• U.S. markets stage strong comeback… back to normal or sucker rally?
• Citigroup drops the bomb… a quick and dirty account of the latest carnage below
• Inflation at 26-year highs, retail sales slump… is anyone not calling for recession?
• Bush pleads for more oil… why the Saudis won’t be saving us this time
• Can’t afford your new home? Burn it down… Foreclosure arsons flaming up across U.S.

You know you’re hurting when IBM posts your most exciting news of the day….

The U.S. stock market rallied yesterday, sending the Dow and Nasdaq up about 1.5% and the S&P 500 up just over 1%. Nearly the entire day’s gains were fueled by an early-morning earnings announcement from IBM. Big Blue beat fourth-quarter earnings estimates by a handsome margin.

But we’re willing to bet very few people noticed this: IBM’s outsized profits were the result of currency moves in its global sales.

“If you take out the currency component,” Chuck Butler from EverBank points out, “IBM’s sales increased 4%, not the 10% for revenues expected. Even big old (boring) IBM can make some money in the currency markets!”

In all, the move shows how desperate the Street is for good news.

And with good reason. Citigroup announced a cornucopia of bad news this morning:

– $18 billion write-down
- $12.5 billion cash infusion from outside investors, including Government of Singapore Investment Corp, Saudi Prince Alwaleed bin Talal and former Citi CEO Sandy Weill
- 41% dividend cut
- 70% decline in year-over-year revenue
- a 4,200 job cut — at minimum
- $9.8 billion net loss — the biggest quarterly loss in the bank’s 196-year history.

Merrill Lynch, Wells Fargo, JP Morgan and Washington Mutual all report earnings this week. While Citi is expected to be the worst of the bunch, similar write-downs and losses are practically guaranteed.

When the dust settles, this might be the worst quarter for financials since the Great Depression.

Rep. Henry Waxman, chair of the House Oversight and Government Reform Committee, has requested Chuck Prince, Stan O’Neal, and Angelo Mozilo to testify at a House hearing next month.

Congressman Waxman wants to ask these former Citi, Merrill and Countrywide CEOs if their bloated salaries and severance packages were “justified in light of your company’s recent performance and its role in the national mortgage crisis.”

It’s so easy to be cynical about Congress on this one… we’ll have to pass. At least it will make for interesting TV.

Neither is there any relief in sight for the economy:

Inflation, for example, at the wholesale level rose to 26-year highs in 2007, reports the Labor Department this morning. While the producer price index managed a tiny 0.1% fall in December, the government reported this morning that total 2007 producer inflation rose to 6.3%, a level not achieved since 1981.

The retail season was rather anemic, too. Total monthly retail sales fell 0.4% in December, says the Commerce Department today. The “biggest shopping month of the year” proved to be the sharpest monthly decline in retail sales in six months. November sales were revised down to a 1% gain, from a previously recorded 1.2%.

And if that didn’t fan the recession fire enough, the National Retail Federation also lowered its 2008 sales forecast to 3.5% — its weakest pace in six years.

And the Baltic Dry Index, which is a measure of freight costs for shipping dry goods like coal and grains, just recorded its biggest two-day drop since its inception back in 1985. It’s now down about 30% from its all-time high in November.

“The slowdown in freight has devastated the shippers,” comments Chris Mayer.“Take Excel Maritime, which was $80 in October… It’s about $30 today. That’s pretty typical. Most shipping stocks have been cut in half. Just another point of evidence that a recession is hitting the U.S.”

The mainstream seems to be taking notice too:

According to The Economist, almost 60% of Americans believe we are in recession.

“High energy prices can damage consuming economies,” President Bush mumbled under his yarmulke today while on a trip to the Middle East. “When consumers have less purchasing power, it could cause the economy to slow down.”

“I hope OPEC nations put more supply on the market,” he suggested. “It would be helpful.”

