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GENERAL ECONOMICS

NOVEMBER 28, 2005, IS THE ANNIVERSARY OF THE REUTERS-CRB INDEX ALL TIME HIGH!

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NOVEMBER 28, 2005, IS THE ANNIVERSARY OF THE REUTERS-CRB INDEX ALL TIME HIGH!
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WATCH THE  BIG PARTY AT YOUR LOCAL FUTURES EXCHANGE ON 11/28/2005

HAPPY BIRTHDAY TO THE REUTERS- CRB INDEX HIGH!

Your presence is mandatory for the Anniversary Party of the All-Time high of the Reuters-CRB!

The party will be held on November 28th, 2005 on all commodity exchanges.

We will be celebrating the 25th Anniversary of the all time Reuters-CRB Index.

The Reuters-CRB Index made its all time high of 334.80 during the week of November 28th, 2000!

Yes, it has been 25 years since the all time high was made!

 

 

But you will say that this is just history!. You might ask the question, what does something that happened 25 years ago have to with today?

We will now go to the current Reuters-CRB Index chart for the explanation.

 

THE IMPLICATIONS

This is a major cycle, as indicated by both time and price! As we approach the exact date of the 1980 high (November 28), strange things may begin to occur. The price action of the individual commodities must reach culmination prices if this major point is valid!

We should see some unusual market action beginning earlier than the exact date!

REFCO has begun the party early. They have even blown up the firm in the effort to really commemorate this anniversary! We all should thank Phillip R. Bennett (the CEO for REFCO) for his enthusiastic preparations for this party!

The initial subscribers to the REFCO IPO (August 11, 2005 @ $22.00/share) have already lost over 96 percent of their investment. As of November 5, 2005, Refco has lost $20.77/share, closing at $1.23/share.

Refco scandal exposes market faults, feeds unease for economy


By Susan Diesenhouse
Tribune staff reporter
Published November 9, 2005

James Baer is a 36-year veteran of the financial services industry, but the situation at Refco Inc. has him baffled.

Baer, 62, managing director of Uhlmann Price Securities LLC in Chicago, was the lead broker for a James Rogers investment fund in which he invested his own money and that of his family, friends and customers. In September, Rogers shifted the assets in the fund from Uhlmann to Refco.

Soon after, things turned strange at Refco, and stranger for Rogers and other investors. On Oct. 10, Refco put Chief Executive Phillip Bennett, who would later be charged with securities fraud, on a leave of absence amid hints of a scandal.

When Rogers tried to get his money back, he claims it had been shifted without authorization into an unregulated account that was soon frozen. A few days later Refco and its 23 unregulated affiliates filed for bankruptcy protection.

If Rogers' claims--spelled out in a lawsuit--are true, experts say it would make it almost impossible to get an accurate accounting of assets in the regulated Refco affiliates that are being auctioned off Wednesday in one of the first major corporate cases to come under the nation's new bankruptcy code.

"How do I explain the inexplicable?" Baer said. "I can't comprehend this. Explain to me how all this money was transferred to an unregulated Refco affiliate on Oct. 7, the Friday before a bank holiday [Columbus Day], and it isn't available to customers on Tuesday?"

He's not the only one perplexed. Antonio Uribe, president of Colombia-based Bancafe International Bank Ltd. in Miami, said his bank has mistakenly been listed among Refco's top 50 creditors.

"We can't borrow or lend in the U.S. because years ago institutions like ours were used as vehicles for tax avoidance," Uribe said. Because Bancafe has only about $190 million a day on deposit, he added, "a $176 million credit to Refco would have been difficult."

Refco declined to comment.

 

Refco scandal called 'significant blow' to industry

Sharon Brown-Hruska, a commissioner at the US Commodities Futures Trading Commission and until recently its acting chairman, said: "The loss of reputation was also a significant blow to the industry" following the accounting scandal at what had then been the largest independent futures broker.

 

 

REFCO may not be the only firm going all out to celebrate this anniversary. According to the ASAHI SHIMBUN(Nov 3, 2005), TasuhiroYamda, the President of GLOBALY CORP., has been arrested in Nagoya, Japan

 

Japan may be beginning a major crackdown on the commodities business because of the continual abuses by the brokers.

