Finger Pointing

When the house of cards fall… the finger-pointing begins.

Investment fund manager says she was victim, too
By Tina Santos
Last updated 06:23am (Mla time) 07/31/2007
DESPITE investors’ claims that it was she who enticed them to invest their money in the foreign exchange trading firm Performance Investment Products Corp. (PIPC), Cristina Gonzales-Tuason, the company’s general manager, insisted Monday that she, too, was a victim of the investment scam.

Accompanied by her two lawyers, Mario Bautista and Gener Ballesteros, Tuason appeared at the National Bureau of Investigation anti-organized crime division (AOCD) at 10 a.m. Monday. She, however, refused to answer questions from the media.

“She’s definitely a victim,” Bautista told reporters, adding that his client went to the NBI in response to the subpoena issued by the bureau last Tuesday.

“We wish we knew,” he said when asked if Tuason knew where Michael Liew, the Singaporean owner of PIPC who allegedly disappeared with at least $250 million of investor money, was.

“We were the ones who asked the NBI to look for Liew. We’re looking for Mr. Liew. He just disappeared with all the money,” Bautista said.

Oscar Embido, assistant regional director and chief of the NBI-AOCD, said Tuason inquired about the nature of the complaints filed against her by at least five investors.

Four of the five investors filed their complaints Monday. The fifth, a businessman in his 30s, lodged his charges last week.

“Ms Tuason asked for five days to file a counter-affidavit to refute whatever charges the complainants had filed against her,” Embido said, adding that he expected her to personally appear at the NBI again on Friday morning.

“She has to come because she has to give [her statement] under oath,” he said.

The NBI, meanwhile, has set up a public assistance center at a hotel to entice investors to come out in private and cooperate in the probe.

The center is in the Azure function room on the 8th floor of The Pearl Manila Hotel which is across from the NBI headquarters on Taft Avenue, Manila. Tel. Nos. are +63 2 4000088, local 3010 and 3011, and +63 927 4845883.

The center will receive complainants round-the-clock Monday to Friday, the NBI said.

“We wanted to provide a private space for investors who might want to but are hesitant to come out and speak up regarding their PIPC investments,” said lawyer Ruel Lasala, head of the NBI National Capital Region.

Lasala was quick to add, however, that the creation of an assistance center in a hotel was not meant to give the investors special treatment.

“Most of them were mum about the issue so we thought of a friendly approach. This is our way of encouraging them to cooperate with us,” he said. “Besides, they’re complainants, not suspects.”

Reynaldo Esmeralda, NBI deputy director for regional operations services, said the center’s expenses will come from the bureau’s intelligence fund.

At the Senate, Sen. Juan Ponce Enrile wants the chamber to investigate PIPC in aid of legislation “to determine the machinations used by PIPC to perpetrate its scheme and circumvent the law.”

In a resolution he filed Monday, Enrile said PIPC had illegally engaged in foreign exchange trading even as it was registered with the Securities and Exchange Commission for the last nine years as a “research company.”

Enrile said the Senate would look into the “alleged illegal investment syndicate involving the PIPC which has caused losses of millions of dollars in foreign exchange trade, with the end in view of recommending remedial measures to protect the investing public.”

With a report from Dona Z. Pazzibugan

Caveat Emptor – Buying real estate in Quezon City

Just recently, it has come-out in the open that OFW’s are being victimized not only by Ponzi Schemes or Scams like the recent FrancSwiss scam… but also, they are being scammed by unscrupulous Real Estate Brokers that sell non-existent real estate or condominiums to these innocent Overseas Filipino Workers. This is now called the “Housing Scam”. You can also read this about OFW’s being victimized and also this more recent warning to OFW’s.

It is heard-thru-the-grapevine that a lot of these unscrupulous Real Estate Brokers that want to make a quick-buck, are selling properties in Quezon City that are not for sale or are not owned by the seller. Some even sell lots in Quezon City at very-low “pre-development” prices so that the would-be victim would buy right away.