Aside from threatening Iran, President Bush was visiting the Middle East in hopes of negotiating an OPEC output increase. Iraq is not a planned stop on his itinerary.

Saudi Arabia, perhaps OPEC’s most powerful constituent, will not increase output for the sake of the U.S. economy.

“A recession in the U.S. is very significant to the oil market and demand,” says Saudi oil chief Ali Al-Naimi. “I’m sure that no one would look with pleasure upon a recession in the U.S. But we will raise production when the market justifies it. This is our policy.”

Even if Saudi Arabia could increase their oil output, which is a debate in and of itself, they won’t be doing so for the sake of U.S. consumers. “Over the years,” the sheik continued, “the U.S. has played an important… and appreciated role in the development of Saudi Arabia. However, some people mistakenly think that the [relationship] is controlled by how much oil the United States imports from Saudi Arabia.”

Take that, W.

Gold popped as high as $914 yesterday, setting yet another record high.

There are few assets outperforming gold during this rocky first month of 2008. While the U.S. stock market has fallen 4-5%, gold is up over 8% since Jan. 1.

“The new gold futures exchange in Shanghai,” comments Ed Bugos on our mention of the new exchange yesterday, “is designed for retail investors. According to press reports, the exchange traded one-third of the average Comex daily trading volume on its first day and gold was trading at the equivalent of $1,000 per ounce.

“That’s a $100 premium over the international gold price.

“The Chinese exchanges are still cut off from the rest of the world, which is the reason for the discrepancy. But there is little doubt in my mind that besides the debt crisis and the central bank response, the launch of futures trading in gold on the SFE last week is responsible for the bullish take off in gold this month.”

U.S. mutual fund investors will likely be hit with the biggest tax bills in market history this April.

According to the Financial Times, American mutual funds will most likely ring in a record $350 billion in capital gains taxes for their 2007 performance. Despite a rocky second half, 2007 mutual fund investors will pay more in taxes this year than during the height of the tech boom, whether they sold their positions or not… ouch.

The spike in foreclosures heated up another trend in housing last year: arson.

Allstate has seen a significant spike in arsons among homes in foreclosure, reports Fortune magazine. In California, one of the states hit hardest by the subprime crisis, “questionable” residential fires increased by 76% in 2007.

With “untold thousands of homeowners struggling with ballooning subprime mortgage payments,” reads a report from the Coalition Against Insurance Fraud, “fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments.”

Apparently, this is a common problem when the housing market slows down. Go figure.

“Today’s news about Citi,” writes an overseas correspondent, “was enough to inspire me to move another huge chunk of our savings out of Citibank and into another account.

“I also noticed Citi is seeking more sovereign wealth money — from Abu Dhabi — after being rejected for same from China, which is no longer interested. Wow. Beijing thinks Citigroup stinks so much they don’t even want it.”

Yesterday, a reader wrote: “There is not a shred of fiscal conservativeness among the current batch of presidential candidates.” And then the mail came…

“Obviously, the only information he’s been fed is from the biased, tightly controlled media,” says one reader. “As everyone should know, Ron Paul is the ONLY true fiscal conservative running for president. And he IS running for president! He wants to repeal the income tax, the inflation tax and the 16th Amendment.

“Of course, along with this, he will drastically reduce government spending. I’m sick of people whining about the government, the taxes and the welfare state and then refusing to vote for a stellar candidate when given the opportunity. The whiners will get what they deserve if their whining is not accompanied by action. Do you really, truly want change? Then quit whining and vote Ron Paul for president.

“If there is to be any shred of financial hope for the USA within the next four years,
writes another, “it lies in Ron Paul winning the election. If not, the fiscal calamities promised by this and other prognosticating readers are essentially guaranteed

“Ron Paul,” writes a third, “has very sensible ideas, including the unusual notion that elected representatives, who swear to uphold the Constitution, should actually do that.”

And so on… we received about 30 responses similar to these.

