NOt a great deal to "blog" about today. The Frauds article that i wrote was published all over the internet, and i received a lot of complimentary emails which is allways good, guess it makes you feel that you have a valid contribuition to make.

The Amaranth blow up was certainly serious, we have had Natural Gas positions on many occasions the last one blew up like Amaranths, but for a lot less money. What i found strange is that the Natural Gas market is notoriously volatile, Brian Hunter the enery trader at Amaranth was not only using dangerous volumes of leverage, but had not heard of stop losses !!!!! result he took the whole fund down.

You also have to be on your guard 100% of the time, ready for the unexpected. Brian Hunter was a hedge fund superstar becuase he had correctly forecast the huge Natural Gas rise after Katrina what he did not factor in was the arrival of JP Morgan Chase into the market in a serious way. When it all went wrong, it was a combination of JP Morgan Chase and Citadel Investments who were on the other sides of the trades and were there at end to liquidate Amaranths trades.

Also fortuitous that Goldman Sachs decided to suddenly change the weighting of there commodities index which led to a major shakeout in all the energies markets. The politically acceptable commodities takedown was obviousl GASOLINE just before the November elections.

Amaranth to me looked like a classic case of too much trader enthusiasm and margin fostered by a big winning streak after Katrina versus Wall Street/Political interests. They got stretchered out of the game.

Allways be very wary of anything the politicians do or say, and even more carefull of Wall Street instituitions, they are as President Jackson once said "A Den Of Vipers". I am certain that Brian Hunter of Amaranth would agree.

The Frauds

Imagine waking up one morning with a wonderful dream still fresh in your mind and then imagine that this dream is going to become a reality today.

You switch on the morning TV, make a light breakfast, look out the window and brew a fresh coffee, lets have a brainstorming day, lets think of a new business idea. Trust me it is going to be a life changing day.

The Business must be immensely profitable, easy to manage and control, extremely low overhead, No stock, and ultimately lead to major social standing and power.

You go to your computer load up Adobe Photoshop and design the most exquisite looking bank note. Far more beautiful than the private Federal Reserve Banks Dollar. It really is a thing of beauty, you alter the colours for each denomination but the beautiful design remains on each note. You decide to call them Frauds you have a 5 Fraud a 10 Fraud a 50 Fraud and even a 100 Fraud note.

Next morning you take 20 Frauds to your local supermarket you buy food that comes to $18 you hand across your 20 Frauds and explain that they are equivalent in value to the Dollar. The checkout girl immediately agrees and gives you $2 change.

Can you imagine your feelings when you came out of the shop, those Fraud notes only cost a few cents to make !!! And yet here you are with $18 worth of shopping, real physical tangible goods. That night you name your business Fraud Inc and print off 50,000 Frauds, it used a lot of paper and ink.

The next day you go to your local Ford dealership and choose a new car that costs $43,000 you hand over 43,000 Frauds and the salesmans response. "Thankyou Sir, for your business, your car will be ready for you to collect later today".

As you drive home in your new car, you stop at the store to buy paper and ink it comes to $180 you pay with your Frauds, no problems at all. That night you set the printer up for sheets of 100 Frauds and leave it running all night, the following day and the next night!

Now the big test of the Frauds you go to the real estate office and see your dream house 6 bedrooms, huge swimming pool, manicured grounds, large garage it costs a staggering $3.2 million. You tell the agent that you wish to buy it and pay with Fraud notes, her reply "Absolutely no problems at all Sir, we will prepare the contracts immediately"

That night you get blind drunk you have something to celebrate and tell your best friend about your wonderful new business Fraud Inc. He listens intensely and thens asks "Can I loan some Frauds from you?" you reply yes, but at 5% interest he readily agrees. What have you got to lose you are not actually loaning him anything, which means that all you have to lose is the cost of the paper and the ink.