Why are they selling properties in Quezon City? They are selling properties in Quezon City simply because of the proliferation of fake “reconsituted” titles that were caused by the anomalous fire that destroyed land titles in the City Hall of Quezon City in 1988. Without this fire, the land scam syndicate would not have been able to steal properties or do their dirty land-grabbing from honest land-owners.

The usual modus operandi of these scammers:

  1. They would have bogus brochures and pictures whether printed or using a website like FrancSwiss.
  2. If the scammer is big-time and wants to scam big-time investors, the scammer usually rents a helicopter and does a “fly-over” on the property and points his finger saying “that is the property for sales”. But please note that the scammer does not even own the property.
  3. Scammers would even rent trucks, bull-dozers or whatever machinery as “props” to show the would-be victim that the property is undergoing “pre-development”.
  4. Some scammers who have contacts with the “show biz” industry would even ask some show-biz talents to “endorse” these bogus properties.
  5. It is easy for these scammers to victimize OFW’s in another country since these OFW’s have not set foot on the property and can only view the property from a brochure or bogus land title.
  6. The more sophisticated scammers that are armed with laptops now even use Google Earth to show the approximate location of the property to add some bogus credibility.

How do you protect yourself from these Real Estate Scams, Housing Scams, Land Scams, Land-grabbers,… or simply criminals?

  1. Make sure you do your “due diligence” or investigate the history of the property and check if the seller of the property really owns the property.
  2. It would help if the property for sale is being advertised that it is “For Sale” to the public. If the scammer tells you that it is for sale, you have to make sure that it is really for sale.
  3. Do not buy a property if you have not set foot inside the property.
  4. Do not buy a property that is under “contestation”.
  5. Do not buy a property without checking the Land Titles first and go to the appropriate government agencies to do your research.
  6. To see is to believe — don’t believe these colorful brochures or websites especially if the developer is not a well-known or credible developer.
  7. Check with the SEC if the “developer” or “company selling the property” is registered to sell properties and if the properties are really under their name.
  8. Scammers are very good at the “business of scamming” and therefore you never know you are being scammed (like the victims of FrancSwiss and PIPC), until it is too late.
  9. Consult your lawyer, if you do not have one, … get a friend who has one.

Like the victims of FrancSwiss and now the more recent Performance Investment Products Corp or PIPC scam, the usual victims are those that do not do their own research, due diligence or even seek “lawyerly-advise”. And so, if a property is “too cheap”… buyer beware. If it is too good to be true, … it usually is.

Hmmm…. is it possible that some scamming real estate brokers have sold portions of the Manotok’s property even though the Manotok family are not selling the property?

Is it possible that these scamming real estate brokers that are “friends” with the “Heirs of Barque” have sold portions of the Manotok property to some innocent OFW’s abroad? Maybe selling portions of the Manotok property at “too cheap to turn-down” or at so-called “pre-development” prices?

Similarly, the University of the Philippines, has been victimized by these scamming real estate land-grabbing syndicates that try their best to make quick-money by selling something that is not even for sale.

CAVEAT EMPTOR in Quezon City.

The questionable “Heirs of Barque”

This article written by Mr. Amado Macasaet, justifiably questions the simple fact as to why did the Heirs of Barque only claim the land (owned, occupied, and in-possession of the Manotok Family for 85 years) 9 very long years after the original certificate of title (of the Manotoks) was burned in the Quezon City Hall fire in 1988?

It is also important to note that the reason as to why they are called “Heirs of Barque” is simply because the person whom the Heirs of Barque claim to own the land is Homer Barque (Sr.) who, while he was still alive, never even set foot on the property or never even claimed that the property was his. It is only the “Heirs of Homer Barque” who say that their father owned the property of the Manotoks. But why did Mr. Homer Barque never claim it was his when he was alive? Why did Mr. Homer Barque never set foot on the property while he was alive?

It is quite obvious that the “Heirs of Homer Barque” are taking advantage of Mr. Homer Barque being dead, most likely, if he were still alive, he would never claim the Manotok property which his “Heirs” are claiming. This is an obvious scam created with some outrageous “Heirs of Barque” story. The story of the “Heirs of Barque” just does not add-up. The story simply does not make sense. This could create other stories of other “Heir of this and heirs of that”.

