Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19
US Tech Stock Sector Setting Up for A Momentum Breakout Move - 12th Feb 19
Key Support Levels for Gold Miners & Gold Juniors - 12th Feb 19
Socialist “Green New Deal” Points the Way to Hyperinflation - 12th Feb 19
Trump’s Quest to Undermine Multilateral Development Banks - 12th Feb 19
Sheffield B17 US Bomber Crash 75th Anniversary Fly-past on 22nd February 2019 Full Details - 12th Feb 19
The 2 Rules For Successful Trading - 12th Feb 19 -
Financial Sector Calls Gold ‘Shiny Poo.’ Are They Worried? - 11th Feb 19
Stocks Bouncing, but Will They Resume the Uptrend? - 11th Feb 19
EURO Crisis Set to Intensify: US Dollar Breakout Higher
Stock Market Correction Starting? - 10th Feb 19
Gold Stocks Gather Steam - 10th Feb 19
Are Gold Bulls Naively Optimistic? - 9th Feb 19
Gold, Silver Precious Metals Update - 9th Feb 19
The Wealthy Should Prepare to Be Soaked - 8th Feb 19
US Business Confidence Is Starting to Crack - 8th Feb 19
Top Myths and Facts about ULIP Plans - 8th Feb 19
A Major Stocks Bear Market in 2020? - 8th Feb 19
Gold Market Extremes Test Your Mettle - 8th Feb 19
The Venezuela Myth Keeping Us From Transforming Our Economy - 8th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Imminent Banking Stocks Destruction to Push Gold Back through $1,000

Stock-Markets / Credit Crisis 2008 May 28, 2008 - 04:41 PM GMT

By: Jim_Willie_CB

Stock-Markets Best Financial Markets Analysis ArticleAn important swing in the pendulum is due to manifest itself in the near future. Leverage with gold mining stocks and silver mining stocks depends upon containment of costs. Whether of energy costs (primarily diesel), or materials (like steel & lumber), or labor itself (also in shortage), even equipment (rigs in dire shortage with long waiting periods), the mining firms need to contain costs in order to make their stocks effective investments from which to exploit the rising gold & silver prices. The biggest breakout in the entire collection of commodity prices during the last two months has been in crude oil, with much attention given it. The gold price hit 1000 then pulled back. The silver price hit 21 then pulled back. Crude oil hit 100, then promptly continued its powerful march to 135. Energy prices might be on the verge of a pullback, even a powerful pullback. My forecast is for a pullback to 100 in crude oil this summer, which is soon to begin.


The topping process is underway. Bank destruction will push the gold price back above 1000 again, at a time when the energy prices soften. This should vastly improve the business profitability of mining companies. The totally unreported story lately is that banks face larger losses, as housing prices continue their historic decline, ensuring profound additional bond losses. Banks have openly admitted it. Watch for the bond insurers to basically go bust, belly up, after failing to replace their capital core. The charts tell the story. The financial press networks do not, as they continue to obey their advertisers who pay the bills and dictate the messages, even if totally false. This USGovt Administration might do well to formalize a new cabinet post, Secy of Information, in keeping with a tradition started seventy years ago in Berlin .

When the system reacts to the next round of bank losses, the further breakdown of the US Economy, and the ongoing corporate failures complete with mammoth job losses, the response will be of vast US Federal Reserve and USGovt stimulus, rescue, and actual programs. We are at the verge of an even more relentless rise in monetary inflation. It requires pressure valves. The recent beneficiary has been crude oil, but next is gold & silver. In my opinion, the US Fed is impatiently waiting for the USGovt, via the Administration and Congress, to initiate its important programs for mortgage relief. No progress has been seen in months for the New Resolution Trust Corp to revive the secondary mortgage market, to create a burial site for critically wounded mortgage bonds, and to negotiate new loans in refinance of growing numbers of under-water home loans. The Case-Shiller home price decline for the 20 major metropolitan areas in March was 2.2% monthly, or 14% annually. This means home prices are accelerating downward. That should be been a loud ugly wakeup call, but it failed to attract attention or marshal forces into action. SO THE ONGOING HOME PRICE DECLINE AND FAILURE TO INSTALL A NEW R.T.C. GUARANTEES THE NEXT ROUND OF BIG BANK LOSSES. The charts tell the story. My words are less necessary.