This really makes you think, because with the Frauds not only can you purchase anything you ever need, but you can also make more Frauds by loaning them to other people, or even businesses and the Goverment. As these people are desperate for your Frauds you can dictate the interest rate that they will pay for the use of the Frauds. If we take property as an example, you not only lend Frauds but you get people to sign a contract so that you can change the interest rate that they will pay at any time that you wish throughout the term of the contract! This is real power. As they will not own the property until they have paid back all the Frauds and interest that they owe you. In many respects it is better that they do not pay you back, because then under the terms of the contract you can take there physical property a real tangible asset and it has only cost you the paper and ink. Hopefully they will have paid you a few payments anyway which will cover this insignificant cost.

Fraud Inc is living up to the original Business plan superbly it is immensely profitable, easy to manage and very low overhead. Infact it is zero overhead as you can print your own Frauds to cover this small cost, and any other costs !!.

In this story you really do live happily ever after.

What i suggest you do is quickly buy up all the media who will explain to the masses what a great and fair idea the Frauds are. You can also control the politicians with the media as it is there life blood, remember these are the people who could legislate against the Frauds. As regards the masses give them an election every few years they will think that there vote matters, in reality they are simply voting for your handpicked men, with the power of Frauds you will control the complete political process all he cards. If the masses ever get unhappy with the feudal debt bondage that they will effectively live under, then the politicians will allways be the neccasary fall guys the masses will be directed to blame the effect and change the politicians BUT NEVER TO CHANGE THE ROOT CAUSE OF THERE MISERY, your Frauds.

Sound far fetched? Take a Dollar note out of your pocket NOW, look at it closely, what do you see? notice it is just a piece of paper not even a very high quality piece of paper that can be printed at will. Just like a Fraud because ultimately it is a Fraud.

The Federal Reserve Bank prints Dollars at will, infact the US Mint prints them and charges the Federal Reserve Bank the cost of this printing. The Federal Reserve Bank has monopoly rights of distribution. Imagine that the only petrol stations in America were owned by Exxon you had to fill up at one of there stations. This is a pure monopoly no corporation would be allowed that BUT and this is a big BUT The Federal Reserve Bank is a PRIVATE BUSINESS and it has that monopoly power for the issuance of money. It actually uses other banks to distribuite money and credit to the masses, but it regulates and controls the whole process.

The Federal Reserve Bank buys Bonds from the US government for fresh new electronic or printed Dollars. The Bond is an IOU a loan nothing else and it stipulates that the Federal Reserve Bank will receive an interest percentage for granting this loan. We have the completely crazy position whereby the American government expands time, effort and money to design and print one piece of paper called a Treasury Bond. They then give these to the Federal Reserve Bank who give them Dollars which have already been printed by the government and then they incredibly CHARGE THE GOVERNMENT INTEREST ON THE DOLLARS THEY ALONE PRINTED.

Would it not be a far better solution to print the Dollars which is what the government needs and dispense with the Treasury bonds completely. One piece of printing and NO INTEREST TO PAY.

Benjamin Franklin did this with "Colonial Scrip" Abraham Lincoln did this with "Greenbacks" and JFK had reintroduced the "greenbacks" before he was assassinated. This is what Abraham Lincoln said about it at the time

"The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity... By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest. The financing of all public enterprises, and the conduct of the Treasury will become matters of practical administration. Money will cease to be master and become the servant of humanity."

The International bankers the very same crowd that own the Federal Reserve Bank to this day, were not so impressed, the following appeared in the London Times newspaper. However they do endorse it as a wonderful idea

"If this mischievous financial policy, which has its origin in North America, shall become indurated down to a fixture, then the Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe."

The following may be just a conspiracy theory but having the right to print Frauds and charge interest on them is the ultimate private business. In every crime there is nearly allways a motive, I would say that JFK liquidating the ultimate private business would provide a lot of murder motive for those who stand to lose. It is also striking that the very next day after the murder LBJ stopped the reintroduction of "Greenbacks" and what of Abraham Lincoln? He was murdered as well. It does seem that is a Politician fails to endorse and support a debt based fiat money system, he or she has a dramatically reduced life expectancy !