Sitting on one’s rights

Obviously, the law punishing a person or denying his rights for sitting on them too long does not apply in land disputes. Otherwise, the Court of Appeals would have thrown out the petition for reconstitution of the alleged title of the heirs of Homer Barque over a 34-hectare property in Quezon City.

The heirs of Homer Barque, represented by Teresita Barque Hernandez, woke up to discover their title or rights over the land, long occupied and titled in the name of the Manotok family, nine years after the original certificate of title was burned in the Quezon City Hall fire in 1988.

The presumption is the heirs of Homer Barque knew all along that they are rich, having a property with a present estimated value of more than P5 billion. Why they decided to be less than rich when they are sitting on huge wealth is a question the Supreme Court did not give too much value to.

The heirs of Barque were sitting on their rights far too long and it took a fire in the register of deeds in Quezon City for them to ask for a reconstitution of the title the duplicate of which they claimed they have.

The argument of the Manotoks that the heirs of Homer Barque never set foot on the land was also ignored by the Land Registration Authority, Court of Appeals, and the Supreme Court.

The tribunal ruled that the title of the Manotoks was sham and spurious.

By whose word? The Land Registration Commission which earlier supported the Manotoks but changed the decision in favor of the Barque. The thing happened in the Court of Appeals.

The RTC’s jurisdiction

None of these would have ever come to pass had the LRA, the Court of Appeals and the Supreme Court saw fit to comply with the inescapable necessity of a law that says that judicial reconstitution of titles is an exclusive and original function of the Regional Trial Court.

Even the Supreme Court did not find it necessary to remand the case to the RTC saying the process is time-consuming and unnecessary since the title of the Manotoks had been established to be sham and spurious.

The key question is who established these “facts”? The wrong agencies such as the land Registration Authority which was sustained by the Court of Appeals which in turn was affirmed by the Supreme Court.

The Manotoks filed a memorandum of reconsideration twice. The Supreme Court denied it twice.

Pending before the court for which orals were held on July 24 was the petition of the heirs of Homer Barque to order the register of deeds of Quezon City to transfer the titles of the Manotoks to the heirs of Barque.

I never commented on that beyond saying that the schedule for five oral arguments were postponed until the sixth was held on Tuesday, July 24.

Self-established facts

The allegation, affirmed by the Supreme Court, that the title of the Manotoks was sham and spurious, was “established” by the Land Registration Authority which, as earlier said, had initially considered the titles as genuine.

The LRA changed its mind. That forced the Manotoks to file an appeal to the Court of Appeals. From what I can understand, the appeal automatically elevated the question to a judicial reconstitution, not administrative in the hands of the LRA.

It is here that the Court of Appeals which also initially agreed that the Manotok title was genuine might have made the mistake of ignoring a law that judicial reconstitution is an original and exclusive function of the regional trial court. In which case, the CA should have remanded the case to the RTC.

A division in the Supreme Court made the same mistake by ruling that since the titles of the Manotoks have been established as sham and spurious, there was no need to remand the case to the regional trial court as required by law. That could be time-consuming and unnecessary, according to the decision of the majority in the division headed by Associate Justice Consuelo Ynares Santiago.

RTC should establish the facts

The alleged facts relied upon by the Supreme Court in ruling in favor of heirs of Homer Barque were not judicially established although the case is one of judicial reconstitution.

In which case, according to the law, the regional trial court has exclusive and original jurisdiction.

The RTC is the venue that should have established the facts by examining documents and hearing the testimonies of witnesses, not the LRA whose administrative function is to approve or deny a petition for reconsideration.

Therefore, the case having become one of judicial reconstitution, the LRA has lost jurisdiction over the dispute.

It would have been automatically assumed by the regional trial court if the LRA had said so. But it did not. Neither did the Court of Appeals. Neither did the Supreme Court.

The SC ruled that the titles of the Manotoks are sham and spurious as established by the LRA and affirmed by the Court of Appeals.

I would have kept my peace if the conclusion that the Manotok titles are sham and spurious was established by the Regional Trial Court as required by law.


