IN THE BELLY OF
"Buy from me White Raiment, so that the Shame of your Nakedness does not appear as you walk about." - Christ Jesus
DID YOU HEAR ABOUT THE TWO OLD PIRATES WHO MET ONE NIGHT . . . .
Yes in deed! One night two old pirates happened to bump into one another in a pub. After looking the other one over, one of them said, "Say, dont I know ye? Didnt we sail together once?" The second one answered, "Yes, matey we did."
The first one said, "Well last time I saw ye, you had two legs, now ye have a peg leg. What happened?"
"Well," says the second, "We were being attacked by another ship that had cannons on board and in the fracas, a stray cannon ball took me leg off."
"Oh", says the first one, "Thats terrible. But last time I saw ye, you also had two hands. Now, ye got a hook. What happened?"
"Matey", says the second one, "Thats true. We was in a clash with another ship, a trying to board them. I was using me sword, when a swashbuckling buccaneer cut off me right hand, sword and all. Fortunately, I had me pistol in me left hand. Thats what saved me."
"Eh", says the first one, "Thats terrible. But last time I saw ye, you also had two eyes. Now yere a wearing a patch. What happened?"
"Sad to relate" answers the second one, "but I had not yet gotten used to having me hook when a fly landed on me nose one day and I tried to kill it. But I about killed meself as well."
The reason I am sharing this story with you, is that it reminds me of whats happening to our economy and that is no laughing matter. In recent weeks, we have witnessed the slight of hand accounting practices of some of Americas largest corporations come to the light of day, shattering the confidence of American and foreign investors. In this article, I will first give a brief rundown on some the companies that have either gone bankrupt or are treading water with panic and then proceed to some warnings. Here's what we'll cover:
FIRST LETS LOOK AT HOW THESE SCANDALS AFFECT THE STOCK MARKET AND CORPORATE BONDS
Enron California Scheming
WorldCom Inc. based in Clinton, Mississippi, met Friday with bankers
Xerox of Stamford, Connecticut . . .
Adelphia Communications Corp. Cable TV operator
General Electric . . . .
Halliburton, the oil giant
Martha Stewart broker suspended
Global Crossing filed for bankruptcy protection
Kmart records heavy loss.
WHATS NEXT? - LETS MOVE ON TO TREASURY NOTES AND THE DOLLAR
The Debt Esplosion that Wont Quit
Bigger Stock Market Insanity Than Ever
The Worst Profit Disaster in U.S. History Coming
WHAT ABOUT REAL ESTATE VALUES?
WHAT WILL WE TELL OUR GRAND CHILDREN?
The stock markets have been one of the major sources of capital gains for many families looking forward to putting their children through college and meet retirement goals. According to research by the Vanguard Group, the average annual Return on Investments from 1926 to 1998, was as follows:
11.2% . . . Stocks (Standard & Poor's® 500 Composite Stock Price Index)
5.7% . . . . Bonds (long-term U.S. corporate bonds)
3.9% . . . .Cash Investments (U.S. Treasury bills)
Corporate scandals of the past few weeks and months, have not only taken the wind of investors sails, but destroyed the sails as well.FIRST LETS LOOK AT HOW THESE SCANDALS AFFECT THE STOCK MARKET AND CORPORATE BONDS
Enron California Scheming
Federal Regulators last week released an internal memo that showed how Enron squeezed cash out of energy-hungry California, by having her sign $40 billion in long-term energy contracts, the cost of which was passed on to consumers on a sliding scale.
Internal documents describe the amazing, code-named ways that Enron rigged the State’s energy prices. Bills today are as much as 67% higher than in 2000.
Many Golden State residents, including Governor Gray Davis, believe that traders had manipulated the complex rules for maximum profit regardless of the effect on consumers.
"Everything the power traders did followed the rules in California," a former Enron trader says — with perhaps a touch of hyperbole. "The state and government people were just too stupid to see it."
Suddenly, the Bush administration finds itself scrambling to contain the bonfires of corporate vanity breaking out all around them.
To listen to the President over the past few days you would think the fire started by accident. But, in fact, it was a disaster that has been in the making for eight years.The fuel for this fire began building in 1994 with the GOP's so-called "Contract With America" which sparked an aggressive and careless deregulation of critical private sector industries.
When George W. Bush was elected President, those same forces moved into the Executive Branch. Just months ago this administration granted many of the very same companies unprecedented access to the regulatory buttons and levers of government.
Some of the same now-disgraced CEO's were even granted White House posts during the transition. Later these companies and CEO's were called upon to help draft industry-friendly regulations for such critical agencies as the SEC and FCC, as well as the Treasury and Energy Departments.
