GOLD BULL II
Aug 5, 2005
MARKET NEWS DIGEST

* Gold at 1-month high, tops $440 -Reuters
* Economists warn against Fed's policy -BL
* Oil surges as Saudi king dies -Reuters
* Sheik Gets 75 Years in Terrorism Financing Scheme
* Dollar falls on outlook for structural deficits -FT
* Chertoff warns of nuclear terror -WND
* New technology seeks to foil numismatic swindlers -AP


COMMENTARY

* THE NEW GOLD RUSH: PHASE II -SATC Special Alert
* Drowning in Debt? -Paul J. Lim, USN&WR
* Study: Moral values top $$ legacy -Terry Savage
* Iran has nukes now -Dr. Jerome Corsi, WND
* San Diegans Vote to Keep The Cross, ACLU fights -CRS
* How Cafta Passed House by 2 Votes -Edmund Andrews
* Rewarding Terror -Rachel Ehrenfeld and Paul E. Vallely
* A Golden Solution To China Syndrome? -Richard Lehmann
* Renowned Fund Mgr Predicts Economic Collapse -Al Martin


QUOTE OF THE WEEK

"In France I had almost always seen the spirit of religion and the spirit of freedom marching in opposite directions. But in America I found they were intimately united and that they reigned in common over the same country.... Religion in America...must be regarded as the foremost of the political institutions of that country; for if it does not impart a taste for freedom, it facilitates the use of it... There is no country in the whole world where the Christian religion retains a greater influence over the souls of men than in America, and there can be no greater proof of its utility...than that its influence is powerfully felt over the most enlightened and free nation of the earth."

-ALEXIS DE TOCQUEVILLE, "Democracy in America"


MARKET NEWS DIGEST


Gold at 1-month high, tops $440 -Reuters
Aug 1, 2005

Aug. 4th Update: -- (MW) Gold futures climbed in early trading with the benchmark December contract up $1.10 at $443.80. The rally in gold "reflects a happy confluence of gold-positive and dollar-negative news," said Brien Lundin, editor of Gold Newsletter, including "looming labor strikes in South Africa, increased physical demand in China and an apparent exhaustion of central bank gold sales."

NEW YORK, Aug 1 (Reuters) - Gold futures hit a fresh one-month high on Monday amid a weaker dollar and reports of the possibility of strikes in South Africa's gold mines.

Other precious metals also rose, led by platinum, which was at a six-month high for futures.

At the New York Mercantile Exchange's COMEX division, benchmark December gold advanced $1.70 to $437.50 an ounce at 9:45 a.m. EDT. The range ran from $434.70 to $438.30, which was the highest since July 1.

Traders and analysts said gold futures were now aiming at the top of a trading range at $440-$445, with good support seen below $430 an ounce.

In South Africa, the world's biggest gold producer, one of the major mining unions said it might strike after wage talks neared an impasse on Monday. If the miners did strike, it would be the first country-wide gold mine strike in 18 years.

"If there was a strike, the sentiment (in the market) would be somewhat positive," said analyst Victor Flores of HSBC Securities. "But it would have no real major impact since we're in a slow period for demand.

"It's not like it would be in copper, where there are low inventories, although you might see speculators jump in and the price might move up a couple of bucks."

He said current gold trading volumes were seasonably slow. "We had a nice rally in May and June and now people are taking their profit and going on vacation," said Flores.

Summer vacations kept gold trading a bit thinner than usual, with COMEX estimated volume touching just 8,000 contracts by 9 a.m.

Gold was further strengthened on Monday by the dollar's continued weakness against the euro.

The euro was at $1.2222 by midmorning, its highest since China revalued its currency, the yuan, last month.

Gold normally climbs as the greenback falls because dollar-denominated bullion gets cheaper for non-U.S. buyers.

Spot gold was at $431.90/432.60 an ounce, up from Friday's New York close of $429.80/430.60.

In Silver, September futures rose to a new one-month high and were quoted up 3.8 cents at $7.30 an ounce. Spot silver touched $7.25/28, from $7.22/25 previously.

Related Stories
Welcome back, gold bull? By Peter Brimelow, MarketWatch
Glistening gold tipped for gains into 2006 -Reuters
What's rising faster than stocks? Coins -Christian Science Monitor
Gold rush may mean inflation bust -CNN/Money
Quarter ounce of gold sells for $1.38 million -Kevin Lipton Rare Coins
Investors Flock to Coins Amid Rising Metal Prices -Wall Street Journal
Why your portfolio needs commodities -MW


Economists warn against Fed's policy -BL
They see danger in U.S. housing boom
BY ANDREW WARD and ALISON FITZGERALD
BLOOMBERG NEWS
August 2, 2005

Federal Reserve Chairman Alan Greenspan isn't worried about the hot U.S. housing market so he isn't cooling it off by raising interest rates faster.

Worry, say Wall Street economists including David Rosenberg of Merrill Lynch & Co. and Stephen Roach of Morgan Stanley.

The economists say the Fed must act for a simple reason: The United States has become so dependent on real estate and construction to fuel growth and jobs that an eventual, wrenching correction has the potential to sink the entire economy.

"Act now and cut off the pinky, or wait till later and risk slicing off the entire hand," Rosenberg said last week. "Either way it hurts, but you can still type with nine fingers."

Greenspan disagrees. While he said July 21 that home prices might be unsustainable in some regions of the United States, the Federal Open Market Committee he leads decided in June that it wouldn't use interest rates to address "possible mispricing," according to minutes of the meeting made public July 21.

Rosenberg credits housing with 40% of the 2.3 million jobs added since the 2001 recession. In a report to clients last week, Lehman Brothers Inc. said related industries accounted for more than a third of the nation's economic growth over the four quarters that ended in March. Fed data show appreciation helped add $5.2 trillion to consumers' balance sheets during the current expansion, or 68% of all wealth creation.

Greenspan told Congress in testimony July 20 and 21 that there is "froth in some local markets," repeating a phrase he used in May to describe the run-up in housing prices. While there's a risk of disastrous results for individuals with mortgages that depend on appreciation, he said, it's unlikely that localized price declines would hurt the national economy.

Rosenberg says it will take at least three more quarter-point rate increases from the current 3.25% to slow home-price gains to their long-term average.

Roach recommends the Fed use its bully pulpit as a bank regulator to tighten lending practices. "We're in a dangerous place," he said.

The median U.S. home price surged 51% to $219,000 in June from the beginning of the expansion in November 2001, according to the National Association of Realtors. The 15% jump from June 2004 was the biggest 12-month gain since 1980, and evidence is mounting that more investors are speculating in real estate, adding to volatility.

Consumers extracted $1.62 trillion from their homes through equity loans since 2001 and spent as much as half of that, Jan Hatzius, a senior economist at Goldman, Sachs & Co. in New York, said in an interview.

FULL STORY


Oil surges as Saudi king dies -Reuters
August 1, 2005

LONDON (Reuters) - Oil prices climbed above $61 a barrel to a three-week high on Monday after the death of Saudi Arabia's King Fahd and as U.S. refinery outages stoked fuel supply concern.

U.S. light, sweet crude rose $1.03 to $61.60 a barrel.