The 38-page dissent of Associate Justice Antonio T. Carpio complete with four pages of bibliography contends that the jurisprudence long established by the Supreme Court was inapplicable.

Justice Consuelo Ynares Santiago in ponecia declared that it is.

Whether it is or it is not, does not depart from the law that the regional trial court has original and exclusive jurisdiction over the case.

Which is saying that if the law had been observed, it would be easier to believe that the RTC had ruled that the jurisprudence is applicable or inapplicable.

Of course the Supreme Court can determine which jurisprudence is applicable and which is not.

But we would have had the comfort of knowing the regional trial determined which jurisprudence is applicable.

The comfort is drawn from the fact the law giving the regional trial court exclusive and original jurisdiction was not skipped. In which I personally would not mind if the Supreme Court had ruled in favor of the heirs of Homer Barque, like it did, with finality.

It’s a case of dura lex sed lex which the LRA, the Court of Appeals completely closed their eyes to.

Manotoks, land grabbers?

After I wrote the first item on this case, a lawyer-friend called me up and told me that I got the facts all wrong. I then told him to write me a summary of what is right.

He never did. Instead, he told me that the Manotoks are the biggest land grabbers in Metro Manila. I countered that is subject to proof.

In the present case, who is the land grabber? Is it the Manotoks who have a Torrens title to the property which they have been occupying and paying taxes on since ‘1923 or the heirs of Homer Barque who woke up to discover their rights nine years after their alleged original copy of the title was lost in a fire in 1988?

They suddenly came up with a duplicate copy of the original which they wanted reconstituted.

If I were one of the heirs of Barque, I would have taken possession of the 34-hectare property long before the copy of the original title was burned. That would have given me oodles and oodles of money and saved me from the current sticky litigation.

That, to my lawyer friend, makes the Manotoks, the biggest land grabber in Metro Manila.



Sounds familiar for the Manotok family

This article written by Mr. Rod Fajardo III is very familiar to the Manotok Family. Like the University of the Philippines (UP), the Manotok family are being victimized by land-grabbing scammers or land-grabbing syndicates. The Manotoks have been in-possession of a large track of land for 85 years and actually have been occupying the said property for all these decades. Then all of a sudden, out of the blue, and conveniently… “the case actually started with the burning of the Quezon City Hall sometime in 1988. The documents under the custody of the Register of Deeds were burned. Thus, arose the necessity of reconstituting documents, specially land titles”.

If there was no Fire, then clearly the Manotoks, who are in possession and are occupying the land,… would not have to face the land-grabbing syndicates who are armed with fake and forged documents.

CLAMPDOWN: UP goes after land grabbers
Rod P. Fajardo III

The Supreme Court made it plain enough when—for the nth time in September 2004—it upheld with finality the ownership of the University of the Philippines over its campus in Diliman, Quezon City. “We strongly admonish courts and unscrupulous lawyers to stop entertaining spurious cases seeking further to assail UP’s title,” it warned. “These cases open the dissolute avenues of graft to unscrupulous land-grabbers who prey like vultures upon the campus of UP. By such actions, they wittingly or unwittingly aid the hucksters who want to earn a quick buck by misleading the gullible to buy the Philippine counterpart of the proverbial London Bridge.”

If there is a hint of exasperation in the way the decision was worded, it must be because the Court is tired of repeating itself over the same issue for almost fifty years now. It first declared that UP is the rightful owner of the Diliman campus on October 31, 1959. Since then, it has decided eight more similar cases with the same verdict.

Even the Land Registration Authority (LRA) has set the record straight. In a report issued by its Verification Committee in August 1984, the LRA traced the origin of UP’s Transfer Certificate Title (TCT) No. 9462 which covers the University’s Diliman campus to the TCT No. 36048 of the Commonwealth of the Philippines. Apparently, the Philippine Government executed a deed of sale in favor of UP on March 1, 1949 relative to TCT No. 36048. Thus, TCT No. 36048 was cancelled in lieu of TCT No. 9462 issued in the name of UP.

