Hat Trick Letter – leden 2011

EVIDENCE OF THE UNITED STATES SLIDING INTO THE THIRD WORLD IS STACKING UP. THE ECONOMIC AND DEMOGRAPHIC AND TRADE INFORMATION IS ALARMING. WITH RISING INTEREST RATES AND STATE IMPLOSIONS, TOGETHER WITH USGOVT DEFICITS THAT CANNOT BE FINANCED, EXPECT AN ACCELERATION IN THE RAMPANT AGGRAVATED DECLINE. THE BATON OF DOMINANCE IS SLOWLY BEING PASSED FROM THE UNITED STATES TO CHINA, AMIDST A GROWING TRADE WAR AND HEIGHTENED FRICTION.

The amazing aspect of collapse is that if it occurs slowly, people tend not to notice the overall trend and pattern. The analogy is a frog that does not notice being boiled alive in a kettle atop a kitchen stove. Snapshots every six to twelve months would be far more shocking, rather than the daily slide. Warning signs abound like rising long-term interest rates, threats of downgrade for USGovt debt, lack of improvement in the job market, continued home foreclosures, rising food and gasoline prices, cities and states going bust in their finances, vanishing pensions, the isolation of the props to the stock market, and new dependence of the USTreasury market on QE2 monetary printing, the continuation of the costly endless wars, birds falling dead from the sky, fish washing up dead on the shores, and the further erosion of rights at airports, banks, and foreign embassies.

The US disseminated the arrogant thesis in 2010 that its mammoth deficits do not matter, a notion that should be shattered in year 2011. Huge deficits became a fixture, overruling the temporary notion. It will be the year when the system breakdown explodes in full view, with numerous sides and broken platforms. It will be the year when an alternative to the USDollar is possibly introduced. Foreign economies have a tough choice to sink with the US or to oppose the USDollar in a functional manner. It will be the year that China suffers some shocks, but responds impressively, unlike the US. Their reserves, large industrial base, ample labor force, greater tendency toward capitalism, and ability to bring about true reform will distinguish them from the US, which is committed to its power base and full blossomed failure. It will be the year when in the United States, several major states will go into debt default and ruin, like California, Illinois, Florida, New York, and New Jersey. They will appeal to the USGovt, which will tell them to renege on worker pensions, then to return hat in hand. It will be the year when the US banking system suffers the shock of at least one big bank entering a death spiral, fully denied, but occurring in full view, denied until its bailout request is registered with the USGovt. The consequence of the bank failure will be to threaten the entire US banking system with a possible bank holiday shutdown. The wild card for the United States is a leak of the Mexican Civil War. There is no other accurate way to describe it. The chaos was forecasted in the summer 2007 by the Jackass, timed to show by 2010.

The concept of Too Big To Fail will return to tabled discussions for more debate. In my view, this concept represents a commitment to systemic failure and vigorous defense of the broken status quo, including its tilted power structure where Wall Street almost completely controls the USGovt. True reform and restructure is vigorously blocked by Wall Street firms, as Theky steer the USGovt finances and gut it for their own welfare.

HUGE OUTFLOWS HAVE STRUCK FROM US-BASED BOND FUNDS, WHILE THE OUTFLOWS CONTINUE FOR STOCK FUNDS SINCE MAY 2010. EVEN THE FLAGSHIP PIMCO BOND FUND SAW NET REDEMPTIONS. THE PUBLIC IS STEPPING ASIDE AS THE USFED DOES ITS DESTRUCTIVE WORK.

The bond market contradiction to the USFed monetization plan is without precedent in US bond market history, a grandiose insult.

INVESTMENT THEMES FOR 2011 INVOLVE THE EUROPEAN BOND MARKET, THE AUSTRALIAN CHINA CONNECTION, USGOVT BUDGET BATTLES, MEMBER STATE RISKS WITHIN THE UNITED STATES, FALLOUT FROM USFED SCRUTINY AND CHALLENGES, AND BIG USBANKS FALTERING. THE AUSSIE-CHINA TRADE LINK IS IN THE PROCESS OF EXTREME STRESS TESTS FROM HARSH WEATHER DOWN UNDER.