The price has climbed over 40 percent this year and is just under a dollar below the record high of $62.10 hit on July 7.

King Fahd died in hospital on Monday and will be succeeded by Crown Prince Abdullah, his half-brother who has been the de-facto ruler of Saudi Arabia since Fahd suffered a stroke in 1995.

Abdullah is expected to adhere to Saudi Arabia's long-standing oil policy aimed at ensuring global markets are well supplied, a leading Saudi diplomat said on Monday.

"I cannot imagine that there will be any particular change (in oil and foreign policy)," the kingdom's next ambassador to the U.S. and outgoing ambassador to Britain, Prince Turki al-Faisal, told reporters.

Analysts also saw any changes in Saudi policy as unlikely, but they said markets were jittery.

"It could have a psychological effect on markets. Anything which adds uncertainty to the market could be construed as bullish in the short-term," said Geoff Pyne, Energy Consultant to Standard Bank.

REFINERIES UNDER STRAIN

A spate of refinery problems in the United States resurrected concerns about meeting strong fuel demand.

Exxon Mobil added to the anxiety at the weekend as it shut down its 235,000 barrels per day Joliet refinery in Illinois, according to trade sources.

BP also shut down a gasoline-producing unit at the weekend at its giant Texas City refinery -- the third-largest in the U.S. and source of 3 percent of its gasoline -- for maintenance, a regulatory filing showed.

It was unclear whether or not the shutdown was related to a Thursday night fire in a secondary unit that BP had said reduced the plant's overall gasoline production by 35,000 bpd.

That fire came four months after an explosion at the plant killed 15 workers, highlighting the rising risks to operations as refiners attempt to run flat-out.

"Steadily declining inventory levels ahead of the gasoline peak demand season mean that this market has been looking increasingly tight from a fundamental perspective, leaving it highly vulnerable to any production disruptions," said Barclays Capital in a report.

http://www.reuters.com

Related Offer:
BLACK GOLD STRANGLEHOLD (Pre-order and save)
The Myth of Scarcity and the Politics of Oil
Jerome R. Corsi, Ph.D. and Craig R. Smith
$26.95, HARDCOVER -- Release Date: October 2005

Experts estimate that Americans consume more than 25 percent of the world's oil but have control over less than 3 percent of its proven oil supply. This unbalanced pattern of consumption makes it possible for foreign governments, corrupt political leaders, terrorist organizations, and oil conglomerates to hold the economy and the citizens of the United States in a virtual stranglehold. There is no greater proof of this than the direct relationship between skyrocketing gas prices and the explosion of wealth among those who control the world's supply of oil.

In Black Gold Stranglehold, Jerome Corsi and Craig Smith expose the fraudulent science that has made America so vulnerable: the belief that oil is a fossil fuel and that it is a finite resource. This book reveals the conclusions reached by Dr. Thomas Gold, a professor at Cornell University, in his seminal book The Deep Hot Biosphere: The Myth of Fossil Fuels (Copernicus Books, 1998) and accepted by many in the scientific community that oil is not a product of fossils and prehistoric forests but rather the bio-product of a continuing biochemical reaction below the earth's surface that is brought to attainable depths by the centrifugal forces of the earth's rotation.


Sheik Gets 75 Years in Terrorism Financing Scheme -AP
July 29, 2005

NEW YORK -- A Yemeni cleric who bragged about his ties to Osama bin Laden was sentenced Thursday to 75 years in prison, the maximum in a terrorism financing case that was nearly derailed when the government's star witness set himself on fire outside the White House.

A federal judge prefaced Sheik Mohammed Ali Hassan Mouyad's sentence with a recitation of the events of Sept. 11, 2001, beginning with a hijacked jet crashing into the World Trade Center.

"We all remember September the 11th," U.S. District Judge Sterling Johnson Jr. said. "While the defendant is not being sentenced as a result of the events of 9/11, he came to the attention of the authorities because of 9/11."

A jury in March found Mouyad, 57, guilty of conspiring to support and attempting to support Al Qaeda and Palestinian extremist group Hamas. He also was convicted of actually supporting Hamas, but acquitted of supporting Al Qaeda.

Mouyad was lured to Germany by two FBI informants in 2003 and was secretly recorded promising to funnel money to Hamas and Al Qaeda. He also boasted that Bin Laden called him "my sheik." He was arrested by German police and sent to the United States.

One of the informants, Mohamed Alanssi, set himself on fire in Washington in November in what he later described as an attempt to get more money from the FBI, which had paid him at least $100,000.

At trial, Alanssi described Mouyad as a dedicated terrorism donor who boasted of giving Bin Laden $20 million in the years before Sept. 11.

Defense lawyers argued that Mouyad was duped into the terrorism financing scheme. They said Alanssi played on the sheik's desire to finance a charitable bakery and other projects in Yemen.

Among the most damaging evidence at trial was a recording of Mouyad praying for the deaths of Jews and Americans: "Dear God, strike them with earthquakes, put them in their coffins, abandon them and defeat them."

The judge called the taped conversations "chilling."

Asking the judge for leniency, Mouyad described a life of giving food, clothing and other aid to poverty-stricken Yemenis.

Prosecutors praised the sentence as a victory in the war on terrorism.

"Those who finance terrorist attacks, and rejoice in the murder of innocent victims, are no different from those who plant the bombs or carry the backpacks," U.S. Atty. Roslynn Mauskopf said.

Mouyad appeared distressed at what his lawyer said amounted to a life sentence.

"Your honor, what have I done?" he said in Arabic as he was led away.

FULL STORY

Related Story
Operation Divest Terror -SATC...7-8-05 -- Private-sector offensive aims to shut down 'business' of extremists... The goal of "Operation Divest Terror" is to help investors identify U.S. companies whose business activities provide revenues, equipment and technology and political cover to governments sponsoring terrorism and send them a message this is a bad business decision.


Dollar falls on outlook for structural deficits -FT
By Steve Johnson, London Financial Times
August 1, 2005

The dollar fell on Monday as a growing consensus that the greenback�s rally has run out of steam coincided with a renewed focus on the structural deficits of the US.

The dollar has made strong gains in recent months, surging from $1.345 against the euro in March to a high of $1.188 in early July as investors chased yield.

However the dollar�s repeated failure to sustain a bridgehead beyond $1.20, despite a welter of positive economic data, has led many to conclude that the move is now over, for the time being at least.

Indeed Monday's fall came despite the strongest manufacturing report this year from the Institute for Supply Management, which sent the yield on 10-year Treasuries to a three-month high of 4.34 per cent.

The dollar's "failure to gain last week on strong US data and rising US yields is feeding concerns that significant good news on the cyclical front is now reflected in current exchange rates, leaving the US currency once again vulnerable to structural infirmities," said Mansoor Mohi-uddin, chief forex strategist at UBS.

These structural infirmities were highlighted by an International Monetary Fund report, which said the level of the dollar was still above that necessary to avoid a further widening of the US external deficit.

http://www.ft.com


Chertoff warns of nuclear terror -WND
Homeland Security secretary sees WMD threat as major concern
August 1, 2005
WorldNetDaily.com

Issuing yet the latest warning of the threat of nuclear terrorism in the U.S., Homeland Security Secretary Michael Chertoff said there are far worse security problems facing the country than bombings of mass-transit systems.