The 5 responds: Here’s the problem. Yesterday, Paul Krugman, writing in The New York Times responded to the increased fear among Americans that the economy is heading into recession.

“Since this is an election year,” Krugman writes, “the debate over how to stimulate the economy is inevitably tied up with politics. And here’s a modest suggestion for political reporters. Instead of trying to divine the candidates’ characters by scrutinizing their tone of voice and facial expressions, why not pay attention to what they say about economic policy?”

He then goes on to review the economic policies of all the candidates. Except one. He conveniently forgets to mention Ron Paul. The only candidate who has actually ever studied or remotely understands economics… and the country’s biggest economic populist (blowhard) doesn’t even mention him.

What can you do? Lest we begin to sound like a recording, the country will need a financial crisis before people are willing to listen to ideas like those espoused by Dr. Paul. And… if current trends are any indication, it looks like it’s going to get one. Probably a doozy.

Cheers,

Addison Wiggin,
The 5 Min. Forecast

P.S. If you’re interested in joining us in Vancouver this summer, today’s your last chance to take advantage of our early registration pricing. We’ll hold our annual Investment Symposium in late July again this year at the lovely Fairmont Hotel, Vancouver. If you’re already thinking about being a part of this incredible event, sign up today and save yourself a couple hundred bucks. See you there…

P.P.S. Thought you might get a kick out of this… we’ve seen several folks looking for tickets to the premiere of I.O.U.S.A. on Craigslist in Salt Lake City. Reminds me of my misspent youth searching for tickets outside sold-out Grateful Dead shows.

By the way, if you do have tickets, or know of someone who does, please stick around after the premiere for a Q&A session. David Walker, the federal government’s chief accountant, and Bob Bixby, director of the Concord Coalition, will be there to field the tough questions. Not exactly Jerry Garcia and friends we know, but should still prove to be a stimulating evening.

• The Dow officially enters “correction”…
• How Middle Easterners just became the largest shareholders in the U.S.’s biggest bank
• Citigroup to fire up to 45,000 souls… some perspective on that “massive” cut below
• Home prices fall at yet another record rate… is any city safe from the housing crisis?
• OPEC delays $100 oil… Kevin Kerr on the real driver behind the latest oil prices

After a morning filled with strong gains and post-holiday optimism, markets took quite a turn for the worse yesterday and fell steeply in unison. The Dow fell 1.8% yesterday, pushing it more than 10% below its all-time high set on Oct. 9 — a textbook “correction.”

Year to date, the Dow is up 2.2%. But that’s a gain worthy of your envy, if you’re an S&P 500 investor. The S&P, which already “corrected” back in August, fell an additional 2.3%. It’s now down 0.8% for the year.

The Nasdaq took a 2.1% haircut on the day. But it’s holding up rather well, considering, with a whopping 5.2% gain in 2007.

Today’s big news… ought to bring protectionists out of the woodwork.

Citigroup, the largest bank in the U.S., sold $7.5 billion of its own shares to the Abu Dhabi Investment Authority this morning. This massive trade accounts for 4.9% of Citigroup’s entire enterprise, making the folks in Abu Dhabi the bank’s largest shareholder.

The “equity units” purchased by the ADIA will be converted into shares in 2010. But Citi is so desperate for cash right now that it offered an 11% annual yield on those units until then — double the yield Citi offers its bond investors.

Citi also let slip to CNBC yesterday it’s planning “massive” job cuts. The total number could reach as high as 45,000, “people in the know” estimate.

Let’s put that number into perspective, shall we? Imagine filling every seat in Wrigley Field…

and then firing all of them… plus a few thousand more.

“Selling a 4.9% stake in Citigroup is a step that is not taken lightly,” comments Mish Shedlock. “Nor is another round of massive layoffs.

“Monday’s news reports on Citigroup raise more questions than they answer. The one thing we do know for certain is that Citigroup was (and likely still is) severely capital-restrained. On Nov. 5, I said that Citigroup was fighting for its financial life. It still is.”