From the very beginning, public interest groups have complained that the administration was way too cozy with industry.
But when the administration was asked to reassure them that nothing untoward was afoot, the administration responded by blocking access to the records of those meetings - not only for the public, but also from Congress and the General Accounting Office.
Now the administration is reaping the whirlwind for its unquestioned trust in men like Enron's Kenneth Lay and Arthur Andersen's CEO Joseph Berardino, both of whom held transition team posts and helped fashion energy and accounting rules, respectively.
California's Money and Enron's "Cookie Jar"Enron's collapse into bankruptcy last December left Californians scratching their heads. It just didn't make sense.
After all, Enron had just spent the last two years pillaging and looting California's ratepayers' pocketbooks. How could the company now be broke? Where did all that money go?
Now we know. California investigators have discovered that during the state's energy crisis of 2000/2001 Enron pocketed over $1.5 billion in secret profits.
But, Enron quickly learned what every big drug dealer quickly learns - a ton of cash with no reasonable explanation can be a burden. At the time California ratepayers were already complaining to Washington that energy companies were up to no good.
If all that cash landed on the company books then it would have been, well, politically inconvenient. At the time Enron's Ken Lay was telling Bush administration officials to ignore California's bellyaching, that the state was simply suffering from its own poorly executed energy deregulation.
So, rather than report all the profits, thereby confirming that the company was indeed gouging, Enron stuffed the money into an off-the-books "cookie jar."
The accounting trick provided several advantages. First, by dipping into the cash stash Enron was able to show Wall Street what appeared to be a respectable rate of growth. This, of course, was like so much that was Enron--an illusion.
In reality the company was already terminally in debt - debts that were safely hidden in secret offshore partnerships.
And, Enron's leadership in manipulating California's energy supplies and prices had created a fresh source of hard cash for one grand final looting of company coffers.
Just prior to Enron's bankruptcy the company approved over $740 million in last minute "bonuses" to Enron executives.
Finally Enron's books balanced, and Californians now know where their money went.
WorldCom Inc. based in Clinton, Mississippi, met Friday with bankers to secure new funding and lenient loan terms and the first of 17,000 employees to be laid off by the telecommunications company were shown the door, an Associated Press report on June 29,2002.
From coast to coast, WorldCom workers were called into offices and told the bad news. Some higher-placed executives received severance packages. But most workers said they received just a few weeks pay based on the years they worked.
If WorldCom does go bust, the top three lenders to US companies all stand to lose money. They are JP Morgan, Citigroup and Bank of America.
But early estimates suggest that as many as 60 banks around the world might have given loans to WorldCom, or bought a slice of its debts in the form of corporate bonds.
The list includes banks in Britain, Canada, Italy and the Netherlands. In part, this is because the banks have spread the firm's debts out thinly among themselves to reduce the risk to any one financial institution. But if WorldCom files for bankruptcy protection, the impact of any bad loans could also ripple through insurers and pension funds.
Some analysts think WorldCom is unlikely to survive long and could even be forced to seek so-called Chapter 11 bankruptcy protection before the end of the week.
"It is possible that the restatement [of WorldCom's earnings] will be treated as a breach of representations and warranties by the lenders, who could move to require repayment," said Morgan Stanley analyst Simon Flannery.
The banks are also counting the cost of bad loans to Argentina, which defaulted on $141bn of international debt at the start of this year.
Xerox of Stamford, Connecticut said that for 1997 through 2001 it is reversing $6.4 billion of previously recorded revenue from equipment sales. Xerox said $5.1 billion of that total will now be reported as service, rental, document out sourcing, and financing revenues for that period.
Xerox said the restatement was larger by some $3 billion than predicted due to a change in its lease accounting in Latin America, where revenues originally booked as sales-type leases -- under which customers were contractually bound over time -- will now be recorded as rentals.
But, following reports in the Wall Street Journal that Xerox's accounting hole could be as large as $6bn.
The firm had also been widely expected to announce a restatement after an agreement last month with US financial watchdog the Securities and Exchange Commission. The agreement saw Xerox fined $10m, although the firm has continued to refused to admit or deny any wrongdoing.
Adelphia Communications Corp. Cable TV operator, another in our string of US firms under investigation for accounting irregularities, has filed for bankruptcy protection after failing to raise enough cash from private investors, renegotiate debt terms with lenders, and sell cable assets fast enough.