In comments during a visit to Lawrence Livermore Laboratory in California this week, Chertoff said the foremost concern for the nation's security now is the threat of a larger chemical, biological or nuclear attack.

Chertoff joins the growing list of public officials, including President Bush, Vice President Dick Cheney and Chertoff's predecessor at Homeland Security, Tom Ridge who have strongly hinted that nuclear terrorism has moved center stage as the No. 1 security threat facing the U.S.

Last month WND and its sister publication, Joseph Farah's G2 Bulletin, reported increasing evidence suggests al-Qaida not only has nuclear weapons in its arsenal, but has smuggled them into the U.S. along with thousands of sleeper operatives.

Michael Chertoff

Referring to the London bombings, Chertoff said: "We can't let what happened two or three weeks ago beguile our concerns about what could happen in the future."

Technology that the Livermore lab and other public and private groups are developing could help make the country safer, Chertoff said. The secretary was shown what the lab has done to provide more portable ways to detect nuclear, biological and chemical devices that terrorists could use.

FULL STORY

Related Story:


New technology seeks to foil numismatic swindlers -AP
SANDRA CHEREB, AP Writer
August 1, 2005

RENO - Gold and silver swindlers have been plying their cagey cons since the days of the Wild West when they passed off slugs and fools gold as something far more precious.

But more sophistication combined with the global allure of the Internet that allows anyone, anywhere to buy and sell coins and ingots with the click of a mouse - has allowed scams to proliferate and forced the fight against fraud to use advancing technology.

Experts now are able to identify atomic components that can trace metals to their mining district of origin, providing a sort of DNA fingerprint. Combined with an unprecedented historical record recovered from the ocean floor, the process is generating excitement among numismatists and hobbyists, who say it could help expose disguised worthless trinkets and validate the authenticity of others.

FULL STORY

Related Story:
BEFORE YOU BUY... Read This -Craig R. Smith, SATC
... In all the years that I've been in the business of buying and selling U.S. rare coins, I've yet to have a week go by that a customer hasn't asked one of my staff ... Was the price I paid the right price? ... How is a coin's real value determined? ... What publications or services provide accurate prices? ... So I will try to answer the most commonly asked questions in this article.


COMMENTARY


Swiss America Special Alert
21st Century Gold Rush, Phase II

"Some of the sharpest minds on Wall Street are betting that you'll make more money in metals than Microsoft the next few years. The new bull market is in stuff, not stocks." -USA TODAY

Starting in 2001, gold, silver and rare U.S. coins began a long-term or "secular" bull market. Since then, tangible "stuff", like real estate, commodities and collectibles, is where big money has been moving.

The good news is that we're still in the early stages of this bull market which could last another decade! This is great news for the individual investor interested in learning more about U.S. rare coins before earning more. Here's a peek at what's been happening with gold so far...

(2001-2004) THE NEW GOLD RUSH: PHASE I

Since 2001, gold bullion has moved up 58%, but high quality U.S. rare gold coins are up 88% ... or more!
In Sept. 2001, gold was $280 ... By Sept. 2002, gold rose to $320 ... By Sept. 2003, gold topped $380 ... By Dec. 2004, gold hit $455!

BUT that's just the tip of the iceberg! During Phase II we believe the U.S. rare coin market will experience accelerated growth as a larger percentage of investors finally begin to take notice that gold coins are the best performing market sector of the new century!

In this SPECIAL ALERT you'll discover WHY:
* RARE COINS ARE NOW "THE TRADE OF THE DECADE"
* NUMISMATIC DOWNSIDE RISK VS. UPSIDE POTENTIAL
* WHY COINS ARE THE TOP TANGIBLE PERFORMERS
* NOTED ECONOMISTS AGREE, "BUY" RARE GOLD

(2005-2009) THE NEW GOLD RUSH: PHASE II
YES! Gold could easily double AGAIN over the next four years, sending rare gold coin prices skyrocketing -- based on the facts...

Register HERE for a free copy: "RARE GOLD BREAKOUT!" OR CALL SWISS AMERICA AT 800-289-2646 *BONUS: "THE FUTURE OF GOLD AND SILVER" CD a 30-minute private interview between Swiss America CEO, Craig Smith and Gold Anti-Trust Action Committee chairman, Bill Murphy.

"We're now in the first or early phase of the gold bull market. Every time gold dips, the metal moves out of weaker hands and into stronger hands. Finally, gold establishes a rock-bottom base. Once that happens, gold will be ready to move higher and ultimately into its second phase." -RICHARD RUSSELL, Dow Theory Letters, 2003.


Drowning in Debt? -Paul J. Lim, USN&WR
Americans' love affair with plastic may have a messy ending if interest rates rise
By Paul J. Limm, U.S. News & World Report
Aug. 2, 2005

Household finances, like the economy, tend to run in cycles. Usually, when times are good, families assume things will be good forever, so they spend more and save less. When times get tough--as they did in the mid-'70s, early '80s, and early '90s--consumers tighten their belts, saving more and borrowing less.

But in the most recent downturn, starting with the bear market of 2000 and the recession of 2001, belts didn't get tightened. In fact, they were loosened.

Household debt rose from 96 percent of personal disposable income (consumers' take-home, spendable cash) in 2000 to 111 percent in 2003 to 113 percent at the end of 2004." Just the fact that it's growing isn't necessarily a problem," says Scott Fullwiler, an economics professor at Wartburg College in Waverly, Iowa. "My concern is that as a percentage of disposable income, it's at an all-time high."

At the same time, the savings rate--that's savings (not including home equity or investment gains) as a percentage of disposable income--has plummeted. It fell to 0.6 percent in May, down from as high as 3.4 percent in 2001 and 7.9 percent in the early 1990s.

Americans are saving less partly because they are spending more, often because it has been so cheap to borrow money to do so.

As the Federal Reserve Board scrambled to pump life back into the economy at the start of this decade, interest rates tumbled to historic lows. Borrowing to buy cars, furniture, and homes became a bargain.

But, as always, there comes a time of reckoning. Consumer debt of all sorts--from home mortgages to credit card balances--has shot up. In 2000, average household credit card balances stood at $7,842, according to Cardweb.com. That figure rose to $8,940 by 2002 and $9,312 last year. "There is an explosion in household debt taking place, and it's a serious problem," says Robert Parks, an economist and finance professor at Pace University's Lubin School of Business.

Households have to worry about inflation, too, says Cheryl Burbano, a planner with American Express Financial Advisors near Tampa."You're seeing key expenses rising, whether it's gasoline prices or the cost of health insurance," she says.

Of course, for individual households, the final debt blow may come out of the blue, as it did for Tracy Moore. As this decade began, the 37-year-old Southfield, Mich., resident had more than $20,000 in credit card debt but was unfazed. Then, shortly after the Sept. 11, 2001, terrorist attacks, Moore was laid off from her job as an event planner for an advertising firm. Within about a year, her credit card debt had ballooned to $40,000, and she had no choice but to file for bankruptcy.