Mish has made some pretty shocking predictions about how this new round of bank bleeding will play out in 2008. Our legal team is pouring over them as we speak. Given his forecasts this year on the subprime market, housing and specific companies like Countrywide… you’re not going to want to miss this report. He’s got a hot hand and his fingers on the pulse… Watch this space.

“American-style capitalism has evolved into a bizarre marriage of financial gimmickry and governmental coddling,” writes Eric Fry this morning. “Very few companies produce much of anything other than derivatives and press releases. This situation would not be so bad if the derivatives possessed a bit of value and the press releases possessed a bit of truth. Instead, the U.S. economy lurches from greed to deception to disaster, and back to greed, without ever eliminating all the flaws and the felons that cause all the problems.

“When we should be lopping off heads (so to speak), we dispense multimillion-dollar severance packages; when we should be marking to market, we mark to markup; when we should be allowing idiotic speculations to fail, we devise new ways to finance idiotic speculations.”

Sovereign wealth fund Dubai International Capital bought a “substantial” stake in Sony yesterday, its first venture into the Japanese market. Neither the DIC nor Sony officials revealed what “substantial” means in dollar terms, but word on the street is that Dubai now owns about 1% of Sony, worth nearly $500 million.

According to the Free Market Investor’s Chris Hancock, these investments by big sovereign wealth funds could save your retirement. If you’re not familiar with his strategy, check it out here.

Home prices fell in every region of the U.S. in September. At least, if you’re inclined to believe the Case-Shiller price index, which published its monthly press release this morning.

“Consistent with prior 2007 reports, there is no real positive news in today’s data,” reports a depressed Robert J. Shiller, the index’s steward. “Most of the metro areas continue to show declining or decelerating returns on both an annual and a monthly basis.”

All 20 cities followed by the group saw a decline in home values during the month.

Year over year, Case-Shiller’s 20-city price index fell 4.9%, the largest drop in the index’s 21-year history. From a quarterly perspective, home prices fell a record 1.7% from the second quarter to the third, and down 4.5%, compared with the same period last year — also a record.

In 2008, real estate foreclosures will likely result in a $1.2 trillion decline in property values nationwide,
according to a gloomy report released by the forecasting firm Global Insight.

The group also expects a 7% drop in average home prices across the country; a $26.6 billion combined decline in economic activity in five of the nation’s biggest metro areas: New York, Los Angeles, D.C., Dallas and Chicago; and a decline in the national GDP to 1.9% — less than half our recent-history average growth.

Not by coincidence, the Consumer Confidence Index sank to a two-year low this month, reported the Conference Board this morning. The Board’s measure of consumer confidence fell from 95.2 to 87.3 — both the lowest level and the biggest monthly decline since Hurricane Katrina struck in the fall of 2005.

According to the survey, consumers believe that the economy and employment are taking it in the pants… and that inflation will continue to rise in 2008.

Gold traders have been ambivalent about the trends. The metal rallied up to $836 yesterday, but this morning, it’s back down to $815.

As oil stood a few cents below $99 yesterday, we were already dreaming up “Oil $100” headlines. But it didn’t happen. Oil trades at $94 and change this morning, following whispers from OPEC that it may increase production.

“There is immense global pressure on OPEC to increase output,” opines our Maniac Trader, Kevin Kerr. “But we won’t know the real answer until Dec. 5. Sentiment might bring prices down until then, but we just can’t know anything for certain until the next OPEC meeting.

“Until then, the dollar is my biggest concern when it comes to $100 oil. We saw oil pull back yesterday after the OPEC news, but then it rallied as the dollar fell again… the dollar is a huge driver for oil prices right now.”