Adelphia, the sixth-largest US cable company, said it had arranged a $1.5bn (£1m) emergency loan from a banking syndicate to help it keep afloat pending reorganizations.Adelphia has already defaulted on some $7bn of debt.
The company said that bankruptcy would allow it to put its house in order, without the immediate pressure to meet looming debt repayments.
The filing follows mysterious multibillion-dollar deals by the company's founding Rigas family, which have led to two grand-jury probes and an investigation by the Securities and Exchange Commission.
General Electric, another industrial and financial Icon, is now being investigated by the Federal Government. The company, nursed to near-legendary status by former chief executive Jack Welch, reportedly made $2.1bn (£1.4bn) in profits from its pension fund in 2000 and 1999 - despite the fact that the fund has been losing money thanks to sliding stock markets.
This is a shame, because, of the companies which made up the Dow exactly 100 years ago, only one remains, General Electric. But I don’t think GE is in danger of bankruptcy, just yet.Billionaire investor Warren Buffett, warns that GE, General Motors, Exxon and other heroes of USA Inc are basing their pension fund profit contributions on "pretty heroic assumptions" about future performance.
The new focus on GE comes as President George W Bush adds his voice to the chorus of disapproval from regulators, politicians and commentators.
In a regular radio address on Saturday, Mr Bush demanded jail terms for corporate fraudsters. "A few bad actors can tarnish our entire free enterprise system," he told listeners.
And he also wants to see senior corporation figures stopped from making financial gains from false company profit statements, while people guilty of such abuses should be prevented from holding high-level business positions again.
Unfortunately for Mr Bush, that could well include his own second in command. Among the big corporations currently in the firing line of the Securities and Exchange Commission is Halliburton, whose chairman and chief executive was current US vice president Dick Cheney.
Mr Cheney was chairman and chief executive of the company between 1995 and 2000 and the probe revolves around the firm's accounts in 1998.
Halliburton, the oil giant, is the latest in a string of companies to come under fire for allegedly shielding their true financial position from investors and analysts.
The SEC is examining allegations that Halliburton relabelled $100m in disputed costs on oil contracts to bolster its financial position during tough merger negotiations.The US financial watchdog has begun a preliminary investigation into Halliburton for its treatment of over-running costs on its construction projects.
Halliburton said it would cooperate fully with the inquiry, and documents are expected to be formally requested in the next few days. The firm says it believes the way it had accounted for construction claims was in accordance with generally accepted practices.
The firm's chief financial officer, Doug Foshee, said he was not surprised by the probe given the current investigative environment, but thought the matter could be cleared up quickly.Halliburton has also been embroiled in a controversy over asbestos exposure. On Tuesday, it settled 30 pending lawsuits for millions of dollars in damage from people suffering with lung cancer.
Martha Stewart broker suspended Saturday, 22 June, 2002,
A stockbroker who sold thousands of shares for US style guru Martha Stewart just before the stock took a dive has been suspended by his company.
The inquiry centers on allegations that Mrs Stewart, a multi-millionaire businesswoman, was acting on inside information when she instructed Mr Bacanovic to sell her holding in biotech firm ImClone.
Mrs Stewart, who is also under investigation, has denied any wrongdoing. Former ImClone chief executive Samuel Waksal, a close friend of Mrs Stewart, has been charged with fraud.
The allegations surrounding Mrs Stewart, a household name in the United States, has dealt a blow to her clean-cut reputation and to her company - Martha Stewart Living Omnimedia Inc.At one stage, the business - which publishes a range of hugely popular lifestyle magazines and books - was worth more than £1bn. But the company's share price has tumbled since the scandal broke at the end of last year, wiping at least $140m from its value.
Problems mount for Tyco
The fire alarms to medical equipment giant Tyco lost about $5.4bn (£3.71bn), or 15%, of its value in just a few hours of share trading on Thursday, June 6, 2002. [The day after I advised many of my friends to move out of stocks]
Investors ditched the shares as theUS District Attorney extended a criminal investigation of the firm's former chief executive, Dennis Kozlowski. Mr Kozlowski, the man behind the creation of Tyco, has been charged with avoiding $1m in New York state sales taxes on purchases of artwork worth $13m.
"I think you're going to have a more aggressive review of all of the company's operating policies," said Prudential Securities analyst Nicholas Heymann. "And that, in turn, opens up the question of 'What else is there?'".
Tyco's shares are worth $87bn less than they were half a year ago.
Global Crossing filed for bankruptcy protection from its creditors on 28 January with liabilities totaling $12bn and assets worth $22.4bn. An executive at Global Crossing testified that, "The bankruptcy of Global Crossing is not the reason for the loss of 9,000 jobs," the firm's chief executive John Legere said before a panel of the House Finance Committee.