"When you're forced to live without a credit card, you understand what it means to live beyond your means," says Moore. "But I'm an intelligent person. There's no reason I shouldn't have understood what it meant a long time ago."

[Ed. Note: The Commerce Department reported Tuesday that the personal savings rate fell to 0%, the lowest since a consumer spending binge in October 2001 and the second-lowest since the Great Depression.]

FULL STORY

Related Stories:
ONE NATION UNDER DEBT: U.S. debt explosion = dollar disintegraton by 2010 By Craig R. Smith, WorldNetDaily

Caution: Debt Crisis Ahead - Craig R. Smith...Gold is the monetary anti-drug because it does not feed the credit habit -- it is a 100% pure asset!

8-1-05 -- Home Bubbles Don't Deflate, They Burst - Gilbert, Bloomberg


Iran has nukes now Let's quit fooling ourselves -Dr. Jerome Corsi
August 2, 2005
WorldNetDaily.com

The Washington Post is running today an "undisclosed sources" article designed to surface a supposedly new "National Intelligence Estimate" that says Iran is 10 years away from having an atomic bomb. Here we go again. The leftist mainstream media has launched its own pre-emptive attack against the Bush administration, hot on the case of making sure we don't get tough with Iran.

Last month, I traveled to Israel where I addressed the Knesset about the nuclear weapons threat represented by Iran. I told the Knesset that Iran's nuclear program was a "clear and present danger," and I stressed that the time was short. Iran has everything it needs right now to build an atomic bomb.

While in Israel, I had discussions with intelligence officials in the Israeli Defense Forces and with the Ministry of Defense. These discussions confirmed my worst fears.

Israeli intelligence estimates are that once Iran begins enriching uranium again, the red flashing light should go off. Once the mullahs reach the "point of no return," they can produce bombs on a constant basis not just one or two, but a steady stream of atomic weapons.

The "point of no return" is defined as the moment when Iran has everything it needs to make a bomb, such that even a military attack couldn't stop them. That point is imminent, here right now, not 10 years away.

The Iranian Shahab-3 missile is also ready to go, with tested solid-fuel capability that could reliably hit Tel Aviv with an atomic bomb any day now. Hezbollah sleeper cells are in place in American cities waiting for the delivery from Tehran of an improvised nuclear device. We do not have the luxury of 10 years to deal with this problem, despite what some disgruntled source within the U.S. intelligence establishment may want the Washington Post to think. The Atomic 9-11 plot is in full swing as you are reading these words. The attack could happen any day.

FULL STORY


San Diegans Vote to Keep The Cross, ACLU fights -CRS
"Symbols come down little by little, just like they did in Nazi Germany in the 1930s."
By Craig R. Smith
Worldnetdaily.com
Aug. 1, 2005

"Extremism in the defense of liberty is not vice...moderation in the pursuit of justice is no virtue."
-Barry Goldwater
, Acceptance speech, 1964

A troubling sign in the city of San Diego surfaced last week that's becoming the norm instead of an exception: Low voter turnout in municipal elections based on apathy.

Last week, by a margin of 76 to 24 percent, San Diego voters passed 'Proposition A' to protect the cross high atop the Mt. Soledad National War Memorial. A special election was called to elect a new mayor and to find the people's will on the possible removal of the cross from the memorial.

I'm thankful Prop A passed, but what troubles me is that less than 28% of the registered voters went to the polls to exercise their precious right to vote!

We're talking about a city which currently has no mayor and faces the possibility of losing a fifty-year old War Memorial icon, simply because one outspoken Atheist hates the cross! Amazing!

Why such a low turnout? Some say it's because this was a special election and if a candidate didn't get over 50% of the vote they'd be forced to have a run off in November anyway. Others say they're just too busy with the kids, the job, the gym, etc.

As I watched the election results, it struck me that 72% of San Diegans apparently don't give a rip who will govern this city -- or whether the cross stays or goes. Have they given up hope that their vote will have any real impact? Or, is it possible we're looking at a larger trend around the country of political apathy?

Low voter turnout is not a new phenomenon that's just hitting San Diego. For years voter turnout has been dropping in almost every city election across the land. I see it as a sign that voters have an attitude that nothing's going to change, so why waste the time.

Part of the problem is that our nation has become polluted with politicians instead of statesmen.

Politicians often say one thing and do another once elected, such as promising to protect the U.S./Mexico border and then allowing millions of illegals to welcome themselves to our land of plenty. Or making campaign promises of 'no new taxes' -- then telling us they have 'no choice' but to raise taxes -- instead of cutting expenses. Their slogans sound so good, yet provide so little. They even promise to keep us safe from terrorism, yet refuse profiling which would stop them in their tracks.

Then, I thought about the vote to save the cross on the War Memorial, which was dedicated to the sacrifice our service men and women have made for their country. This three-story high cross has been seen for miles in every direction for 50 years now without bothering a soul. Yet suddenly it offends one Atheist and his liberal ACLU-backed attorney and the fight is on.

The passage of 'Prop A' allows the city to turn the memorial over to the Federal Government to make it a National Park. So now, instead of forcing the cash-strapped city of San Diego to fight the ACLU, the fight will now be with the Federal Government.

What's interesting is that support for Prop A was lead by a Jewish man, Phil Thalheimer -- hardly a man who views the cross as an expression of his personal faith.

According to Mr. Thalheimer, "As a Jew the cross reminds me that when you have this type of religious intolerance, it leads to what my family experienced." (His parents are Holocaust survivors.) "Symbols come down little by little just like they did in Nazi Germany in the 1930s. And where does it stop? The answer is that it doesn't."

Now the fight over the separation of godly symbols from our culture will continue in the courts. It seems no matter how many times the voters have spoken on an issue, a liberal judge still has the ability to overturn the will of the people on the basis that it is "unconstitutional" in his/her opinion.

There was a time in this country when judges and politicians had a sincere and deep respect for the only true Judge on ALL issues in this world -- GOD. The Bible was our plumb line for right and wrong, black and white. The Ten commandments were considered America's moral standard, pure and simple. But the day we started allowing liberal judges and politicians to remove symbols of God from our society is the day the decay began. How quickly we've forgotten Who it was that blessed us to begin with.

So, the next time you hear of a low voter turnout in a local election, ask yourself how many repressed world citizens would give their eye teeth for the right to vote. Sadly, we may soon have more in common with them then you think -- unless we use our right to vote.

Perhaps its high time the people of faith become even more "extreme," in the words of Barry Goldwater.

Craig Smith WorldNetDaily Archives


How Cafta Passed House by 2 Votes -Edmund Andrews, NYT
By EDMUND L. ANDREWS
The New York Times
July 29, 2005

WASHINGTON, July 28 - It was just before midnight on Wednesday when Representative Robin Hayes capitulated.

Mr. Hayes, a Republican whose district in North Carolina has lost thousands of textile jobs in the last four years, had defied President Bush and House Republican leaders by voting against the Central American Free Trade Agreement, or Cafta.

But the House speaker, J. Dennis Hastert, told him they needed his vote anyway. If he switched from "nay" to "aye," Mr. Hayes recounted, Mr. Hastert promised to push for whatever steps he felt were necessary to restrict imports of Chinese clothing, which has been flooding into the United States in recent months.