The dollar had it tough yesterday and overnight. It sunk to a two-and-a-half-year low versus the yen… going as low as 107. The pound rallied back to $2.07. The euro eked ever closer to $1.49…

“I just spent a week in Uruguay,” comments a reader on the fate of the dollar in global markets. “I was hiring workers to make improvements to my home there. Guess what? They refused to provide quotations in dollars and wanted to make sure they were paid in Uruguayan pesos. When Uruguayans value pesos more than the dollar, it is a sad day.”

Goldman Sachs downgraded the entire auto sector yesterday to “cautious.”

“The automotive industry in the USA stinks,” writes a reader. “It is all on the verge of bankruptcy. It’s not that the industry is producing junk. Its product is of high quality. It’s just that its long-term liabilities will eventually drag it under.

“It needs to do something different to get the customer back. ‘Different’ is the key word. Right now, it’s the ‘same old, same old.’ When is one of the companies going to come out and say, ‘By the year 2012, all new Chrysler cars will average 60 miles per gallon. We are doing this to show our customers we are the LEADERS in the automotive industry. We will do whatever we can to help our country reduce its dependency on foreign oil’?

“Einstein stated that insanity is doing the same thing over and over again but expecting different results. Aren’t the sources of our problems in this country pretty obvious?”

The 5 Responds:
Last month, Canadians bought more U.S. cars than ever in history, presumably because their dollar is kicking ours in the cojones. How’s this for a mission statement:

“By 2012, GM promises that every car will be worth way less than it was in 2007.”

We can reverse-engineer the auto industry… and produce Yugos and Daihatsus by the middle of the next decade. How’s that sound?

Regards,

Addison Wiggin
The 5 Min. Forecast

P.S. We’ve received word this morning that nearly 300 seats at our Vancouver event in July 2008 are already spoken for.
That’s a phenomenal response… nearly half of what’s available. The Fairmont is a beautiful old hotel, and as much as we’d like to take more attendees, we’d be really stretching the facility to do so.

Our suggestion: If you want to attend next year’s event, make your plans early. Discounts are still available, too, until January 15th. Don’t forget… if you are an Agora Financial Reserve member, you may attend our event for free.

The 9th Annual Agora Financial Investment Symposium
The Fairmont Hotel Vancouver
July 22-25, 2008

ADDITIONAL RESOURCES
Citigroup to Raise $7.5 Billion From Abu Dhabi State
Massive Job Cuts Expected At Citigroup
Consumer confidence sinks to two-year low in Nov.

• OPEC contemplates abandoning our “worthless paper” greenback
• 18 nations ditch the dollar… Japan and China slowly exercise their “nuclear option”
• Goldman downgrades Citigroup, predicts up to $15 billion in losses
• Wall Street I-banks to issue $38 billion in bonuses despite dismal 2007
• Gold prices got you down? James Turk on the next stage of the gold bull market
• Plus… Chris Hancock on how Beijing could be literally buried in sand

“They get our oil and give us a worthless piece of paper,” Iranian President Mahmoud Ahmadinejad told his OPEC cronies on Sunday. OPEC’s 13-member cartel met over the weekend, and the decline of the dollar was clearly on the minds of its ministers.

“All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency,” Ahmadinejad said. “Some said producing countries should designate a single hard currency aside from the U.S. dollar… to form the basis of our oil trade.”

“That’s right heathens… 2… $200 a barrel”

“Don’t you see how the dollar has been in free-fall without a parachute?” chimed in fellow nutjob and OPEC minister Hugo Chavez. “The empire of the dollar has to end,” said he, urging his OPEC brethren to shift to the euro.

Curiously, neither mentioned their own worthless paper currencies during the press conference.

In the official OPEC postmeeting statement, Secretary General Abdalla Salem of Saudi Arabia said that OPEC will “study ways and means of enhancing financial cooperation among OPEC… including proposals by some of the heads of state and governments in their statements to the summit.”

Iranian and Iraqi ministers will both be spearheading studies on the dollar and its affect on OPEC’s oil revenues and currency reserves.