The crude oil price seems to be straining near a possible near-term top. At least official efforts are being designed toward that end. Global economic slowdown is a reality. North America and European Union show the signs of strain. Asia will soon, probably after the Olympics this August in China . If not less physical demand, reduced speculation from goofy Congressional rules proposed against speculators will discourage their bets in crude oil. We are likely to see a migration toward something else. My guess is gold & silver, especially after the Big Second Round of bank destruction is painfully evident.

The XLE energy stock index is a good forward indication of any imminent rollover toward a lower crude oil price. It has indeed signaled a lower price. My forecast is for a summertime decline in crude oil down to the 100 mark, with the first thud to 110. A long uptrend has lasted over three years. The preliminary initial signs are evident of a breakdown in that uptrend. A breakdown correction is coming for the XLE stock index, down to below the 80 level, and toward the 75 to 80 range where the moving averages await. The correction in the XLE gives a strong signal of imminent correction in the crude oil price.

The gold price has recovered in the last month. Next it must gather itself, consolidate for a week or so, before it continues upward. This chart is extremely bullish to technicians, resembling a launching pad. Support is to be found at the 920-930 range. Support is also offered from the 20-week moving average around the 900 level. The bullish stochastix crossover is important. The next gold price target is still 1150 to 1200. The response to the bank sector will be huge, as a whiff of panic enters the room.

The Oil versus Gold Ratio represents the benefit versus cost ratio for precious metals mining firms. The profits are derived off gold output. Their expenses contain energy as a major component. The ratio is ready to fall, signaled by a possible crossover soon in the stochastix indicator. Notice a sizeable gap in the 0.127 to 0.131 range, which usually is filled over time. The big upcycle this spring eclipsed the high levels established from summer 2006 to autumn 2007. Next comes the pendulum swing back toward the mean, in a reversion. Profits from energy investments are due to roll into gold.

The XLE versus HUI Ratio represents a good forward indicator on the benefit/cost ratio for gold mining firms, in energy producers versus miners. The XLE and HUI stock indexes each concentrate most weight on the bigger firms. A reversal seems evident and underway. The correction shows progress a little ahead of the commodity ratio of oil versus gold above. The same type of gap is evident, in need of fill. It also shows a possible crossover soon in the stochastix indicator. This chart is very unstable. A move down comes imminently.

The BKX bank stock index is staring at the precipice, for huge additional declines. The technical breakdown receives little press or network coverage, probably because it smashes their propaganda messages from the last month or more. The bank recovery is nowhere visible. In fact, several important banks have announced increased expected losses in just the last couple weeks, precisely as my forecast has stated consistently and without hesitation. Housing prices are accelerating downward, which precede yet another round of bank bond losses. My forecast is for future losses to be centered mainly in the prime rated category, and losses to be larger in magnitude than the subprime category.

Prepare for a second bigger and more painful round of bank destruction. Their balance sheets are depleted of capital. They are not prepared with loss reserves or basic remaining capital to withstand what comes next. Their core capital is on a net basis totally borrowed. Major bank names and many midsized banks will be forced into bankruptcy in the next year or more, as they fail to resupply cash into capital. Another major breakdown is in progress. The bearish triangle base, shown recently in another public article, has been breached. The target is 56 in an earth-shattering decline. Even Goldman Sachs was downgraded by a major analyst this week. Be clear in the message, that the entire US financial industry is insolvent, in ruins, and not easily remedied. The sector has been led to the toilet by housing bubble that busted dramatically in a very predictable manner. A nation cannot build an economy atop a housing bubble and expect to survive.