Going by these judicial declarations, UP should not have a problem with chasing away illegal settlers.
Yet this is not the case. In the past decades, UP has been busy keeping land grabbers at bay. It’s almost funny how all these claimants come out of the woodwork, their bogus papers matched only by their absurd claims.

But this is exactly what alarms UP. Where are these fake documents coming from? How do the claimants get hold of them? Armed with fake titles, they are able to get their day in court no matter if their claims run from the incredulous to the hilarious. Some of these claimants even manage to elevate their arguments to the Court of Appeals, and quite a few to the Supreme Court itself.

Is there an invisible hand that orchestrates these relentless and seemingly organized land-grabbing attacks against the UP property?

Unholy crusade

Only this October, for example, UP won a favorable decision from the Quezon City Regional Trial Court against St. Mary’s Crusade to Alleviate Poverty of Brethren Foundation Inc., which seeks the reconstitution of a parcel of land in Quezon City with an area of 4,304,623 square meters. The claim apparently encompasses the 493-hectare Diliman property.

St. Mary’s Crusade claims that the land area in question is covered by Original Certificate Title (OCT) No. 1609 which is owned by one Marcelino Tiburcio. On November 26, 1985, Tiburcio supposedly executed a Deed of Transfer and Conveyance of OCT No. 1609 in favor of St. Mary Village Association, Inc. It is based on this alleged Deed of Transfer and Conveyance that St. Mary’s Crusade is now laying claim over the property.

Interestingly, in 1989, an entity named St. Mary Village Association, Inc. filed a petition seeking the annulment of UP’s titles to its Diliman property based on an alleged Spanish grant issued on March 25, 1877 in favor of one Eladio Tiburcio. The trial court dismissed the petition on January 31, 1990.
The people behind St. Mary’s Crusade admit that they do not have the original certificate but they do have a technical description of the property in question, duly certified as correct by the National Archives of the Philippines and a certification issued by the Land Management Bureau of Manila. How did they get past these government agencies? But what the Office of the Vice President for Legal Affairs finds most curious is that these claimants refuse to identify in their petition all the persons that they claim would benefit from the property. Who exactly are these people?

A check on the background of the people behind St. Mary’s Crusade reveals that they are all residents of the Diliman campus, presently living in the housing area allotted by UP for its qualified personnel under its housing program. All but one of the petitioners had been former UP employees who had availed of and qualified for housing privileges. These employees subsequently resigned or retired from active service but refused to leave their respective housing units. They are, in short, illegal tenants, and therefore subject to eviction.

Monomania of lands
And then there’s the perplexing case of Prince Julian Morden Tallano. Here is a man who claims to be a descendant of King Luisong Tagean whose sons supposedly included Rajah Soliman and Lapu-Lapu. (This alleged filial relationship between Soliman and Lapu-Lapu—two prominent figures in the country’s history—has apparently escaped the attention of historians for it is not mentioned in textbooks.) And by virtue of his lineage, Tallano is now asserting ownership over several land titles. OCT No. T-01-4, for example, covers the whole archipelago and its four regions: Luzon, Visayas, Palawan-Zamboanga embracing Kalayaan and Sabah, and Mindanao. TCT No. T-408, on the other hand, covers 1.253 billion square meters of Metro Manila.

What is even more baffling is that despite the patent absurdities of such claims, the Court of First Instance (CFI) of Pasay City allegedly promulgated on November 4, 1975 an Order for Reconstitution of TCT No. T-408 and OCT No. T-01-4 , among other titles, in favor of Gregorio Madrigal Acopiado, Tallano’s supposed great great grandfather. As in the case of St. Mary’s Crusade, the original copy of the said decision was reportedly lost or, more specifically, destroyed in a fire that gutted the Pasay City Hall on January 18, 1992. Tallano’s group, however, claims they have a true copy of the decision certified by the Office of the Solicitor General.

In 2005, Tallano and a certain Anacleto Madrigal Acopiado filed with the Regional Trial Court Branch 220 of Quezon City a petition for the enforcement of the CFI-Pasay City’s 1975 decision. Acopiado insisted that by virtue of said judgment, UP’s TCT over its Diliman campus is null and void. Thus, UP should reconvey ownership over its Diliman property to the Acopiados.