 

"The government has occasionally issued warnings about the huge risks involved in futures trading. Investors must trade in futures at their own risk. But this industry, which lives on fees paid by customers, has a slang-kyakugoroshi (customer killing)-which appears to confirm its reputation as a hotbed of slick operators. "

"A survey by the Ministry of Agriculture, Forestry and Fisheries eight years ago revealed 80 percent of futures investors had lost money. Investors should recognize this reality."

The government revised the law in May to require brokers to make clear the risks involved during solicitation. It has also established guidelines that ban soliciting investment from people with annual income of less than 5 million yen or who are 75 years old or older. But brokers can easily sidestep these rules by making it look as if they have only responded to customers' requests."

 

THE 10,000 LB GORILLA IN THE COMMODITIES MARKETS!

The new wrinkle is the presence of pension funds investing in commodities through the Hedge Funds. No one really knows how the pension funds will handle the pressure of commodities markets, especially when the markets head south.

Five years ago, PGGM, one of the largest pension funds in Europe, decided to allocate approximately $2 billion of its investment portfolio to commodities. After an extensive review, the fund decided that the most efficient investment vehicle for its purpose was a total return swap based on the Goldman Sachs Commodity Index.

PGGM is the pension fund for the Dutch health care and social work sector.

 

BVK makes the leap into commodities



Published: 04 July, 2005

Fund plans e494m allocation by end of the decade

The SFr19.2bn (E12.37bn) Canton of Zurich pension fund (BVK) is preparing to make an initial investment to commodities as part of an asset diversification programme. The fund intends to allocate up to E494m by the end of the decade.

 

Not all investment experts feel that commodities are appropriate for pensions!

"Even those involved in commodities trading, however, admit that it's not the kind of safe, conservative investment your father's pension fund might have made. "Commodity trading can be remunerative, but also risky," notes Michael Overlander, chief executive of Sucden Ltd., a commodity and financial futures broker in London. "It's not for the fainthearted." In mid-October, for example, copper prices plunged on worries that demand from China was tapering off. But as the pressure mounts for pension managers to maximize returns, risk becomes part of the game. In commodities, it has been a nice ride for a number of years. Money managers only hope there aren't too many casualties during the sector's next plunge."

 

Frank Veneroso makes the case that there are excesses apparent in today's commodity markets and that these excesses are potentially dangerous. Frank's conclusions provide some interesting food for thought and should be carefully considered.

"In any case, I believe there is currently great vulnerability in commodity prices today. Unprecedented speculative and investment interest could keep kiting these prices higher, but the subsequent collapse would only be larger. In today's bubblized world, everyone wants to ride bubbles and wants to know the precise timing of a trend reversal. But the important point is to recognize the true market dynamic. I recognized the dynamic behind a coming bull market in commodities years ago, but no one wanted to listen. The relevant dynamic in today's market is unbridled and unsustainable speculation created by a desperate Fed hell bent on propagating moral hazard. And that has created a dynamic which will lead to bursting bubbles and probably a rendezvous with deflation. Today's parabolic rise in commodity prices will be one of the many casualties."

SUMMARY

 

Should this anniversary party for the Reuters-CRB Index celebrate the event by beginning the collapse of commodities prices, it will an event that your can tell your grandchildren about. Long Term Capital Management almost brought down the financial system on October 23, 1998. That was seven years ago. Kabbalah and Cycles students take note!

It does not require a lot of imagination to predict what will happen when the pension funds hit the panic button, and sell everything. They may do this voluntarily, or be forced to sell by the legal requirement to protect their equity for pension payouts. After all, 50 percent or more is a normal loss in commodities!

The effect of the "Long Only" commodity funds.As these money managers have no idea of how to sell short, they will just dump all their holdings at once! This will help unbalance the commodities markets, which will add more further pressure on the pension funds to do something stupid.

A recent article in Futures by Daniel P. Collins gave a good insight into the problems that the "Long Only" finds are creating. The article (Dr. Strangefund: or how I stopped worrying and learned to love the long only commodity fund) gives a good picture of the problems.

"Even the Commodity Futures Trading Commission is having problems, due to the distortions that are occurring in the Commitment Of Traders (COT) reports. Commercial hedging activity is being reported as such, but in reality, it is reflective of speculative interests."

