, is the immediate upside potential? Heavy resistance would seem to exist at $850-$900 while the downside risk is at least as large as the upside potential.

From a personal perspective, says Faber, of his total assets, about 5 per cent is in equities, 8 per cent in gold, 8 per cent in real estate and related investments and the rest is split between US and euro fixed-interest securities.

But Faber’s own cash flow (income) is to some extent dependent on the performance of equities, he acknowledges, since he receives some performance fees when stocks appreciate.

“As a result, my indirect exposure to equities is higher than is suggested by the asset allocation figures listed above. From my fixed interest securities and from my business I have a relatively high cash flow and, therefore, I am a happy holder of gold and a buyer on the way down (in fact, irrespective of the price I buy every month some) for the following reasons: I am not a great believer in insurance policies, but since I think that sooner or later the entire financial system will blow up I want to make sure that whereas my assets, which are on deposit and could become worthless through default, I shall still be left with some assets that are mine (physical gold in a safe deposit box — not in the US). I should like to emphasise that this is also a point which speaks for owning some stocks.”

So in typically cheery mode, Faber says, “let us assume the financial system blows up”. Large deposits could become worthless overnight. But if you own shares of companies — even though they may decline in value — you will still own these shares since they are a certificate of ownership and not liabilities of someone else.

So, no matter how negative a stance one might have toward equities, at this point the ownership of some solid companies might be more desirable than being a creditor in a financial system that may not be able to pay at some point in the future.

Also, I consider gold as a hedge against renewed US dollar weakness. Finally, I maintain the view that gold will over the next few years outperform US equities and bonds as it has done already since 2000.

Onto broader themes and Faber’s prognosis that we are amidst a significant liquidity contraction as a result of slower debt growth.

Don’t forget, he says, that lending standards are now tightening in earnest for both individuals and for commercial property lending. In turn, tighter lending standards hurt personal consumption and lead to a contracting US trade deficit as a result of lower demand for imported goods and also oil. Moreover, lower imports have negative implications for Asian economic growth rates.

In turn, slower Asian economic growth amidst high inflation depresses the domestic demand in the Asian region, which then leads to reduced demand for commodities.

In addition, a declining trade deficit leads to a decline in the current account deficit and a relative tightening of global liquidity as Foreign Official Dollar Reserve growth slows down. Since FRODOR growth is inversely correlated with the USD and correlates over time with the movement of gold prices, any contraction in FRODOR growth would be USD supportive and negative for commodities and gold

” I have a friend who is an outstanding economist who thinks that the Asian current account surpluses will shrink in 2009 by about 50% from their peak in 2007. In this scenario, global liquidity would become extremely tight and would have a devastating impact on asset markets including real estate, commodities, non-AAA bonds and equities. Such a decline in the Asian current account surpluses would cut the US current account deficit by half and lead to a very strong USD.”

Equities, meanwhile, look shakey — although the US markets less so than the rest of the world.  Over the last 18 months, households have been heavy sellers of equities. The support for equities in 2007 came only from LBOs and share repurchases.

Demand from these important sources has now collapsed and will not come back as long as lending standards are not eased considerably and as long as the outlook for the global economy deteriorates.

Outside the US, equity markets look even more vulnerable, he adds. The US economy is in deep trouble but this is now widely known whereas other economies such as Australia, the UK and the eurozone are just starting to deteriorate very badly, most from an even more inflated level. So while housing affordability has improved in the US as a result of the sharp price decline, affordability in Australia is at a record low.

So, predicts Faber, US stocks will continue to outperform foreign equity markets as they have since the start of the year — but that’s not because he thinks US equities will move higher but because they are likely to move down less than foreign markets and also because the USD should continue to strengthen. Central banks around the world will shortly begin to cut interest rates, which supported foreign currencies so far. The NZ dollar, the Australian dollar and the British pound are particularly vulnerable, he adds.

In the US, the most vulnerable sectors are now material and energy related companies and increasingly the last sector that has held up well: technology, including companies such as Apple, Research in Motion, Amazon.com, Google and IBM.

In recent commentaries we have also suggested that Japanese equities were relatively attractive. They have indeed begun to outperform the Hang Seng Index and also other Asian markets and I expect this outperformance to last for some time.

Again, this does not mean the Japanese stocks will move up but that they will move down less than other Asian markets.

In sum, credit growth and global liquidity are contracting, a vicious economic downturn is about to unfold (China could surprise on the downside and put additional pressure on commodity prices) and asset markets are still very high by historical standards and, therefore, remain
vulnerable.

In conclusion, advises Faber, use equity rallies as a selling opportunity and further weakness in gold as a buying opportunity for long term holders with significant cash and cash flows. But if his great strategist friend is right and the S&P500 trades down to the 500 level, “you should be careful not to be eaten by bears in all asset market”.

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The center-left German newspaper Suddeutsche Zietung wrote this week:

The admonition of the outgoing American president won’t have much impact in Moscow. Firstly, the Russian leadership doesn’t see itself as morally accountable to the Iraq warrior Bush. Secondly it’s waiting to see who will be moving into the White House: Republican hawk John McCain, who wants to throw Russia out of the G8 group of leading industrial nations, or the young Democrat Barack Obama, who has made more moderate noises.

My take: The next administration should invest in a healthy relationship with Russia, because both countries need each other.

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 Gold is also falling because it just needed to in order to stay in a long-term bull trend. It is also falling because of the stronger dollar in the past weeks.  Equity gains during dollar bull markets (20% rally preceded by a 20% decline) are much greater than dollar bears (20% decline preceded by a 20% rally).The average return of the S&P 500 during dollar bull markets is over 80%.  During dollar declines, the average return is less than 20%.

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This is the latest must-see interview with Charles Munger, the guy behind Warren Buffett and his partner in the establishment. There is so much wisdom here, I can hardly write more about it.

Direct link to Munger video

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For those traders interested in trading or understanding oil, please start tracking  the Crude Oil VIX index which the CBOE realeased recently.  On days when oil prices have a big swing, the index, called the Crude Oil VIX, tends to respond dramatically. It spiked 25.8% on June 6, based on historical data, when oil shot up $11. When crude tumbled for four sessions in a row last month, the index jacked up 13% and hit a record on July 17. Not surprisingly given the wild swings in crude recently, the volatility index has surged 66% since last May, based on historical figures. The index is based on the weighted prices of all out-of-the-money but non-zero options on the U.S. Oil Fund, the biggest oil exchange-traded fund.

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