Dollar in the Dumps, Heads Roll at CFC, Gold $1,000, and More!

by Addison Wiggin & Ian Mathias

  • The greenback’s new all-time low… time to buy the dollar or are lower lows on the way?
  • Gold maintains the $700-plus mark… is $800, $1,000 on the horizon?
  • Countrywide makes its own special contribution to this month’s jobs report… we’ll save you the suspense… they ain’t exactly hiring
  • Picture this: Putin as editor in chief of The Wall Street Journal. It almost happened…
  • Gabrielle spares Carolinians… but more storms are on the horizon. Gunner’s hurricane play spikes…
  • Plus… a special “short” play, free to readers of The 5… details below


The Fed’s “trade-weighted” dollar index busted through the resistance point we’ve been watching.
At 77, the index is at the lowest point since the St. Louis Fed created it in 1973.

“There is more room on the downside,” commented Chris Mayer after viewing this chart. “It’s hard to make a case for the dollar when so many dollars remain out there to trade — and when the central bank still seems so willing and ready to pump more dollars into the system at the merest whiff of troubles.”

John Williams’ ShadowStats.com reports that thanks to recent Fed pumping, money growth is running close to 50% annualized over the past several weeks.

“It’s pretty obvious the Fed is going to let the dollar collapse
,” writes Dan Denning from his perch down under this morning, “to prevent major recessionary pain from the housing market in the U.S.”

“Inflation has been the ‘predominant concern’ of the Fed all year long, and for good reason… the dollar has been in the pits for sometime. If the Fed’s hand is forced to lower rates, traders will surely rush in for the kill. And if there were ever a time for China to bail out of its ‘nuclear option’… this would be it.

“Makes you wonder, could gold reach $1,000 in the next couple of weeks?”

Gold isn’t exactly in the four-digit range yet, but at $703, it looks like it’s ready to challenge its 2006 high of $720.

“Gold has headed higher as more and more people come to understand that gold does not have counterparty risk,” says James Turk of GoldMoney.com. “It also remains undervalued. Gold is not only a safe haven, but a good value, too.”

On Friday, gold broke above the downtrend line it has followed since the May 2006 high.

Turk’s upside target for gold this year is $800. “To be honest,” he says, “I thought we would be there by now, but we’re not, thanks to the central bank. We have reached a state in the gold market where central banks cannot restrain gold at these relatively low price levels. So I still expect to see $800 this year.”

U.S. stock markets took it on the chin Friday… major domestic indexes lost close to 2%.
The Labor Department’s first negative jobs report since 2003 sparked an early-morning sell-off that held steady right through the closing bell. Japan’s Nikkei lost 2%, akin to the U.S. sell-off, but otherwise, international markets were pretty flat. No contagion brewing just yet…

The fleet-footed John Williams calculates that “consistently adjusted” jobs fell 82,000, rather than the widely reported 4,000.
“When the popular media and consensus economists start talking recession,” Williams warns, “usually, an economic downturn already has been under way for a year or so.

“The 2000 recession gained rapid recognition following Sept. 11, but the terrorist attacks did not trigger the downturn. The recession had been in place for over a year; the attacks only deepened an ongoing contraction. In like manner, the current recession has been under way for well over a year, but it was not triggered by the liquidity crisis that erupted in August, only intensified by it.”

And the September jobs report is off to a bad start as well… U.S. mortgage giant Countrywide announced they will cut up to 12,000 jobs by the end of the year
… that’s 20% of their entire work force.

“Countrywide’s retail and wholesale lending divisions plan to continue aggressively pursuing the increased opportunities presenting themselves in the current environment for profitable market share growth,” said the company in a press statement on Friday. We guess that means putting thousands out of work.

In the same statement, Countrywide predicted a 25% cut in loan originations in 2008. The mortgage sector could shed as many as 100,000 jobs by the end of this year.

Stock prices for CFC fell down to $18 on the news… much to the delight of Survival Report
subscribers. Their Countrywide put is currently returning 217%, and growing every time ol’ Angelo Mozilo opens his mouth.

Tropical Storm Gabrielle proved to be all bark and no bite over the weekend.
She came rolling right into North Carolina, but ended up being more of a surfer’s delight and less of a destructive force.