For a tremendous article describing in detail the giant fraud which is the present banking system and the even greater fraud which is Fractional Reserve Banking please click here.

www.trendinvestor.info/Earth.pdf

One final thought with modern computers it is easier to transfer Frauds electronically, so you do not even have to print them. When you next look at your mortgage statement you are working every day to pay "interest" on something that never really existed, it is simply Frauds in a database somewhere, it is a fraud. What is backing that fraud is your families home a physical tangible asset. What is backing the Frauds lent to the Goverment is the taxation of the people they are the collateral. Remember all they have loaned you is Frauds it is a win, win situation for the Bankers if you continue to pay THEY WIN if they foreclose THEY WIN.

One final thought the Federal Goverments total ANNUAL tax take or income is approximatly $2.2 trillion dollars and they spend nearly $500 billion on the military each year and nearly $450 billion dollars on the national debt INTEREST . The total national debt is now nearly $8.5 Trillion Dollars or $29,500 for every man, woman and child in America. A family of four has a debt built up by the Goverment of $118,000

I told you that Fraud Inc is a great business, it is the ultimate private business.

We have a major problem with statistics !

Government statistics are becoming more of a self serving sham as every day passes. The truth is that nobody knows what the real GDP is and nobody knows what the real rate of inflation is ! We are told that the American GDP is circa $12 trillion dollars but this includes a whole raft of hedonic adjustments. For example a computer 10 years ago would have cost $1500 today it costs $500 but today's computer can do far more than yesterdays computer so we will give it a value of $2000 as regards the GDP calculations. Farce?

Inflation is calculated without using figures for "volatile" housing, food and energy. Maybe I am wrong but I would say that mortgage costs, and heating and petrol costs together with food are my largest costs BUT THEY DO NOT FIGURE ANYWHERE IN THE COMPUTATION OF THE OFFICIAL INFLATION FIGURES instead of mortgages they use rents, which is convenient as they are then able to completely ignore the whole housing bubble. Farce?

Nearly everyone relies on the governments inflation figures to calculate COLA allowances against Pensions, Benefits and most Wage increases. You are being, for want of a better word screwed. Imagine that everyone in America work,s for me not a pleasant thought !!! I am going to tell you that my "official" rate of inflation is 2% so you will all get a 2% wage rise this year, OK?. I know that the real rate of inflation is far higher and is actually closer to 5% by telling you it is only 2% I save myself a payment of 3%, so I have a good motive to lie about the real inflation rate IT SAVES ME MONEY.

When the GDP is calculated a "deflator" is used to represent the rate of inflation,for example if the economy is growing at 3% a year but real inflation is also growing at 3% a year then there is NO GROWTH. The problem is that the GDP is inflated by way of "hedonics" and the inflation rate is reduced by using "reverse hedonics" which means that growth is being booked THAT DOES NOT EXIST. Farce?

It all makes the GDP look far larger than it really is and the rate of growth far higher than it really is. This makes it easier to keep floating on the market new bond issues and keep the interest payments far lower than they should be because potential bond investors look at the "figures" and see that the GDP is large and growing so the ratio of debt to GDP is acceptable, and that inflation is quite low, so lets buy some bonds.

It always amuses me that countries use the GDP/Debt ratio when most GDP,s are an extremely unreliable measure. A far better measure would be to use the TOTAL TAX COLLECTION/ Debt ratio, is the government really going to repay the nations debt with hedonically adjusted computers?

Unfortuantly Debt will be repaid out of what the Goverment receive from taxing the people. The people are the collateral for all the bonds or IOU,s issued

The total tax take or put another way GOVERMENT INCOME for 2006 is $2.228 Trillion Dollars and the national debt is approximatly $8.5 trillion dollars the interest payment on this debt will be just over $400 billion dollars annually or approximately 4.7%.

What we can immediately see is that the debt is approximately 400% of the total tax take and that 17% of the total tax take is spent servicing the interest on this debt. The amount of $400 billion is similar to the total amount spent on the American military. It also shows that the Goverment CANNOT ALLOW INTEREST RATES TO RISE very much as the leverage built into there debt is now very large, at bond rollover times the interest payments would soar.