The HGX homebuilders stock index also shows a dire decline continuation, as they face ruin. Their stated losses have not abated at all. Of course, with record high home inventory for sale, the builders must stop building homes, which strains the inventory glut. That simple fact is missing by analysts, maybe since poorly trained in economics, and since compromised by paychecks. This beleaguered group has already faced two major stock index declines. They are due for a third imminently. The pennant pause pattern shows early signs of breakdown. During the entire six months of consolidation, notice no improvement to the moving average alignment (in red & blue). They remain in downward bias. The housing prices continue down. A national insolvency story is not properly being told. This homebuilder group must go extinct.

The MFX mortgage finance stock index shows yet more devastation. This index receives little attention. The mortgage industry faces ruin also, especially since fees from refinanced loans are a virtual impossibility. That is the urgent need! Another important decline comes imminently. The 50% decline last autumn will be repeated. A new bearish triangle is evident, which also displays a breakdown. The target is 26 in the next few months. To date, 261 lending institutions have gone bust. Check the excellent website ‘Implode-o-Meter' (click here ) by Aaron Krowne for details.

The bond insurer MBIA is the largest, and it is doomed to go bust in dramatic fashion. This event is written in stone. If not the downgrade of its own corporate bond rating, then surely their payouts on failed mortgage bonds will kill them. The former makes recapitalization impossible, while the latter drains them into bankruptcy. As MBIA and its small group of competitors go down in flames, the bank industry will entire utter turmoil of unmistakable terms. Calls will be made for nationalization, as in USGovt takeover of bond insurance. Such calls will join those for the mortgage Resolution Trust Corp. While the self-serving nitwits in Congress argue with the syndicate representatives in the Administration, the national home equity and bank capital will continue to tragically burn. THE NATIONAL RESPONSE WILL BE MONETIZATION OF BANK AND EVENTUALLY HOME EQUITY BANKRUPTCY AND INSOLVENCY. Gold & silver will skyrocket as policy kicks into gear during desperate times. The irony, another black eye to the financial sector, is that MBIA will likely continue to bear a shiny AA or AAA rating, even as it goes bankrupt. That is a fine closing statement for this article.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

From subscribers and readers:

“You are able to consume and regurgitate complicated information into layman's terms. It shows that you understand your subject well. It is very easy to take complicated material and repackage it as complicated material. You, however, have the ability to take the complicated and make it understandable to the common man.” (RickS in Californiaa)

“Keep up the good work, and stay safe- the world needs your interpretative skills. “From your radio interviews, I know that your quick wit and conviction are genuine. Your confidence and eloquence comes across just as strongly. You make specific, seemingly outrageous predictions with specific timing, and you are very often right. Really, can one offer any higher praise to an analyst?” (TomH in California )

“The unfortunate demise of Dr. Kurt Richebacher leaves Jim Willie, Bob Chapman, and Jim Sinclair as the finest financial minds on the scene today.” (DougR in Nevada )

“There are four writers that I MUST READ. You are absolutely one of those favorites!! William Buckler, Ty Andros, Richard Russell, and YOU!!” (BettyS in Missouri )

“Your newsletter caught my attention when the Richebächer report ended. Yours has more depth and is broader in coverage for the difficult topics of relevance today. You pick up where he left off, and take it one level deeper, a tribute.” (JoeS in New York )

By Jim Willie CB
Editor of the “HAT TRICK LETTER”
www.GoldenJackass.com
www.GoldenJackass.com/subscribe.html

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise like a cantilever during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by heretical central bankers and charlatan economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. A tad of relevant geopolitics is covered as well. Articles in this series are promotional, an unabashed gesture to induce readers to subscribe.

Jim Willie CB is a statistical analyst in marketing research and retaicl forecasting. He holds a PhD in Statistics. His career has stretched over 24 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com

Jim Willie CB Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules