Don't Get Baited By The Fed

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	Wednesday, May 7, 2008 Whitelist Us         0%... Will Americans Take the Bait? By Dr. Russell McDougal We are living in perilous financial and economic time. Very few Americans are even paying attention. All it takes to re-start an economy is to hand out cheap money…right? As you likely know, my major theme for 2008 is bailouts .  So far, so bad. I think the boys at the non-Federal non-Reserve have been hitting the peyote. Everything can be patched up by simply issuing more tonnages of green paper. Especially if you claim a bit of blue blood. It wasn’t too long ago that Japan’s bubble burst from their 1980’s excesses. Remember when fear was rampant that the rich Japanese were going to buy up the world? Remember when their real estate was chokingly overpriced? Quite predictably, the Bank of Japan responded to the bust by lowering interest rates in the early 1990’s. As you can see in the following chart they even held them at 0% throughout much of this decade. Deflation tends to scare the fully loaded crap out of central planners. Even negative interest rates are possible. The motto is “please borrow and spend!” Otherwise, the whole system gets flushed. This didn’t sit too well with traditional Japanese. They are thrifty savers. They tend to function just fine without Suburbans, spa treatments and vacation homes. You can make cheap or free money available but someone has to accept the loan. The Japanese didn’t take the bait. INTERNAL ENDORSEMENT INVESTMENT PORNOGRAPHY To heck with men’s magazines… you’ve seen it all before anyway. Here’s what a real centerfold should look like. 373%... 233%... 220%... 159%... 153%... 100%... 185%... 103%... 104%... 188%... 121%... 116%... 111%... 107%... 108%... 210%... 113%... 238%... 261%... 271%... 139%... 200%... 214%... 178%... 200%... 119%... 133%... 368%... 158%... 142%... And, you won’t even have to hide it… you can even brag about it to the ladies! Find out more right here about the one subscription you must have. A two-decade long deflation was the result. The Bank of Japan was completely impotent in their attempts to re-inflate and get the Japanese economy back on track. Now it’s the US’s turn to stave off deflation. Sequential bubbles of tech stocks and real estate have seriously damaged the economy. By the way, the Fed caused these bubbles in the first place. They are now attempting to create a new credit expansion. They are a one trick pony. There is no Paul Volker and no dollar rescuing rate increases in sight. US interest rates are now trending towards zippo. Is a 0% Fed Funds rate in the cards? I wouldn’t rule it out. Speculators are frothing at the mouth in anticipation of free funding. Low interest rates are not what wring out excesses. Low interest rates are designed to keep the NY financial orgy going. Party on, Garth! They still haven’t worked in the Japanese culture. Japan has yet to recover in a significant way. Will Americans take the low interest rate bait? “Oh, hell yes, Baby, bring em on! You talkin’ free money? That’s a good thang, no?” The US culture is saturated with the motive of instant gratification. Don’t expect many to turn up their noses at the Fed’s desperate offers. We will borrow and we will spend. There will be no lost decades around here. In fact, I predict that a major trend will take place in the US real estate market in the coming decades. The reverse mortgage phenomenon will become a craze. My fellow Boomers will try to time their last breaths with their last home dividends. Is Doc Kervorkian still in business? Invest Resourcefully, Rusty P.S. To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com. Market Watch Will High Interest Rates Kill the Bull Run in Gold? By Charles Delvalle When the Federal Reserve hinted at the possibility of higher interest rates in the near future, gold dropped $50.  But will higher interest rates in the future signal an end to the bull-run for gold? For that answer, let’s look at the last time interest rates were going higher – from July of 2004 to July of 2007. In those three years, the Fed Funds rate rose from one percent to five and a quarter percent. During that same time frame, the price of gold went from $400 an ounce to a peak of $730 an ounce by May 2006. By the time the Fed stopped hiking rates, an ounce of gold was sitting at nearly $660 an ounce – an increase of 65%. As you can see, when there’s a long bull run pushing the price of gold, it doesn’t matter if interest rates are increasing or decreasing, the price of gold should shoot higher. With inflation and government spending out of control, we should see much higher gold prices in the next 12 months. That makes today a perfect time to begin acquiring gold at a significant discount. INTERNAL ENDORSEMENT Winners Cherry Pick! Losers Bottom Feed Thousands of stocks have just fallen 40% or more... most will continue to tumble… but you should still overpower the markets. Because a select few stocks are now set to roar back for outstanding near-term gains. It’s time to party like it’s 2002 You don’t want to miss out… because, today, you can jump into any one of seven companies at what should be their once-in-a-lifetime lows… each is poised to take you to new highs. Grab this low-hanging fruit here. If you enjoy IDE's daily investing advice, you'll definitely be interested in checking out our sister publication, Early to Rise. Each morning, you'll get powerful wealth-building advice covering real estate, entrepreneurship, personal finance, marketing, and much more. Sign-Up for Early To Rise today! To unsubscribe, Click here To change your email address, Click here To cancel or for any other subscription issues, write us at: Investor's Daily Edge 245 NE 4th Ave, Suite 201 Delray Beach, Fl 33483 Phone: (800) 681-4759	The Market Minute The market decided that no news was good news… Taking the Dow Jones from 100 points in the red to 50 points in the green. When you see a big reversal like this, it tends to signal bullish things for the market. But in the past few weeks, we’ve seen a few major bullish and bearish reversals. In the end, this market is still trying to find its groove. But keep your eyes on downside risk since we’re still in recession.       In The Markets   Last Change YTD Dow 13,020.83 51.29 -1.84% Nasdaq 2,483.31 19.19 -6.37% S&P 500 1,418.26 10.77 -3.41% Gold 876.10 2.10 5.14% Silver 16.86 0.17 14.15% Oil 121.87 1.90 26.97% Nat Gas 11.09 0.07 48.26%   Newsworthy Investigations into mortgage lenders, including American Home and other companies, are focused on whether officials made misrepresentations in securities filings about a company's financial position and the quality of its mortgage loans, including failing to disclose a rising number of loan defaults, or engaged in questionable accounting to hide losses. Prosecutors also are looking at whether companies doctored information about borrowers, such as credit histories, before making loans and selling those loans to banks or Wall Street firms, which packaged them into securities and sold them to investors. Investigations by the Brooklyn U.S. attorney's office include some of the probes previously announced by the Federal Bureau of Investigation, of about 20 companies involved in subprime lending, or lending to borrowers with poor credit. The bureau didn't name the companies. The Justice Department, which oversees the FBI and local federal prosecutors' offices, including the Eastern District, declined to comment. Prosecutors also are looking at ways in which lenders that originated loans may have defrauded Wall Street banks that funded those lenders. For instance, prosecutors are looking at whether some lenders, in violation of agreements they had with Wall Street firms, didn't pay back the firms after the lenders sold loans they originated directly to investors such as Fannie Mae and Freddie Mac, and then lied to the Wall Street firms about the status of the loans, said one person familiar with the matter. -wsj.com     Meet the Team MaryEllen Tribby - Publisher Jedd Canty - Business Director Rick Pendergraft- Managing Editor Jon Herring - Editor Nicole Reynolds - Marketing Analysts / Editorial Contributors Michael Masterson Charles Delvalle Andrew M. Gordon Dr. Russell Mcdougal D.D.S.

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