As it turned out, the switch by Mr. Hayes was decisive. Within a few minutes, the House approved the trade pact by the paper-thin margin of two votes, 217 to 215. The pact would eliminate most trade barriers between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

The cliffhanger House vote was one of the most wrenching in Congress this year, and it highlighted the messy compromises that were necessary to overcome deep antagonism in many quarters toward trade-opening agreements.

The restrictions Mr. Hastert promised could come soon. Within the next 10 days, the Bush administration is expected to rule on whether to impose import quotas on Chinese sweaters, wool trousers, bras and other goods.

Mr. Hastert "said to me, 'If you vote with me, we'll do everything we need to do in your district to help with jobs,' " Mr. Hayes recalled.

Democrats charged Republicans with buying votes and forcing members to vote against their consciences.

But Bush administration officials said the ultimate goal was one of high principle: an opening of the United States to greater competition and engagement with poorer countries in its own backyard, a liberation from trade barriers that would benefit Americans as well as their neighbors.

"This became much bigger than Cafta, because it became a political issue," said Rob Portman, the United States trade representative. "It was important to our position as the global leader on trade, so we had to fight back, and to fight back meant being very aggressive, explaining why it was good."

Trade agreements have almost always been difficult to pass, because any reduction in barriers provokes intense opposition from unions and industries that would face new competition.

But the Central American trade pact became a litmus test for both parties, a precedent for both the opportunities and dangers of freer international trade.

In economic terms, the Central American trade pact will have a negligible impact on the United States. About 80 percent of the exports from those countries to the United States were already duty-free, and the total trade volumes are tiny: American exports to the six countries - about $17 billion a year - are about equal to the annual global exports of New Jersey.

Supporters of the trade pact said it was the principles at stake, a reaffirmation and an expansion of the much bigger North American Free Trade Agreement of 1994 that linked the United States, Mexico and Canada.

Like Nafta, the Central American free trade pact will eliminate most barriers to trade in goods and services and most barriers to investment. It will give American companies tough new legal rights to enforce patents and copyrights in other member countries, and it may give some pharmaceutical companies even greater protection against generic drugs in Central America than they have in the United States.

But labor unions and their Democratic allies charge that the pact offers strong backing to corporations while offering little additional protection to low-wage workers in Central America. As a result, they contend, it will encourage American companies to shift more jobs to those countries.

Whatever the economic merits, the vote on Wednesday night made it clear that the political appeal of the trade agreement was low. Only 15 Democrats supported the measure.

And despite intense pressure from President Bush and House Republican leaders, 27 Republicans voted against the deal; many others badly wanted to do so.

The biggest opposition among Republicans came from textile producing states in the south, sugar-producing states like Louisiana and Idaho and old-line manufacturing states like Ohio and Pennsylvania.

FULL STORY


Rewarding Terror -Rachel Ehrenfeld and Paul E. Vallely
FrontPageMagazine.com
August 2, 2005

The latest terror attacks in London found the West shocked to realize that Islamist terrorists have established a worldwide support system. This, however, should not have surprised any student of terrorism.

Israel, which since the first Hamas attack on April 13, 1994, has suffered hundreds of suicide bombings in which more than 1200 of its citizens and foreign nationals were murdered, and thousands maimed and wounded, has identified the terrorists' international financial and tactical support links. Yet Israel received little sympathy and even less assistance from the international community in its efforts to stop these terrorists. Even now, as law enforcement agencies are busy tracking and exposing Islamist terrorist cells, and world leaders are condemning terrorism, Israel is conspicuously absent from everybody's list as a country victimized by terrorism.

This "oversight" is consistent with the fact that Israel is being pushed to surrender to Islamist terrorism and reward Palestinian Jihadists who are committed to the destruction of the Jewish state, and even to provide them with the necessary gun-power to achieve their aim. Has anybody suggested providing more explosives to the al Qaeda cells in Britain? How can anyone distinguish between the victims that were murdered in cold blood aboard the London Tube and busses and the victims that were murdered on board busses in Tel Aviv or a pizzeria in Jerusalem?

Only the 9/11 attacks on America utilized different suicide mass-murder tactics than all the other Islamist attacks in Britain, Spain, Russia, Egypt, Morocco, Turkey, Italy, Afghanistan, Pakistan, India, Indonesia, the Philippines, Thailand, Argentina, Kenya, Tanzania, Iraq, and Saudi Arabia. In each of these countries, the methods were similar, if not identical, to the suicidal bombings in Israel. Only the scope was sometimes different.

US Secretary of State Condoleezza Rice's and Jacques Chirac�s demands that Israel supply ammunition to the PA, which has consistently refused to disarm and denounce violence against Israel, will simply add more fuel to the fire, and will lead directly to more death and destruction.

After the London attacks, the Western world leaders at the G8 meeting in Scotland, stated jointly that "We are united in our resolve to confront and defeat this terrorism that is not an attack on one nation, but on all nations and on civilized people everywhere." At the very same time, the Palestinian president Mahmoud Abbas joined Syria's president Bashir Assad in Damascus to celebrate the London bombings along with other leaders of U.S. - designated terrorist organizations including Hamas, Islamic Jihad, and the Popular Front for the Liberation of Palestine. Not one world leader condemned that meeting.

The more time elapses since the first Hamas suicide bombing in Israel, which was excused away by Hamas and accepted by most of the international community as a reaction to Israeli oppression and occupation, the more suicide bombings became an existential threat in the West. Yet, instead of supporting and encouraging Israel in its fight against these Islamic terrorist organizations and conditioning future assistance and territorial independence upon the Palestinians fulfillment of ALL the agreements they have repeatedly violated, the U.S. and its European allies are pressuring Israel to provide these terror organizations with a new base of operations- the Gaza Strip � and to provide them with the weaponry which they can then use to attack Israel and the West.

As long as the Saudis continue to fund madrassas where Jihad and martyrdom are praised, and Iran continues to fund, harbor and train Jihadists, Shiites and Sunnis alike through its Syrian/Hezbollah connection and their support of Islamic Jihad and Hamas in the West Bank and Gaza as well as other Islamist groups in Europe, the Middle East and Southeast Asia, the Islamists commitment to Jihad, the only commitment they have been known to fulfill, will continue.

Their overall united objective is to destroy Israel and Democratic free societies, while using supposed oppression by Israel, America and its allies to justify their continuing violence. To solve the Israeli/Palestinian situation, a broader and stronger Middle East Policy must be adopted and executed by the United States and Israel that takes out of play those nation states that continue to support and fund terrorism and radical Islam.

Giving Palestinian Islamist terrorists a territory in and from which they can operate freely would only contribute directly to the escalation of terrorist attacks, suicidal or otherwise, around the world. With this in mind, the U.S. should reconsider its pressure on Israel to appease terrorism.

http://www.frontpagemag.com

LET'S GO: LIBEL -The New Yorker, 8-8-05 Edition ...When the first plane crashed into the World Trade Center, Rachel Ehrenfeld was sitting at her desk in her apartment in midtown. "I was on the phone with my editor in Brussels, finishing an op-ed about terror financing for the European edition of the Wall Street Journal," she said the other day. "I ran up to the roof to see what was going on, then I came back downstairs and did a new lead. It ran the next day."