"The restructuring that Global Crossing has gone through... is similar to what the entire industry has gone through," he said.
Global Crossing is being sued by Judicaial Watch. The suit was filed on behalf of Global Crossing shareholders who have brought claims of fraud, civil conspiracy and violations of the California Corporations, Business and Professions Code.
Former defense secretary and Global Crossing board member William Cohen is among the suit’s defendants for allegedly conspiring to "pump and dump" Global Crossing stock, and for allegedly corruptly awarding contracts.
After a series of NewsMax.com exposés, a Congressional committee held a hearing on Global Crossing in late March, and other House panels are investigating the company, which experienced an Enron-like bankruptcy, leaving shareholders and employees high and dry.
Finally, the suit names Li Ka-Shing as a defendant, along with his Global Crossing affiliate, Asia Global Crossing. The extra eye-opening significance of this is that Li Ka-Shing, a Hong Kong businessman, is an agent of the Chinese communist government, and he is now seeking majority control over the entire corporation.
"If Li Ka-Shing gains control over Global Crossing, that would make the Chinese government the phone company for the Pentagon and other sensitive agencies," Judicial Watch President Tom Fitton told NewsMax.com.
Kmart records heavy loss.
BBC NEWSBankrupt US retail giant Kmart has said on Friday, June 14, 2002 it lost $1.45bn in the four months to May. The grocery chain was hit by costs associated with filing for bankruptcy protection and an 8.4% drop in sales.Kmart filed for protection from its creditors under Chapter 11 of the US bankruptcy laws on January 22nd. Since then it has struggled to attract customers to its stores, with shoppers concerned about the company's viability and the fact that sale merchandise as promoted in adverts was often not available.
WHAT’S NEXT? - LET’S MOVE ON TO TREASURY NOTES AND THE DOLLAR
George Soros, the billionaire financier, on June 28, 2002, warned that the US dollar could lose one-third of its value. After years of rising against other major currencies, "it seems that the trend in the dollar has been reversed," Mr. Soros said. Against the euro, the dollar has fallen about 10% so far this year.
Trends in currency markets tend to last several years and involve major swings, he said, so a drop of around a third in the dollar's value from recent levels "would not be unprecedented."
Speaking to BBC business correspondent Rory Cellan-Jones, Mr Soros warned the Bush administration against its "market fundamentalism", the belief that markets are self-correcting and best left alone.
Mr Soros said: "When markets are going down, then all the weaknesses come to the fore, and they need to be dealt with.
"There is basically an attitude of market fundamentalism: leave the markets alone and they will take care of themselves. That is a false idea. Markets do not tend to equilibrium, but tend to excesses, and you need intervention at the right time to stop these excesses going overboard."
Mr Soros also warned stock markets could fall "much lower" if consumer confidence and growth faltered in the United States.
The financier made his fortune running a hedge fund which speculated against weak currencies, including the British pound, reportedly making a £1bn profit by forcing it to leave out of the European Exchange Rate Mechanism in 1992.The dollar also hit fresh lows against the yen and sterling, which rose above $1.50 for the first time since the beginning of 2001. The main cloud hanging over the dollar concerns the drooping US stock market, which is persuading many international investors to shift their money into European and Asian shares.
News that the US current account deficit mushroomed to a record $112.5bn in the first three months of the year, indicating that ever more money is being siphoned out of the US, also weighed on the greenback.
THE DEBT EXPLOSION THAT WON'T QUIT: When asked the question, "What do you see ahead for the United States?",
Dr. Richebächer, the foremost living authority from the Austrian School of Economics said: "Consumers are running on empty. Personal savings have almost totally disappeared.
"In 1990, the savings rate stood at around 8%. It used to be a truism among thinking people that saving in the sense of abstinence from consumption is the primary key requirement for capital formation. Saving releases the resources that are needed for the production of capital goods.Investment activity often falls short of available savings. That isn't unusual. But the volume of available savings sets the limits to possible capital investment.
"A country without such savings is a country without the possibility of capital formation. The United States has become such a country. It is simply not possible for capital spending to increase without saving and, of course, profits. The United States has neither."
Here's what Dr. Richebächer sees coming:BIGGER STOCK MARKET INSANITY THAN EVER: In the last year, profits per share in the companies in the S&P 500 have fallen from $50 to $25. At the same time, their valuation has surged from 22 to 45 times earnings. Keep in mind that the historical average valuation is about 14.