Convinced that the alleged CFI judgment was secured through fraud, the UP System Office of Legal Affairs sought the assistance of the Office of the Solicitor General and the National Bureau of Investigation (NBI) to determine the true identity of the claimants. In a report dated June 10, 2005, the NBI declared that Julian Morden Tallano is not a prince but an impostor who, many times in the past, had assumed different identities and provided different addresses with the evident aim of defrauding other people. Tallano, who turned out to be a native of Nueva Ecija, was also found to be the subject of several warrants of arrest for estafa, falsification of documents, and swindling, among many others.

The identity of Anacleto Madrigal Acopiado, meanwhile, could only be established by an altered death certificate issued by the Local Civil Registrar of Taguig, Manila on November 28, 1994. Moreover, the NBI could not find any document to prove that Don Gregorio Madrigal Acopiado exists or ever existed.

Cracking the whip
There are countless other spurious claims over the ownership of the UP Diliman campus currently docketed in trial courts. And, as long as equally spurious documents are readily available from the black market, many more are expected to come out.

This is the reason UP is going beyond asserting its ownership over its property. UP is now determined to go after these organized land-grabbing factions who are growing ever more brazen.

Asian Investors Rattled by Dow’s Plunge

Asian Stocks Tumble in Wake of Wall Street’s Plunge; Nikkei Down 2.4 Percent

By Mari Yamaguchi, Associated Press Writer

Friday July 27, 4:23 am ET

TOKYO (AP) — Asian markets tumbled Friday in the wake of one of Wall Street’s biggest losses of the year, with Japanese stocks also taking a hit on the yen’s recent strength and uncertainty over weekend elections.

Markets in Hong Kong, Australia, South Korea, Taiwan, Singapore, Malaysia and the Philippines also fell sharply. Mainland Chinese stocks, however, remained flat.

Investors were rattled after U.S. markets plunged Thursday amid worries over the U.S mortgage and corporate lending markets. Those woes could cause global liquidity to dry up as international investors pull out of riskier assets, including Asian emerging markets, analysts said.

“If big foreign funds have selling orders, they tend to go by region. If they sell Asia funds, they do it to reevaluate portfolios or cover losses in the U.S.,” said Rommel Macapagal, chairman of Westlink Global Equities

“But for local investors, it’s a sentiment. When big drops occur, they tend to get jittery because of expectation of foreign funds selling. They tend to get out,” he said.

In Tokyo, the Nikkei 225 index sank 418.28 points, or 2.36 percent, to close at 17,283.81 — nearly a three-month low. Losers included Honda Motor Co., Toshiba Corp. and Nikon Corp.

Philippine stocks suffered their biggest percentage drop in 10 years, sinking 3.9 percent. Taiwan’s benchmark index fell even more, dropping 4.2 percent.

The sell-offs also came after stunning rallies in Asian markets — stocks in South Korea, China and India hit records just this week — and some investors viewed Wall Street’s drop as a good opportunity to sell and lock in their profits.

South Korea’s benchmark index dropped 4.1 percent, its biggest drop in more than three years. In afternoon trading, Hong Kong’s Hang Seng index was down 1.9 percent, while Indian shares fell 3 percent in morning trading.

Chinese markets, however, shrugged off the declines. The benchmark Shanghai Composit Index slipped just 0.03 percent after hitting an all-time record high on Thursday.

In Tokyo, Japan’s Chief Cabinet Secretary Yasuhisa Shiozaki, brushed off concerns about the influence of the U.S. stock market on Japan’s economy. The Dow Jones industrial average plunged 311.50 points, or 2.26 percent, Thursday to 13,473.57, its biggest point drop since Feb. 27.

“The Japanese economy is expanding stably and I have not heard that there have been any major fluctuations in other key countries,” Shiozaki said.

Investors in Japan were also unnerved by the yen’s recently appreciation against the dollar, which erodes overseas income at the country’s key exporters. The dollar fell to 118.70 yen in afternoon trading in Tokyo, down from 119.46 yen late Thursday in New York.