As of this writing, OPEC controls 40% of the world’s oil production and 75% of its reserves.

Friday’s Treasury Dept. TIC data revealed that Japan, China, Caribbean banking centers, Luxembourg, Hong Kong, Korea, Germany, Singapore, Mexico, Switzerland, Turkey, Canada, the Netherlands, Sweden, France, Russia, Ireland and Israel were all net sellers of U.S. Treasuries in September.

For three months in a row, Japan and China — the world’s largest holders of U.S. government debt — were sellers of such Treasuries. They now hold less than $1 trillion in dollar reserves.

From a trading perspective, the dollar held on to its recent rally over the weekend. The euro, pound and yen all stood mostly still… at $1.46, $2.04 and 110, respectively. The dollar index remained around 75.7, less than a point above its all-time low.

“So long as the dollar weakness does not create inflation, which is a major concern around the globe for everyone who watches the exchange rate, then I think it’s a market phenomenon, which, aside from those who travel the world, has no real fundamental economic consequences,” uttered Alan Greenspan yesterday morning, echoing the same sentiment Ben Bernanke told Ron Paul last week.

Whether Greenspan is expressing his true opinion or simply aiding in post-OPEC meeting damage control, we don’t know. He’s made a fabulous career out of saying one thing and meaning another.

“If we can get beyond this housing problem, I think we’ll do pretty well,” said Greenspan.

The U.S. economy doesn’t look like it will be getting through “this housing problem” anytime soon. This morning, the National Association for Business Economics forecast 1.5% growth in the fourth quarter, down drastically from the rate of 3.9% in the third quarter. NABE previously forecast fourth-quarter growth at 2.5%, but decided to revise this forecast based on current housing and credit conditions.

The NABE revised its yearly growth forecast, as well, from 2.8% down to 2.5%.

“Alan Greenspan really made a mess of all this,” retorted Joseph Stiglitz, former World Bank chief, last week. In an interview on Friday, Stiglitz reiterated an argument you’ve heard from us before… that the U.S. economy sits on the brink of recession because of the “mess” left by Greenspan. “He pushed out too much liquidity at the wrong time. He supported the tax cut in 2001, which is the beginning of these problems. He encouraged people to take out variable-rate mortgages. That helped create the subprime crisis.”

As a result, Stiglitz told reporters he was “very pessimistic” about the state of the economy. “Americans have been taking money out of their houses to finance a consumption binge,” Stiglitz said. “Last year alone, mortgage equity withdrawal was between $850-950 billion. That game is over.”

Stiglitz said that the U.S. faces “a very major slowdown, maybe recession.”

Goldman Sachs downgraded Citigroup to a “sell” rating this morning. GS analyst William Tanona estimated that Citigroup will incur an additional $15 billion in write-downs by the end of the first quarter of 2008.

“Given the dislocations in the credit markets, we have become more pessimistic,” said Tanona. “Citigroup will likely face an increasingly challenging operating environment, which is likely to pressure results in many of their businesses.”

While he was at it, Tanona also cut price estimates for Merrill Lynch, Morgan Stanley, Lehman Bros., Bear Stearns, J.P. Morgan and E*Trade. While we expected dull holiday trading this week, news like this doesn’t bode well for benchmark indexes.

Yet Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros. and Bear Stearns will hand out $38 billion in bonuses this year, up a billion bucks from 2006. Split among about 186,000 employees, the five investment banks will pay an average bonus of $201,500. Not bad considering their market caps are down a collective $74 billion this year.

Such a bonus is four times the $48,201 median household income last year.

Gold looks like it they may have ended its free-fall this weekend. The spot price for immediate delivery traded as low as $785 and up to $796 in weekend trading. As we write, an ounce sets you back about $786.

“Last week, gold dropped $46.80, which is a decline of 5.6%,” summarizes James Turk. “That drop seems fairly large, but let’s step back to get some perspective.