Interestingly enough, despite Gabrielle’s tame performance, Gunner’s East Coast storm-reconstruction business saw a nice volume spike. You’ll recall from last Thursday’s 5 Min. Forecast, forecasters are still expecting a busy hurricane season. This image from NOAA seems to agree:

If any damage occurs on the East Coast, this Bulletin Board Elite pick could explode… a great way to speculate on the hurricane season. Click here to gain access to the portfolio.

After having dodged Felix and Dean themselves, several pipelines owned by Petroleos Mexicanos near Veracruz were destroyed this morning by bombs.
The last time guerillas attacked, in July, they stalled operations at Honda, Kellogg and Hershey.

“The price of natural gas continues to wallow around and not do much,”
Chris Mayer tells his Capital & Crisis readers, “but there are two long-term, seemingly relentless natural gas trends that bode well for those invested in the industry.

Price movement like this is making many natgas stocks “move around sluggishly like fat dogs in the noonday sun.”

“The first is the decline in productivity per well. In 1999, productivity per well was nearly 4 billion cubic feet of gas. Today, that productivity is about only 1 billion cubic feet per gas well — a 75% decline (according to the EIA and Baker Hughes).

“Second, drilling intensity is rising. In 1999, total wells drilled every month couldn’t top 400. That figure was over 1,500 last year — yet domestic natural gas production did not increase. It seems clear the natgas industry is running on a treadmill that’s getting faster. New natural gas is getting more expensive and harder to find. This is good for drillers, as well as companies loaded with proven reserves and that have the ability to grow production. The demand for natural gas should also intensify the search for new wells.”

Capital & Crisis readers have natgas drilling and production plays in their portfolio, both of which Chris says are still a “buy.” Click here to check out the C&C portfolio.

Here’s an odd bit of international news. Before News Corp. offered to pay $60 per share for The Wall Street Journal, Gazprom — the massive state-owned energy company — contacted Dow Jones with a rival $5 billion-plus offer.

On Friday, Dow Jones completed a regulatory filing with the SEC on Friday in which it revealed an “approach from an international oil and gas company.” Gazprom, the Times of London later confirmed, was that company.

For entertainment purposes alone, we wish this deal would have gone down. If protectionists in Washington had a problem with Dubai owning ports, this would have completely flipped them out. Imagine the most influential business publication in the U.S. being run by a massive Russian energy company.

“In some ways,” comments Christopher Hancock on the deal, “Gazprom is like a sovereign wealth fund. It’s effectively controlled by the state, it has cash to spend and it’s already diversified in a multitude of industries.

Gazprom’s reach is already astounding in Russia. Aside from controlling the biggest gas reserves in the world and an equally massive oil business, it owns Russia’s only nationwide independent television station, several newspapers and radio stations and Russia’s third largest bank.

“If anything,” says Chris, “this offer symbolically illustrates Gazprom’s perch as the arm of the Kremlin. If you control energy, the media and banking… you’re holding a pretty heavy hand.”

Back here in the States, apparently, a married duo of mortgage brokers fell on hard times “and so opened a brothel,”
reports Whisky & Gunpowder’s Greg Grillot. If there was ever a “beat” for Greg to cover, this is it:

Police in New Rochelle, N.Y., arrested Richard Werner and Heather Mezzenga, both mortgage brokers, after the two decided to turn a home they couldn’t sell into an illegal prostitution house. According to neighbors, the couple lowered the price of the home from $750,000 to $600,000… and then, all of a sudden, the house went off the market, windows were covered in heavy shades and at least five cars started parking outside the house every night.

“Addison,” Greg comments, “if our stock research service business turns south like the mortgage biz, I wouldn’t mind opening a brothel…or a drug smuggling ring…or at least a traveling carnival.”

If you can juggle or swallow swords, e-mail Greg and reserve your space on the carny wagon here: greg@whiskeyandgunpowder.com

“I read an English translation of Unrestricted Warfare while living in China during 2003,”
writes a reader. “After a quite accurate assessment of U.S. military prowess, the authors concluded that the weak point of the fascist insect is the monetary system — something anybody dealing with the IRS, as well as most folks at Agora, will readily agree with. Thanks, Agora and Dr. Richebacher — I now have paid for property in the Highlands of Panama plus physical gold and silver.”

You’re welcome. Maybe we’ll come by for a visit.

Regards,

Addison Wiggin,
The 5 Min. Forecast

rspertzel

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