This is a hard statistic as it measures the total debt in relation to the total money that the government have available to service this debt.

http://www.publicdebt.treas.gov/opd/opd.htm

http://www.whitehouse.gov/omb/budget/fy2007/pdf/07msr.pdf

Not a lot to report today, looks like the election fix is well under way push up stocks and bonds, hold the dollar stable, hold housing together for another few months and smash commodities just like Bush,s election in 2004 which was also in November. Hopefully this rally will gather some momentum and then morph into the Santa Claus rally.

Personally with a slowing housing market I think it will ultimately morph into the mother of all bear traps as we see a customary reversal in the first 6 months of 2007, just like we did in 2005 and 2006.

It is very sad and very worrying that we have reached this stage of blatantly manipulated markets, it makes you wonder what else they are trying to manipulate. To summarize our position

Stocks - Since January 2004 we have been in NO MARKET not up or down but grinding sideways. To the manipulators this is a far better solution than what we should have had Phase 2 of the bearmarket.

Bonds - Being monetised via the "Caribbean Banking Interests" and Britain to regulate the long end of the curve. The heavily talked about flattening of the yield curve is the inevitable result of raising short term rates while monetising the long end to protect the housing market.

Housing Market - This is running out of steam on its own accord, dodgy borrowers, dodgy lenders, dodgy appraisers, dodgy real estate agents, dodgy builders the whole bubble has been blown on a mass of lies and now the truth is out for all to see.

Commodities - Only real bull market in town, but very unloved by Wall Street and open to blatant attack and price manipulation.

Precious Metals - As commodities BUT MORE SO

What to do? Stocks stay LONG but don't expect to make much, Bonds you would be buying at a peak with a yield of about 5%, which is probably lower than the TRUE INFLATION RATE. However the risk of a Bond market crash is very slim in my opinion why? It would destroy American Business, Consumer and government all of who ARE FAR TOO MUCH IN DEBT and could not afford the inverse of a bond market crash HIGHER INTEREST RATES they will monetise the debt further as they have already began to do. Housing NO !!! This is going to be a disastrous investment the next 10 years, that's right MINIMUM 10 YEARS, housing busts or even corrections tend to be very long term remember the the last one which went from the late 80,s to about the year 2000. The Japanese bust went from the late 80,s and is still going, 16 years and still running.

Commodities? Yes this is the only true bull market in town BUT and this is a BIG BUT they will try every dirty trick in the book to try and dislodge you from your position however much you would like to YOU CANNOT USE MARGIN it is just too dangerous especially in the Precious metals. Sad but true

Time to put the Sherlock Holmes hat on and try and detect what is happenning. To set the record, we are long term trend INVESTORS we do not trade. Why? becuase trading does not work search GOOGLE or YAHOO and look for millionare traders and nothing comes up. People like Soros and Buffett are longterm investors as was Jesse Livermore and Jim Rogers.

Livermore and Buffett have both stated publicly that the MARKET CANNOT BE BEAT. So why would we bother to try?

We look at charts but only to get a feel as to the markets trends, for every technical analysis buy signal there will be a sell signal, for every divergence that works, there will be one that does not.

We only look at Weekly and Monthly charts as daily charts are really just nosise and give no real clarification. On most of the weekly commodities charts recently we were seeing extremely well formed triangles, also on the USD chart. Now conventional technical analysis wisdom is that a triangle breaks out in the direction of the dominant trend. This proved WRONG commodities whose dominat trend was UP, have been hit very hard this last week and the USD has moved up very slightly. To me this smells. I believe very stongly that the commodity markets in particular are very heavily manipulated THEY DO NOT WANT RISING COMMODITIES for many reasons

1, The energy,s are inflationary they affect the price of everything eventually as we are so dependant on them. Joe Public sees rising petrol and gas and electric prices and thinks " this is not good i better tighten my belt" he slows his consumption. As the consumer is 70% of the economy this is bad news !!!

