Our current political administration has followed the left-wing liberal domestic and foreign agenda  to the letter. Domestic policies include higher taxes, more welfare, encouragement of union power, destruction of capital markets, driving out wealth and investment, and tossing a cascade waterfall  of handouts to band aide an economic malaise. The new foreign agenda is to renounce a previous stance of patriot hawkishness, embrace enemies with timidity, and put forth unabashed appeasement that would do Neville Chamberlain proud. Gold remains the only choice.

This new blueprint for destruction of the United States will produce a debt burden taking decades to repay, encourage unemployment, and kill the golden goose of capitalism. Worst of all, these policies encourage our enemies to push, prod, test and perhaps attack. It appears a whole new gang of international criminals are and will be descending upon our South American neighbors. We do not wish to forecast trouble, but would be very surprised if some of the really bad stuff Europe and the Middle East has experienced does not land on our shores this summer. God forbid.

In the Middle East, there are so many messes it would take 50 pages of details to explain them all. The Iraq war being the worst has moved to Afghanistan and more robustly into Pakistan where higher dangers of nuclear war rears its ugly head. Hundreds of thousands of innocent Pakistan refugees are caught in the middle of fighting and violence. Unless the Pakistan military has the temerity to instigate ferocious attacks against their enemies and erase them for good, this goes on for years. We think they lack the will to do this. And, the escalation of Middle Eastern tensions continues to grow.

The second hotter spot is a potential conflict between Israel and Iran. It is now clear our president will not help Israel. This has been a long standing US policy but is now obviously discarded. After the meeting between Obama and Israel’s new prime minister, Netanyahu, Israel could begin to prepare for all-out war in the Middle East. It is clear to their leaders they must attack Iran’s nuclear facilities, or risk annihilation. This confrontation could probably be prevented if our president would stand-up and be counted with a firm ally stance. Instead, he will continue to follow his normal political posture of waffling and no-decisions. This is no time for greenhorns and inexperience in the White House. But, sadly, that is what we get. Iran’s missile tests were another warning.

While the president is stoutly for welfare and all of its attendant trappings, the tough decisions are left to dangle as he has demonstrated so convincingly during his tenure in the Illinois legislature. History says that people lacking the nerve to stand-up and be counted will be crushed. That is our new fate for the next two years, as a minimum, until the next election when voter dissatisfaction could go nuts. Watch 2010 voting.

The Die Is Cast In Bronze-Plan For War And Extreme Economic Hardship

Our 2003 forecast said Ford Motor Company would go bankrupt. We hold to this forecast but its obvious GM and Chrysler beat them to it. Also per our predictions, GM has announced they might leave Detroit probably citing affordability of their monster headquarters building. The real reasons are to exit the USA’s failed auto market, and dump all health care and pensions on the US taxpayers. We think they move to Germany using Opel as the new GM base for a corporate headquarters and European operations. Buick stays in China and very few US plants and facilities remain. The US car market is dead for a decade. And, the United States as a world class manufacturer is down the drain. The steady off-shoring of American manufacturing for cheap labor has gutted the US’s ability to provide for itself in many key markets. We think this comes back to haunt.

“General Motors is considering moving its headquarters from Detroit, selling-off U.S. plants and even renegotiating parts of its restructuring plan with its major union, the new chief executive said Monday. A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler and a sharp downturn in auto manufacturing. GM purchased its glass-towered headquarters building known as Detroit's Renaissance Center in 1996 for $625 million. GM's current restructuring plan, which is supported by the U.S. autos task force is headed by former investment banker Steve Rattner, would cut about 21,000 more U.S. factory jobs.”- Reuters & CNBC

US autos are literally crashing as Chrysler buyers stay away in droves due to the company’s bankruptcy, lack of dealer credit and no confidence in the job market. Would you buy a car from  a manufacturer in bankruptcy owned and operated by the UAW and US Government?

Largely unnoticed in the auto news is the demise of dealers. An auto dealership surprisingly employs more people than you would think. The National Automobile Dealers Association says 3,000 dealers will close and that could only be the beginning. They tell us each of those dealers employs an average of 53 people so 159,000 jobs in this sector could be lost. The Detroit News says that’s more than GM and Chrysler’s (domestic) workforces combined. And, this does not include 6-10 parts supplier jobs for each manufacturing position. If 50,000 GM and Chrysler employees are laid-off this could mean 300,000 to 500,000 more auto parts suppliers’ jobs are eliminated. This is shaping-up to be an unbelievable disaster.

The cost to various local communities is staggering. Taxes will not be incurred nor paid. Those huge dealership lots would be a blight on the suburban landscape encouraging crime, stealing store metals and fixtures. Further, those facilities would probably remain empty for many years.

The U.K. has announced they plan to hike taxes for the wealthy to 50% of income. With other province and local taxes, the total take should round out at a nice 75% of gross income. Anyone with a brain and the ability to leave England for greener more friendly pastures will do so. That is beyond socialism. We think it is criminal.

The United States is next. New tax policy is to tax anything that moves as 800 new tax employees seek to grab more from overseas. Domestically, the president will increase taxes everywhere in a strain for more government income. This kills the source of most tax funding; the dominant small businesses.

The state’s are in much worse trouble as they have to balance their budgets by law. Almost all of the 50 states in our union have some problems with many having disasters. California is toast but will be re-funded with big Obama checks. My state of Michigan is now seeing a shortfall for fiscal 2009-2010 of $1.4 Billion. Naturally, instead of cutting-back state expenditures, new state employee raises are proposed and the grabby-grab for more taxes to cover prevails. One of our favorites, Rick Santelli of CNBC asked, How about a federal government pay cut of 20% to match other comparable industry norms? Sorry Rick; they get raises and the Sheeple get nothing.