GREENSPAN WARNED OF A POSSIBLE BOND MARKET COLLAPSE. HE HAS COME FULL CIRCLE FROM BOASTING OF SOPHISTICATED OFFLOADED RISK, TO CONCLUDING THE SYSTEM IS BROKEN AND TEETERING ON THE EDGE. STOCKMAN WAS MORE SPECIFIC ON THE IMMINENT BOND MARKET CRISIS, AND THE WAR COSTS THAT ASSURE ITS  CCURRENCE.

A BIG MUNICIPAL BOND DUMP IS IN PROGRESS. GRAND MUNI SHOCK WAVES WILL BE FEATURED IN 2011. THE RIPPLE EFFECTS COULD EASILY REACH THE USTREASURY COMPLEX. WATCH AS THE USCONGRESS STANDS IDLY BY, ORDERED BY ITS WALL STREET HANDLERS. THE RULING ELITE WISH TO CRIPPLE THE STATES AND TO END THEIR LAVISH PENSION PROGRAMS.

Some bond analysts with a good grip of reality believe the US Muni Bond market has the potential to drag down the USTreasury market.

A war over the USGovt budget will likely expand into a war over the royal-like USFed independence in spotlight. The predatory and secretive deals struck by the USFed will be front & center, as legal challenges mount. The USFed conducted between $13 and $20 trillion in secret loan deals in late 2008, whose cover was given by the TARP Fund extensions. Global elite control and slavery is their objective.

GEITHNER DEMANDED AN URGENT RAISE OF THE USGOVT DEBT CEILING LIMIT TO AVOID A DISASTER. THE CLASH WITH THE USCONGRESS HAS BEEN ENGAGED, EVEN SUDDENLY ELEVATED. THE FEISTY USCONGRESS REPUBLICANS HAVE MADE THE DEBT LIMIT INCREASE DECISION MORE DIFFICULT FOR PASSAGE. THE BATTLE LINES HAVE BEEN DRAWN.

Through their Goldmans Sachs mouthpiece and low ranking lieutenant, the Obama Admin has urged the USCongress to raise the USGovt debt limit with urgent dispatch. They chose to use the diminutive Treasury Secy Geithner. The debt from the USGovt source is expected to reach its legal borrowing limit by the end of March and no later than mid-May 16th. Geithner urged House and Senate leaders to move quickly to raise the debt ceiling so as to avoid an unprecedented disaster or even default. The new USCongress is loaded with mavericks, angry independent types, and lone wolves determined to bring change. Many newcomers have openly pledged to vote against any increase to the debt limit. The stage is set for legislative brinkmanship between the president and legislators, a battle that has played out several times in past decades. The budget showdown features Republicans who will try to

force President Obama to accept deep cuts in domestic spending as the price for their votes. The outstanding gross national debt stands at $13.95 trillion, only $335 billion below the $14.29 trillion debt limit set by the USCongress last February 2010. That headroom slack is sufficient until through the calendar 1Q2011. The limit is expected to be breached this spring. The Obama Admin was leaving to the USCongress the decision on how much to raise the limit.

Geithner made the official statement, „If we are forced to do some [emergency actions] again, these measures could delay the date by which the limit is reached by several weeks. Once these steps have been taken, no remaining legal and prudent measures would be available to create additional headroom under the debt limit, and the United States would begin to default on its obligations. Failure to increase the limit would be deeply irresponsible. It is important to emphasize that changing the debt limit does not alter or increase the obligations we have as a nation. It simply permits the Treasury to fund those obligations the Congress has already established. Given the gravity of the challenges facing the United States and world economies, the world’s confidence in our creditworthiness is even more critical today.“ HE MENTIONS THE WORD DEFAULT!!