“It is interesting to note that in the 79 weeks since reaching its high in May 2006, there have now been five weeks in which gold has lost 5% or more. So a 5% decline in one week is not new.

“It is reassuring to note that gold eventually overcame the four previous declines of 5% or more. In other words, last week’s decline came after gold had already made a new 27-year high. Recovering from sharp short-term corrections is a clear sign that gold is still in a bull market.

“Once this current correction ends, I expect gold will climb higher.”

Mubadala Development, an Abu Dubai sovereign wealth fund (SWF), will buy a 9% stake in microchip maker AMD. Mubadala’s $700 million investment will surely attract interest from protectionists in Washington, as AMD’s technology is very much a part of current defense and national security systems.

“Each year, the Gobi Desert devours 2,460 square miles of Chinese soil, an area roughly the size of Delaware,” writes Free Market Investor Chris Hancock. “Violent sandstorms threaten to conquer Beijing. Dunes now tower just 43 miles from the ancient capital…firmly marching south, like Sherman through the soft Georgia pines, at a brisk 12-15 mile per year clip:

“Why is Asia’s largest desert growing so quickly? It is because of a process scientists call desertification. Basically, China’s rapid economic growth comes at a great price, as the fast-approaching desert threatens to blanket Beijing before the Summer Olympics in 2008.

“The solution? The ‘Green Wall.’ Beijing officials set aside $8 billion to construct a natural wall of trees spanning more than 2,000 miles.

“But they’re no match. Trees need water. And air pollution inhibits precipitation. Researchers from Israel’s Hebrew University of Jerusalem and the Chinese Academy of Meteorological Sciences found that on hazy days, precipitation from the top of Mount Hua in China’s northwestern Shaanxi province is cut by up to 50%.

“Consequently, one-quarter of China currently finds itself buried beneath sand… two out of every three major Chinese cities have less water than they need. Cities in northeast China have roughly five-seven years left before they completely run dry. China’s immediate need for water remains paramount.”

Cambodia aims to open a stock market by 2009, reported government officials recently. Last month, Cambodian senators passed a law that legalizes the issuance and trading of stocks and bonds… all that remains is the infrastructure required to maintain a stock market. Driven largely by a booming textiles market, Cambodia’s economy has grown about 11% per annum in the last three years.

But buyer beware… this one won’t be for the faint of heart: Moody’s currently rates Cambodian bonds a “B” grade investment, five steps below “investment grade” and somewhere within the realm of subprime-backed CDOs.

“Thank you for reporting the fed raid at Liberty Dollar/NORFED,” writes a reader. “It is a given that times change, and that understanding of the times also change. Established institutions, as Professor Carroll Quigley of Georgetown University School of Foreign Service pointed out, either restructure and adapt in order to maintain the purposes for which they were formed, or those institutions will be outflanked, crawled over or run through by the tides of history.

“The current enforcement activities of the DOJ/IRS/Federal Reserve monetary complex are not at all encouraging as indicators of graceful adaptation.”

The 5 responds:
Amen. We suspect there’s a lot more strife coming down the pike. It took two world wars before the British pound, and the institutions developed to support the Victorian era gold standard, gave way to the establishment of the Bretton Woods exchange rate system… and its concomitant governing structure.

If you want to follow the strife first-hand, Bernard’s been hammering out daily updates on the raid and his strategy for dealing with the feds. You can read all the details here.

Regards,

Addison Wiggin
The 5 Min. Forecast

P.S. Don’t forget, you’ve got about 24 hours left to take advantage of our Energy & Scarcity Investor offer. To honor its introduction, we’ve slashed the price by over 30%. Click here to learn more about ESI… in this era of rapidly expanding energy opportunities, we can’t think of a more appropriate investment advisory.

ADDITIONAL RESOURCES
Even in brutal year on Wall Street, $38 billion in bonuses to be paid
OPEC members clash over weak dollar
Desert Army Invades Chinese Capital