All governments should have taken a clue from the Teabaggers demonstrationsbut instead they laughed and ridiculed them. What happens when the Teabaggers have an empty bag? More and more we see this while administrations across the land are clueless. The ending will not be pretty as taxpayers no longer pay as they cannot pay. Watch for massive municipal bond defaults with California leading states down the fiscal drain.

Consumers have been the engine of prosperity in America but are tapped out. The savings rates by consumers recently rose by 4% from next to nothing. They are not spending but are now saving out of fear. The big banks have been recapitalized from TARP money but few are lending. They need their capital to keep loan-capital ratios intact. The silly Stress Tests were nothing but a public relations ploy to calm the herd. So far it’s working but underneath this facade of “all is well” lurks trillions in derivatives. Consumers have no remaining credit. Even the upper class has cut-back on spending. In tony Bloomfield Hills, The Corporate Auto Address, a huge mansion of 22,000 square feet offered at $15mm is being auctioned this week end with opening bids at $2.5mm!

Smaller banks not participating in this reckless lending are caught between the Big Boyz who got loads of TARP cash and a skidding local or regional lending market. They are solvent but have no new business and cannot earn money or, even maintain a neutral posture. As Great Depression II grinds on more banks fail.

Commodity inflation signals have popped-up but could wane on the short term cycle of “Sell in May.” This cycle might have begun yesterday. China is buying replenishment copper but in reality their manufacturing continues to sink as Western buyers are absent. China’s stimulus money was formidable but has failed to expand as expected with no buyers for Chinese exports. Those expecting domestic Chinese buying to cover losses are misguided. New reports from China indicate markets and the economy is worse than expected.

Precious metals, grain, and other food-related commodities should continue to do well over the longer cycle. Soybeans remain strong on fundamentals and food prices continue to rise; particularly in those categories related to basic foods. We wonder how well the luxury prepared frozen foods are doing. We know for example, restaurants are suffering with the exception of very inexpensive fast food stores. McDonald’s is fine as are a few others who can deliver in that price category. Diners have down-scaled and are cooking at home.

Housing has actually bottomed and is finding new buying in the worst of the worst markets like Detroit. For example in the up-scale village of Gross Pointe east of Detroit, it was reported by The Detroit News, that a 24 year-old landscaper was able to buy a little bungalow for $92,000 from the previous owner who paid $165,000 only 4 years ago. In my beaten down local market, they are about $30,000 cheaper for a similar product. A decent Michigan home can be purchased for the price of a new car. Yet uncontrolled utility bills are up 35%.

Unemployment nationally is now a true 20%+ but is reported at 8.9%. In Michigan, the official report says it’s near 12% but reality is 25%. Within 2-3 years at the height of our economic problems, we think the US will unofficially post 33% jobless with Michigan near or above 40%; both exceeding the 1930’s Great Depression number of 25%.

New social problems abound. Tent cities have sprung-up in parks and other places across America. The hungry are multiplying by the hundreds of thousands as officials cannot understand the depth of these troubles, or have a real plan to contend with them. There is money, food and resources available but governments cannot deliver and are not organized to distribute to the needy. We will all pay the price in pandemic malnutrition and starvation, particularly among the retired elderly and very young. Food related crimes will skyrocket. People must eat. Milk, butter and cheese will be 34% higher later this year.

On the brighter side in Michigan, the agriculture community is working harder and planting more. California  will lose roughly 1/3rd of its massive vegetable crop in a no-planting situation as irrigation water was cut-off.  In Michigan, food related employment is 500,000 and 65,000 of those are directly related to farm work or food processing in factories. The last sales report from the Agriculture Department reported 2006 revenue of $4 billion for Michigan. This is mostly from beans, blueberries, cherries, cucumbers, pumpkins, pickles, apples, asparagus, sugar beets and milk cow products. There is also some corn. Michigan also has some excellent vineyards.

Newest growth industries are national government make-work jobs and crime.

Those without work and no education in particular, are turning to many forms of crime. Sadly, many folks doing this are participating out of emergency need and were not formerly criminals. Meanwhile, overcrowding in jails in several states causes politicians to free prisoners early as they lack funds and resources to contain them in jails. Add this group to the newly desperate and we expect a massive and continuous crime wave for years.

This is not a hard recession. This is A Greater Depression II Disaster

Those pundits, analysts and over-paid bureaurats are constantly telling us a new economic base is established and we will rebound to old new highs in late 2009-2010. In our view, they don’t get it. We forecast a bottom before the next major war in 2012. If you count and compare the 1930’s six dead cat bounces to today’s situation, we are in bounce number two; soon to end with the Sell in May cycle.

Should this be true, we’ve four more bottom-to-top-to-bottom cycles to endure taking many years. I don’t see any recovery for ten years. Further, with the over-indebted nations competing for crumbs as domestic and international violence escalates, how much longer do you think the cycle extends? No one knows for sure but the old paradigms and “good old days” are gone for good. Deal with it by purchasing, investing and trading gold and silver.

Weekly gold produced a new breakout on 5-21-09. Goal is double top of $1,007.

Support and three resistance points for shares index (XAU) is nearby 150.00 price.

Dollar reached our goal 80.50 support. Next major support is 80.00, plus or minus .50.

We are nearing a peak in precious metals shares that generally follow the primary stock indexes. When the current stock market peaking descends into Sell in May, PM shares will follow. With each cycle we think they might sell less with higher lows. This will be decided by how far down the S&P selling might go. We expect 800 to 850 with 800 S&P’s more probable.

Do not get tangled up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction.

Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. – Traderrog