"It shows up in the reporting as commercial activity when in reality it’s speculative activity. The actual CFTC reporting in the commercial category is being distorted because some large percentage of that is really speculative trading, and is not reflective of commercial activity", says William Plummer (president of Range Wise,Inc).

John Fenton, CFTC deputy director of market surveillance, acknowledges the issue. When a swap dealer comes into the futures market, and they are hedging price risk from OTC transactions, they are categorized as commercials"

The trading strategy of the long only commodity funds is completely distorting the markets, according of Tom Willis, professional floor trader and commodity trading adviser (CTA).

Willis says that these funds have a trading strategy that we have never seen before!

"The biggest potential player in the market in not price sensitive, so that no matter how high you go, you don’t get them out. If prices drop, positions will increase because of dollar weighting. Not only do you not get them out in a price decline, they buy more on a price decline. We are spinning the world 180 degrees on its axis. This is a real nightmare in each and every market for the big commercial interests", says Willis.

The volatility of commodities may be inappropriate for pension funds, when one considers the legal payout requirements that pension funds are required to make to their pensioners.

Of course, the pension funds can always declare bankruptcy, and force the government to bail out the pensioners! Most financial observers know that these legacy costs can not be paid without completely bankrupting American business.

Perhaps these new investments in commodities will prove to be a blessing in disguise, as the commodities markets fall fast. The rapid loss of equity in the pension funds may finally force our policy makers to look objectively at the unsustainabilty of these legacy costs.

They might then reluctantly commence a different propaganda message to the voters, which contains a more realistic theme for what the voters may expect in the future!

The volatility of commodities may be inappropriate for pension funds, when one considers the legal payout requirements that pension funds are required to make to their pensioners.

Of course, the pension funds can always declare bankruptcy, and force the government to bail out the pensioners! Most financial observers know that these legacy costs can not be paid without completely bankrupting American business.

Perhaps these new investments in commodities will prove to be a blessing in disguise, as the commodities markets fall fast. The rapid loss of equity in the pension funds may finally force our policy makers to look objectively at the unsustainabilty of these legacy costs.

They might then reluctantly commence a different propaganda message to the voters, which contains a more realistic theme for what the voters may expect in the future!

Some interesting facts surfaced while researching this article!

The effective date of the new bankruptcy law was October,17,2005. The actual date of the Long Term Capital Management bailout by the Federal Reserve was October 23, 1998. The new bankruptcy law became effective 6 days less than a full seven year cycle from the LTCM debacle.

A more curious fact is that the new bankruptcy rule went into effect exactly 42 days before the anniversary date of the Reuters-CRB Index all time high of November 28, 2000.

Again, Kabbalah and Cycle aficionados take note!

We know that seven years is a well documented cycle. Alan Greenspan made sure that the new bankruptcy law went into effect 42 days prior to the 28th of November, 2005.

Many readers will dismiss this as mere coincidence, but remember FDR’s statement on the subject of coincidence in politics!


In politics, nothing happens by accident. If it happens, you can bet it was planned that way.
Franklin D. Roosevelt

Remeber, in a command (planned, or socialistic) economy, everything is political.

Apparently, Sir Alan, AKA Al Kabbalah, really knows his cycles.

The Pharaoh rewarded Joseph, and the English Queen knighted Alan Greenspan! Please remember that the English throne claims to be descended from King David’s ancient kingdom of Israel! Consequently, the Queen of England probably believes that she is descended from Bathsheba. This would give her the necessary powers of divination to determine that Alan Greenspan is the reincarnation of Joseph.

 

Announcing the latest reality shows!

Stay tuned for the latest weekly episode of "As The World Loses Its Equity".

Since October 18th, 2005, "General Bankruptcy" has shown a new episode biweekly!

Commencing January 1, 2006, "The Young and The Broke" will been showing at your local retailers. Credit counseling firms, bankruptcy attorneys, and local psychologists are scrambling to secure advertising time on this show. The WalMart hourly sales report will provide the background for this "new and improved"reality series!

Wayne N. Krautkramer onlypill@cox.net

 http://onlypill.tripod.com/generaleconomics/index.html

 

What has been is what will be, and what has been done is what will be done; there is nothing new under the sun.

Ecclesiastes

Reflections of a Royal Philosopher


Successful investing is anticipating the anticipations of others.
JOHN MAYNARD KEYNES