Rachel Ehrenfeld, Director of American Center for Democracy (www.public-integrity.org), and author of Funding Evil; How terrorism is Financed and How to Stop It. Paul E Vallely, Major General, US Army Ret and Senior Military Analyst Fox News Channel and Co-author of Endgame -Blueprint for Victory in War on Terror.

Related Story
Operation Divest Terror -SATC
...7-8-05 -- Private-sector offensive aims to shut down 'business' of extremists... The goal of "Operation Divest Terror" is to help investors identify U.S. companies whose business activities provide revenues, equipment and technology and political cover to governments sponsoring terrorism and send them a message this is a bad business decision.


A Golden Solution To The China Syndrome? -Richard Lehmann
http://www.silverbearcafe.com
July 29, 2005

Put yourself in China's shoes. Your economy is heavily dependent for its economic growth and well being on exports to the United States, long its least-favorite country. It has to accept payment for its exports in U.S. dollars,a currency over which it has no control other than to cause it to depreciate by trading out of the dollars it holds and into another currency.

(Note: This is something the U.S. is trying to get China to do to itself by revaluing the yuan.) To add insult to injury, it has accumulated a staggering $700 billion of such dollar reserves and sees no other investment option besides the U.S. Treasury market.

Hence, they not only supply cheap goods to this least-favored country, they then lend it back the proceeds of their labor lending which makes them vulnerable to a freezing of these reserves by the U.S. should serious enough policy differences arise, a la Iran. Welcome, China, to the World Trade Organization, or should I say, "Welcome to the Hotel California."

Fairly recent history offers two examples of countries who have dealt with this problem with mixed success. In the 1970s, when OPEC managed to take control of the oil market and more than double prices, their foreign reserves quickly built up as they had not yet figured out how to spend these vast sums. Their solution was to invest in CDs with large international banks, thereby providing the funds necessary for oil-importing countries to fund their higher oil import bills. This dubious arrangement lead to an international banking crisis, as the debtor nations defaulted nearly causing some major international banks to fail.

The 1980s saw a replay of the reserve problem, only this time the country with the excess reserves was Japan. Their attempt to diversify out of dollars led to an organized spending spree involving the purchase of hotel properties, signature office buildings and golf courses. The problem with this strategy was that it was premised on the notion that property values overseas were cheap in comparison to those in Japan. The flaw in that thinking was that it was the Japanese values that were out of line, not those in the rest of the world. Bottom line, the Japanese overpaid. As for their infatuation with buying and building golf courses around the world, leave this to a psychologist to explain.

The recent purchase attempt of Unocal (nyse: UCL - news - people ) by CNOOC (nyse: CEO - news - people ), the state-controlled China oil company, exemplifies an attempt to pursue yet a different route for diversifying out of dollars. China appears to be trying to spend its foreign reserves to buy entire U.S. companies. From a Chinese strategic point of view, this is definitely the right policy: Buy the means of producing the raw materials you need or alternatively, buy the companies that have the technology and distribution channels for the products you produce or want to produce.

For the United States, however, this strategy is a serious threat that goes beyond trade rivalry. Let no one kid himself. International trade and capitalism is a form of warfare where domination is the objective. A country such as China is playing a different game from most WTO members�they are mercantilists. That means they are not interested in creating a level playing field and letting private enterprises compete. They want state involvement to a much greater degree than is practiced in the U.S. This means direct ownership of key enterprises, setting economic priorities, controlling foreign ownership participation, rule-making that favors national enterprises and using commerce to achieve foreign policy ends.

The U.S. has allowed foreign ownership of domestic companies except in cases involving national security. This usually means protecting against foreign control of sensitive technology, defense companies or vital sources of supply. Even excluding these types of companies, China could make major inroads in dominating key industries in this country.

Such dominance by a country that is fundamentally hostile to U.S. interests will not be tolerated by the U.S. government. We already see this with the protests over the CNOOC tender for Unocal, the acquisition of which is, at best, peripheral to U.S. interests. That protest, however, should be a clear signal to China that acquisition of U.S. operating companies is a non-starter that can only lead to further strained relations.

How then can China reduce its subordination to U.S. interests and use its dollar reserves to strengthen its role in world affairs? I believe China will eventually find gold as a partial solution to its foreign-exchange problem. While an immediate reaction may be to think this is nonsense, a closer examination may provide some food for thought. Gold was the world reserve standard for centuries until former President Richard Nixon closed the "gold window" on Aug. 15, 1971. What he did, in effect, was end the exchangeability of gold for dollars at the fixed rate of $35 per ounce. In effect, the U.S. stopped being a sponsor of gold under a system whereby it set the price and became the buyer and seller of last resort.

The change was necessitated by the fact that foreign holdings of dollars had gotten well beyond the U.S. reserves for gold. Even a steep rise in the pegged gold price would not have solved the problem for long and would have rewarded Russia and South Africa, two countries not then in favor with Washington. Also, the U.S. stood to gain tremendously from the new world order in which the U.S. dollar became the world�s reserve currency by default. It would be no exaggeration to say that Nixon�s action was one of the keys to America's subsequent world economic dominance.

When America abandoned gold, no one was inclined to step in and continue the gold standard. And since gold earned no interest, nations around the world began to systematically reduce or eliminate their gold holdings. Time has shown that such gold holdings would, through subsequent appreciation, have served quite well as an alternative to U.S. Treasurys. However, in today's world of multibillion-dollar reserves, the gold market is too illiquid to serve its former role.

To revive gold's role as a reserve currency, it again would need a sponsor, a buyer and seller of last resort who dictated the support price. That price could increase each year, per government policy, by a set amount. China, with its $700 billion in reserves has the clout to assume this role. Keep in mind that gold is still a scarce resource that has not kept up in supply with the growth of world economic activity. It is insufficient in quantity to serve as the main world reserve currency unless its price was vastly higher. It could, however, be a close second or third. More importantly, like the De Beers diamond cartel, it can be extremely profitable for its sponsor.

Dominating the gold market would offer a number of benefits to China. It offers a viable alternative to buying more U.S. Treasury debt. It allows them to set the rate of return on their gold investment, much as De Beers sets the price of diamonds. However, their control of prices would be even stronger since a net buyer role is much stronger than the De Beers role as a seller. In fact, once China let its newly assumed role in gold become known, a worldwide gold rush would commence, driving prices well above current levels. China will not be able to take control until well into this initial rush. Over time, other nations would join China in again holding gold as a way to reduce their dollar exposure.

Holding large gold reserves can serve China's domestic economic policy, as well. China does not want to see its citizens investing abroad. Allowing Chinese citizens to buy gold would help satisfy domestic saving and investment desires while also giving the government a means of regulating the money supply. Gold has a long history with individual Chinese as a way to hide and preserve wealth, a way made no less attractive by the mistrust that is always present with an autocratic central government.