Debt is increasing 10 times faster than income. Last year the national income grew by $178.6 billion. Debts, on the other hand, increased more than $2 trillion.THE WORST PROFIT DISASTER IN U.S. HISTORY: Non-financial corporate profits fell 48% between the second quarter of 2000 and the fourth quarter of 2001.
Manufacturing was hit even harder. During the same period, profits fell 71.2%. Retail profits edged up about 1.5%. That's the impact of consumer confidence on U.S. corporate profits. A serious recession, a collapse in the stock market and a fall in the dollar are inevitable.
And investors must be prepared or they are going to get seriously hurt.
WHAT ABOUT REAL ESTATE VALUES?
I must also touch on one other market. The Real Estate market. As you know, I live in Lake Havasu City, Arizona, a bedroom community, to a bedroom commununity, to a bedroom community, to a bedroom community in California.
I confess I love California and spend a lot of time there. As amazing as it sounds, in April, median prices for homes jumped to $305,940, over the $300,000 for the first time, in California.
This is up 18.8% over last year’s prices. Sales rose 13.1% from their level a year ago First-quarter existing home sales were on a record pace, with strong price gains in many markets.
Availabe home inventory droped from around 3.5 last year to 2.3 months, now. These figures are so unreal in that they do not reflect the realities of life in the U.S.A. It gives me no joy to say this, but we definitely have a Bubble that is certain to burst.WHY DID CHRIST WARN, WATCH LEST I COME TO YOU LIKE A THIEF IN THE NIGHT?
WHY DID CHRIST PROPHETICALLY SPEAK TO OUR AGE THROUGH THE LETTER TO THE LAODICEAN CHURCH, SAYING, "Because you say to yourselves, ‘I am rich and increased in wealth and in need of nothing’, not knowing how Poor and Wretched and Naked you really are, I will spew you out of my mouth. Buy from me Gold tried in the fire. . . ."
It seems to me that Christ was speaking of events to come, so universal, so traumatic and painful that it would literally constitute "an hour of temptation" or more literally, "an hour of testing".
Many Americans know their heritage - how our forefathers came to this continent to escape persecution from religious and political authorities - to establish a new form of government that would be modeled upon Biblical precepts.
It would have money backed by real gold and real silver, not issued by greedy bankers intent on extracting ‘a pound of flesh’ for their services, but issued by a government that spent the money into circulation.
When they established their Constitution, it provided that only Congress would be able to, "COIN Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; AND Provide for the Punishment of counterfeiting the Securities and current Coin of the United States" - Article. I, Section. 8, Clauses 5 & 6.
They also provided that, "No State shall . . . . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts. . . . Article. I, Section. 10, Clause 1: It stands to reason that if the States cannot make anything but gold and silver coin legal tender for debts, then neither can the Federal Government.In 1967, Alan Greenspan, chairman of the Federal Reserve Corporation, wrote an article called ‘Gold and Economic Freedom’. In that article, he displays his genuine understanding of the necessity for gold and silver backing for a healthy currency:
"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other…
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
So, why doesn’t uncle Al lead the charge to liberate us from the Federal Reserve? You tell me.
To learn how the Bankers get Congress to forego their sacred duty and relinquish this power to the Bankers I would encourage my reader to explore two series of articles contained under the headings: HARD TIMES and SCARLET AND THE SEVEN HEADED BEAST found at
WHAT WILL WE TELL OUR GRAND CHILDREN?It would not surprise me at all, someday, to hear some elderly person trying to explaining why the American people turned on their Senators and Congress-persons by giving them a ‘necktie party’.
Stop and think for a moment, how many promises were made in the last campaign to do away with the cumbersome and impossible tax code ‘if you vote for me’. How many of your Congressmen and Senators have called on you lately to ask for your help, to give pink slips to the gangsters who carry IRS badges?
If they think the American patriots were angry two hundred years ago because ‘taxation without representation’ wasn’t right, just imagine how irate our generation will be when they wake up to discover that their Social Security taxes were spent by their duly elected officials, on pork-barrel projects and that there’s nothing left.
Wait until they realize that those well paying manufacturing jobs were exported abroad to foreign workers, who don’t even like Americans, under ‘Free Trade’ agreements.
Just wait until you hear about our young military people being brought up before the ‘World Court’ and charged with ‘genocide’ and sentenced to death without a trial by jury. Just wait.This is Jeffrey Brackeen, wishing you and yours the best.
_________________________________________________________Discover our other web site devoted to Spiritual and Social Issues. Go to__________________________________________________________
Post A Comment On This Article | Tell A Friend | Past Issues: www.theseventhtrumpet.com