2 The precious metals show up the truth as regards inflation so they need to be managed downwards to maintain the inflation lie. Does anybody honestly believe that the real inflation rate is approximatly 3.5% per year as officially stated? i would suggest that you are smoking some pretty good stuff if you believe this. By understating the official rate of inflation this is theft pure and simple. Anybody receiving Pensions, benefits or wage rises based upon the official calculation is being shortchanged the difference between the official rate and the true rate. Compound this theft over several years and the person will be feeling real poverty. Gold and Silver is real money as JP Morgan stated in front of a senate select committee when asked about the role of Gold "Gold is money and nothing else is" so the dollar denominated value of real money has to be "managed" to maintain credibility in the paper money which is inheretly worthless.

3 Base commodities such as base metals and agriculture products are earnings destroyers, they are business inputs. If a company has to pay higher prices for imputs this will flow through to the bottom line and hurt nett profits or earnings. This will affect the share price of the company. This is becuase we know that the share price of any company has a long term PE ratio average for a publicly traded company of 14 to 1. If earnings are decreased becuase of increased input costs then the share price will fall eventually to reflect the new earnings reality.

So make no mistake commodities have no friends in Wall Street or the City Of London the tragedy is that real people are being conned by inflation manipulation and most of the 2nd and 3rd world is largely a product of Wall Street and the City. These poorer or very poor countries rely on commodity exports WHICH ARE ALLWAYS MANIPULATED DOWNWARDS.

They are manipulated by using futures exchanges, for example Silver is bought and sold in 5000 ounce contracts. It is a paper game and rarely involves physical silver. For every contract buyer there is a contract seller as all contracts must match. If there are more buyers than sellers the contract price rises. If more contract sellers than buyers then the contract price falls.

Becuase the contracts are denominated in $ the large banks WHO PRODUCE DOLLARS AT NO COST have a huge market advantage. They can produce any amount of SHORT or sell contracts whenever they wish to overwhelm the market, which they frequently do. The 1987 stockmarket crash was the largest one day crash in history even greater than any of the declines in 1929. In many of the commodities this is a regular event, in Silver it has happenned 3 times in the last 3 years !!!!

Why? these bone crunching falls are deliberate and orchestrated, the large Banks work together at the behest of the Fed, when they wish to take a market down they pull there bids. This means that desperate sellers find there are no buyers, the market enters a vaccuum until they step forward to cover there SHORTS by buying from the badly bruised and beaten LONGS.

The reason is simple they DO NOT WANT MARGIN OR LEVERAGE BUILD UP IN THE COMMODITIES MARKETS It is obvious that commodities are in a major bull market, largely the result of worldwide increasing demand but also the supply side problems the result of a near 20 year bear market. Add in rampant monetary inflation and the conditions for a sustained Bull market arec in place. THEY DO NOT WANT TO MAKE IT AS EASY AS THIS. We are invested in commodities but we do not use margin, we believe in the fundementals of commdities but we fully understand that it is a white knuckle NO MARGIN ride.

If you want to invest in commodities great! BUT and this is a very BIG BUT be carefull they are often treacherous markets. This treachery is man made by some very powerful vested interests.

That is the tragedy, the reality we have elections coming up in November so would it not be "usefull" to have Energy prices falling, the stockmarket rising and house prices stabilised right before the election to help, the voters with there decision !!!. The markets are looking like a rerun of 2004 with George Bush,s election "victory". You can guarantee that Bernanke at the next meeting will ceratinly "pause" and may even "cut" to help the election cause

It was time for a commodities TAKE DOWN that simple.

My Present market thoughts are as follows. We are trapped in a Kondratiev Winter or a supercycle bear wave. This will probably continue for many years until real GAAP PE ratios hit historic bear market lows of below 10 and probably closer to 7. At the height of the 2000 Bull market they were 40+ which is just ludicrous. Large progress has already been made back towards fair value as they are now in the area of 16. We know that a longterm fair value average is 14. We call the markets "BULL" or "BEAR" these are representative of animals. They need feeding just like an animal a Bear market needs a constant appetite of falling stockmarket prices, interspersed with the occasional rally or Dollar devaluation. So far this Bear market has received both with the S&P 500 the broadest index a near 20% decline from the peak and a near 40% decline in the USD index. However if we measure the Dollar by way of gold the only true measure the decline has been closer to 240%.