The ultimate attraction of such a policy for China is that it allows them to reduce their vulnerability to the United States. Even more so, it allows them to play a dominant role in international affairs, clearly a high priority with current Chinese leadership. While it is not in the U.S. interest to strengthen China�s role in world affairs, it is a better alternative than letting pressures build inside China's government over a perceived, if not actual, threat to their sovereignty. Also, other solutions to the dollar reserve problem may be dreamed up that prove to be far more dangerous to the current international order. Forecasts are for China's reserves to grow to $1 trillion dollars by June 2006. Such an accumulation only puts more pressure on the Chinese to find an alternative solution.

http://www.silverbearcafe.com

Richard Lehmann is editor of Forbes/Lehmann Income Securities Investor. Read more analysis and information from Lehmann, or subscribe to Income Securities Investor.


Renowned Fund Mgr Predicts Global Economic Collapse -Al Martin
www.almartinraw.com
July 29, 2005

Julian Robertson formerly ran Tiger Management, the world's largest hedge fund.

Martin describes Julian Robertson as "One of the greatest of the old-timers. 53 years on the Street. He manages the Robertson group of funds. They used to call him, still do call him `Never Been Wrong' Robertson. He has predicted every economic cycle, every debacle, every bull market, and every bear market." Martin says "Of course, he's a very old man now. But his reputation on the Street is like nothing you could imagine. When the segment of his interview was through, his comments alone took the Dow Jones down 50 points. Just on his comments alone. That's how powerful this man's reputation is."

Robertson said that he's worried about the speculative bubble in housing and the fact that more than 1/4 of all consumer spending is now sustained by that bubble, plus the fact that 20 million citizens could lose their homes in a collapse of the speculative bubble in housing, and that the Fed and, indeed, central banks worldwide would act in concert out of desperation to re-inflate the global economy in the process, creating an inflationary spiral unheralded in the economic history of the planet.

"Where does it end?" Robertson was asked and he said, "Utter global collapse." Not simply economic collapse; complete disintegration of all infrastructure and of all public structures of governments. Utter, utter collapse. That the end is collapse of simply epic proportion.

In 10 years time, he said, whoever is still alive on the planet will be effectively starting again." Bill Murphy of Letropolecafe.com says "As for Robertson's comments as they relate to the gold price, we will most likely see the gold price somewhere between $3,000 and $5,000 US an ounce. Wait until the facts surface about how the central banks squandered 2/3 of all their bank reserves to foster a price manipulation scheme. There will be a frenzy to own the stuff like never seen before." Julian Robertson blamed everything on what he calls 'the Bush-Cheney regime'.

He says "they have now consolidated power and money on the planet to the maximum extent possible. The planet's net liquidity, that is its, net free cash flow. Is now a negative number. The planet is not simply sinking into a sea of red ink; it is already sunk. The people just don't realize it yet."

Robertson says "the Bush-Cheney regime is preparing the nation for transition from democracy into dictatorship because a dictatorship will be necessary to control, in 5 years' time, food and water riots."

He said "the federal government, that part of Patriot II Act, the internal exile, that the government is going to have to build now huge detention compounds on federal lands, probably in the West where the land is available, to potentially house 50 million or more citizens that will be in financial ruin."

Julian Robertson went on to say "Food production will fall. Any further effort to control environmental destruction will be abandoned. Inflation will run into the double and eventually triple digits. People will be carrying around U.S. dollars in wheelbarrows like Germany."

Robertson said there would be "total collapse of public infrastructure. Total collapse of medical care systems. All public pension plans, Social Security will collapse. All corporate pension plans will collapse."

Robertson backed up his comments with statistics in one statement he said "But, 14% of all real estate transactions now being interest-only mortgages, and another 14% of people now, that, when they bought their homes, originated more than 100% of the purchase price in the mortgage and then borrowed further."

He said "The American consumer is effectively now supporting the rest of the planet, consumption rates in all other nations are falling, have fallen to the point that the tax revenues to governments, that the business and industries those nation states are providing is now a net negative number relative to total debt service and public cost, that this exists in virtually every nation state on the planet now."

He said "More importantly, and I am trying to think how we imply this or how we express this to the people, what extraordinary times we are living in and how the destruction of the planet has been engineered by the Bushonian Cabal from 1980 to 1992, and then from 2001 to present, which has effectively destroyed the economic liquidity of the planet."

When Ron Insana the interviewer said "you have sold all of your real estate and you are moving into one of the new super-secure compounds for wealthy Republicans for when the 'barbarians will be at the gate.' Robertson replied, "Ron, those barbarians will be potentially a third of the American population." Robertson ended his comments by saying that "he hopes that he is not alive to see this. The lucky ones are the ones who are my age now."

I would add to Julian Robertson comments, the lucky ones will be the ones who buy gold and silver coins now, at less than $500 an ounce before the price of gold sky rockets to $3000 then $5000 an ounce and the price of silver goes over $100 an ounce in the years ahead as Julian Robertson's predictions, made in his interview on CNBC, unfold.

www.almartinraw.com


A BLAST FROM THE PAST... (It's what we reported one year ago...)

SAFETY FIRST! -Aug 1, 2004

MARKET NEWS DIGEST

-> NY/NJ/DC Put on `Orange' Terror Alert, Ridge Says
-> $43 Oil, 21-year high, Stocks take a hit -CNNfn
-> July Consumer Confidence Rises to 2-Year High
-> 9-11 Panel Wants to Release Four More Reports -DR
-> MIDDLE-EASTERN INVADERS CAUGHT IN ARIZONA -TT
-> BRITAIN to Issue Safety Leaflet on Terrorism -Reuters
-> OIL prices rise on terrorism fears -Reuters


COMMENTARY

-> THE DEMOCRATIC MYTH, AMERICA THE FREE? -Bill Bonner, DR
-> THE CURRENCY OF TERRORISM -Thomas Kostigen, CBSMW
-> GOLD: THE RED CROSS OF INVESTMENT ASSETS -SATC
-> Faith versus History -John Mauldin, Frontlinethoughts.com
-> O'Reilly's "No Spin Zone" is a farce -Bill Murphy, GATA
-> The Separation of Republican and Democrat -Tom Jackson, GoStrategic


REAL MONEY PERSPECTIVE Archives ~ FEATURED COMMENTARY Archives

REAL MONEY PERSPECTIVES is Growing ~ Post RMP on YOUR website!

Welcome to the 21st century paradigm shift
-- from a "stock-driven era" to a new "commodity-driven era."

In "Economic Solutions for the 21st Century" you'll discover ...
* SOCIAL SECURITY REFORM ... A plan to unify America
* WHY YOU MUST OWN assets that offset a DECLINING DOLLAR
* WSJ SAYS: "You don't have to be rich to invest in COINS."
* WHY SILVER could rise to $50, $75 or even $100 per ounce.
* "ATOMIC IRAN" spells the beginning of a new U.S. "Dirty War"

ECONOMIC SOLUTIONS for the 21st Century -- FREE Offer! ($19.95 value) ... LISTEN: "A Must Read" ... LISTEN: "I SLEEP BETTER!" -Michael Savage

NEW!! -- The Future of Gold and Silver CD Offer! --
Craig Smith Interviews Bill Murphy, GATA -- Recorded: June 1, 2005 (30:00 trt) ... Bill Murphy, founder of The Gold Anti-Trust Action Committee, explains why gold should be $750 and silver $15 an ounce -- nearly twice current prices -- IF major bullion banks would finally stop their market manipulation!


ABOUT THE EDITOR

David M. Bradshaw is Editor of REAL MONEY PERSPECTIVES, a new, syndicated daily financial/cultural news digest. In 2001, he published REDISCOVERING GOLD IN THE 21ST CENTURY: The Complete Guide to the Next Gold Rush and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 2004, he produced "A CITIZEN'S GUIDE TO COUNTER-TERRORISM" a free-to-the-public educational resource on DVD and CD. In 2005, he released a new CD, "WHAT'S YOUR WORLDVIEW?" a one-hour CD sample from his 24-hour series, "THE BIG PICTURE: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. MORE ... PERSONAL NOTE: Youngest daughter Braida Zoe (age 18 mo.) is now feeding herself, running, climbing and floating & swimming. Shown with her mom (and loving wife) Micki.


DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Swiss America. Past performance of any investment is no guarantee of future performance. All investments have risk.
RMP EXCLUSIVE:
In Housing We Trust? Pt. II

Speculation, denial, overseas lessons and "the weakest link"
By Craig R. Smith
Oct. 14, 2005

"It is a scene that is playing out across some of the hottest property markets from California to Florida. Inventories of unsold homes are rising, buyers are turning cautious, prices are slipping after a period of explosive gains, analysts and real estate agents said" -10-11-05, Reuters

Over the past five years, the stock market has gone nowhere and consumer confidence has evaporated, except for U.S. housing prices, which have soared as much as 60 percent -- fueled by a 50-year low in interest rates, lost faith in equities and cheap energy prices. No wonder so many economists are convinced that real estate is a "bubble" ready to pop.

As I stated last week in Part I, my goal is to help readers steer clear of as much economic pain in the future as possible by examining the facts and ignoring the hype.

What, if anything, can be done to hedge a housing crash which could lead to record foreclosures, bankruptcies and collateral damage to the global financial markets?

Here's four more of the seven biggest risks facing homeowners today;

4) Rampant Speculation

A study by the National Assoc. of Realtors (NAR) found that 23% of all American houses bought in 2004 were for investment, not owner-occupation. Another 13% were bought as second homes. Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising -- the very definition of a financial bubble. "Flippers" buy and sell new properties even before they are built in hopes of a large gain. Rising interest rates have already slowed speculation, but what would happen if one in four homes in your neighborhood were suddenly put on the market?

5) Homeowner Denial

A recent WSJ poll indicates most U.S. homeowners today are living in economic fantasyland (aka denial). For example, "Only 10% of homeowners polled said they believe that rising real-estate values had affected their spending, yet over 50% had extracted funds through home equity loans." Do you see a disconnect here? Even a modest weakening of house prices in the U.S. would hurt consumer spending, because homeowners have been cashing out their capital gains at a record pace. Goldman Sachs estimates that total housing-equity withdrawal rose to 7.4% of personal disposable income in 2004. If prices stop rising, this "income" from capital gains will vanish. Then comes the belt-tightening, garage sales and second jobs for many - or else foreclosure.

6) When Realtors Start Warning

David Lereah, the chief economist for the National Association of Realtors surprised some of the industry faithful this last summer by cautioning, "Local housing bubbles could burst in next couple of years". Mr. Lereah listed "eight indicators a market may be headed towards a bust":
1. Home sales falling,
2. Price growth below historical average,
3. More than a 6.5-month supply of housing,
4. Properties taking longer to sell,
5. Job loss in the area,
6. Rising mortgage rates,
7. Negative net migration, and
8. Rising loan-to-value ratios.

7) Lessons From Overseas

While America's housing market is still red hot, others like in Britain, Australia and the Netherlands have already cooled. What lessons might they offer the United States? The first is that, contrary to conventional wisdom, it does not require a trigger, such as a big rise in interest rates or unemployment, for house prices to decline. British and Australian prices have stalled mainly because first-time buyers have been priced out of the market and demand from buy-to-let investors has slumped. The International Monetary Fund analyzed housing prices in 14 countries during 1970-2001, it identified 20 examples of "busts", when real prices fell by almost 30% on average. Japan provides a nasty warning of what can happen when boom turns to bust. Japanese property prices have dropped for 14 years in a row, by 40% from their peak in 1991.

Economists Agree: U.S. "The Weakest Link"

Homeowners who've borrowed against the rising value of their homes in the last few years are starting to pay for it now. In California, just one household in six can afford to buy a median priced home. Even at today's low interest rates, the $568,890 price is too much for most people to handle.

"Self-indulgent consumers are turning their homes into a massive ATM machine," and are the "weakest-link" in a global economy that could come off the rails at any moment, according to Stephen Roach, chief economist at Morgan Stanley.

Other financial wizards tell us we should expect a "Regression to the mean" - which simply means what goes up to high to fast, eventually must come down. But how fast? Still others comfort us saying, "The bubble should end with a fizzle, not a bang".

The Arizona Republic reports, "Broker Jim Sexton said in September eight of 10 homes sold at or below list price. But in April or May, eight of 10 homes went for above their listing price. Sexton said that about 15,000 houses are listed for sale in Maricopa County now. The figure was below 6,000 in the April-May time period and is estimated to hit 18,000 by the end of the year. There's obviously been a dramatic turn. It's not a bubble bursting but an awful lot of investors think this is a time to cash out of the market."

Morgan Stanley economist Andy Xie believes a global housing crash is a serious possibility. "Either you have a big adjustment like a 20% or 30% decline, or you have a big recession or you have a slow decline in property prices or several years of no growth," said Xie, based in Hong Kong.

According to Gary McGill, professor at the Fisher School of Accounting, "I question these hyper markets where people are buying and selling condos three times. To me, it looks more like playing poker. That's fine, until you're the last person standing, holding the condo."

Despite fears in the marketplace about a U.S. housing bubble, about 60 percent of homeowners expect the value of their homes to increase by at least five percent annually during the next several years, according to an online survey of 1,001 consumers.

Beyond the Bubble - Taking Back Control

As housing bubbles in U.S. metropolitan areas begin losing air, the trickle-down will likely effect almost everyone. Where's an investor to turn? That's the subject of In Housing We Trust, Part III which answers the biggest question on the mind of Americans today:

How can I take back control of my financial future -- creating a nestegg capable of keeping up with the ever-rising cost of living, catastrophes (natural or man-made bubbles) and the growing uncertainty in the 21st century?

Is there ANY asset or investment today that's 100% safe, 100% liquid and also has 100% growth potential in the next 5-10 years? Thankfully, the answer is YES! (Hint: it has a 6,000 year track record)

Whatever your view on the housing "bubble" question, I recommend having a long-term perspective and hedging the risks of a potential housing decline. As for my fellow Americans who've NOT bought into the 'bi-coastal bubble', I say bravo! Don't borrow to consume, instead find ways to; earn more, pay down your mortgage, save all you can, and give all you can to your favorite charities. As one economist put it "Losing an opportunity can be much less regrettable than losing money."


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