To save the stockmarket, Alan Greenspan cut interest rates to historic lows which resulted in a huge housing boom. If you can afford a $100,000 mortgage at 10% then you can afford a $200,000 mortgage at 5%. Existing homeowners found that there houses soared in value which led to many of them extracting "equity" at low interest rates to spend in the economy. This "equity" extraction eventually falls into the bottom line of Americas largest companies as listed in the S&P 500. If profits are rising because of all this equity extraction then the PE ratio rapidly comes back into line as we have seen, which will arrest further MAJOR market declines. We have had pullbacks against the extremely weak BULL trend that has been in force since early 2003 but no major declines as per the period 2000 to end of 2002. It looks to me with the beauty of hindsight that we have had phase 1 of the bearmarket, we then had the 2003 bearmarket rally, or Iraq war rally. Since then the market wants to enter Phase 2 of the bearmarket but is being stopped by way of massive inflation and also timed intervention. If you divide the S&P 500 price by the Gold price it clearly shows that we are well and truly into Phase 2 of the bearmarket and have been since the summer of 2005.

Housing is rapidly turning into a major headache for Wall Street, the equity extraction is rapidly slowing as house prices have reached extreme overvaluation. This could easily push the economy back into recession which is what I fear, as never forget the consumer is 70% of the American economy. If the housing market slides it will also wreck the balance sheets of many financial institutions as people slip into negative equity. The major problem is that the average house to the average customer is nothing more than a leveraged margin account. If you put down 10% and the house increases by 10% in value you have made a 100% gain, you were using 10 to 1 margin. Leverage works both ways if the house fell in value by 10% instead you have just lost all your equity!.

Commodities have done very well these last four years as they are the only true bull market in town. Some of the gain has been because of genuine supply and demand issues primarily because of China and Indias growth, and constricted supply the result of a near 20 year bearmarket. However another major part of the gain has been the destruction of Dollar purchasing power. Producers want more of Bernankes devalued Dollars to pay for there finite resources. There is a lot of talk about Peak Oil. My own belief is that this is for real. It is very obvious that for oil to move from below $20 a barrel to above $60 a barrel in such a short space of time. There are geopolitical problems aside, major supply problems. The problem with investing in commodities is the extremely volatile nature of the market. I am positive that much of this volatility is deliberate and an attempt by Wall Street and the City Of London to deliberately stop the build up of large margined positions in the direction of the dominant primary Bull trend. Commodity rises are inflationary, they affect the bottom line and lead to interest rate rises nt good for the pushers of paper assetts !!!!The 1987 stock market crash was the largest 1 day fall on record even greater than 1929, we reguarly see falls of this magnitude in the commodities markets, it is a normal event. So my advice to anybody thinking of investing in commodities IS DO IT as it is a true bull market. But do not use any margin and expect a very bumpy ride, you will need nerves of steel.

That's it for now, I was expecting the Dollar to break downwards, giving commodities and the stockmarket a boost. This has not happened as of yet but we will watch with interest.

Lets have a go at using this Blog technology. I run an investment website called www.trendinvestor.info last year 2005 we finished 2nd out of nearly 400 investment managers as listed at www.iasg.com this year so far has not been so good, but plenty of time left in 2006 to turn this around. I have many investment thoughts that I would like to share. The markets are dynamic and change frequently as does my thoughts regarding them. What interested me about blogging is that it is a great way to time and date all of my thoughts. Everyone has an opinion, I want to test my market opinions publicly. If my market opinions are seen to be largely correct then I have built a reputation. That reputation then has a marketable value. That is why George Soros and Warren Buffett are such rich men there market opinions over many years have been proven correct, which is why there reputations are regarded in the financial community so highly. For a list of my previous articles which have proven with the passage of time to be very accurate please go to the following link http://www.financialsense.com/fsu/editorials/shepherd/archive.html
I will "blog" as and when i have something interersting to say. The advantage of Blogging is the fact that i can post so quickly