“A stronger Japanese yen has a greater impact on today’s Nikkei than overnight losses on U.S. stocks,” said Hiroyuki Fukunaga, chief strategist at Rakuten Securities.

There was also anxiety in Japan about Sunday’s upper house elections. Recent newspaper polls have predicted that the long ruling Liberal Democratic Party could win fewer than a third of the seats contested in Sunday’s upper house elections.

A defeat would not immediately threaten its hold on power, but Prime Minister Shinzo Abe could face pressure to resign from other leaders within his party and from the public.

Associated Press Writer Hrvoje Hrjanski in Manila contributed to this report.

Subprime Woes Go Global…

Subprime Woes Go Global…

Good day… Without any data in the U.S. and a slow data day in Europe, the currency markets continued to track along their recent trend lines, which are US$ negative. The mood of the markets continues to be one of trepidation as traders wait to see just what the subprime mortgage mess will bring next. Traders continue to come to the realization that the U.S. housing slowdown and subprime mortgage mess will not go away quickly.

Data due out today and tomorrow will do little to calm their fears. The ABC Consumer Confidence number and Richmond Fed Manufacturing Index are the only two reports which will print today, and neither is expected to show much strength. Tomorrow we get a snapshot of the housing market with the release of MBA Mortgage Apps. & Existing Home Sales in the morning, followed by the release of the Fed’s Beige Book in the afternoon. Existing Home Sales will be the driver of the markets and are expected to show a month-on-month drop of 2.1% in June.

With the markets nervous about this week’s housing reports, the dollar weakened against all of the 109 most active currencies. Even the Japanese yen got in on the fun as it strengthened to a two-month high vs. the greenback. The dollar’s slide accelerated after the dollar reached levels that triggered automatic sell orders.

News released yesterday shows the subprime rout is going global, as Reuters reported that Basis Capital Fund Management Ltd., an Australian hedge fund, is hiring Blackstone Group LP to advise the fund on limiting its losses. It seems Basis Capital Fund bought into the CDO markets, and these investments are falling fast. I also read that Japan’s nine biggest banking groups have more than 1 trillion yen of combined holdings in products backed by U.S. subprime mortgages.

This is an interesting twist to the mortgage mess, as foreign investors are starting to feel the pain. These foreign investors have been pouring money into the U.S. markets, supporting our deficits and keeping our dollar strong. We have been talking about how these foreign investors will start moving away from their U.S. investments on interest rate differentials, and this latest report of subprime losses will only serve to accelerate these sales.

In the category of ‘what is he smoking,’ U.S. Treasury Secretary Henry Paulson was on CNBC yesterday and said that problems in the subprime mortgage loan sector could be contained and would not hurt the overall economy. I think Mr. Paulson should try and tell that to investors in his former firm’s hedge funds! Confirming our assertion that the Treasury Secretary must have been on something, he followed up his subprime comments with a statement that a strong dollar was in the best interest of the U.S. Tell that to the manufacturers who are trying to compete with Asia!

Dollar losses vs. the euro were limited as offsetting economic reports released this morning made it difficult for traders to establish a direction in early trading. The conflicting data started on the consumer side as French consumer spending surprised to the upside rising 1.6% from the .7% which was expected. This was the best reading since August 2006 and was buoyed by a sharp reduction in French unemployment. On the other hand, Italian Retail Sales showed a far more tepid rise of just .1% vs. .3% projected.

Other data this morning showed growth in Europe’s manufacturing and service industries slowed more than economists expected in July. The Royal Bank of Scotland Group Plc’s combined index fell to 57.3 from 57.8 in June as reported by Reuters. While this index did fall, any reading above 50 indicates expansion. This negative data was offset by German import prices, which increased more than economists expected in June. German prices rose 1.3% in the year, the biggest gain since December of 2006. These price gains will continue to put upward pressure on the euro.

The pound sterling rose to the highest in 26 years against the dollar on further speculation the BOE will raise interest rates at least once more this year. Much of this recent movement in the pound is due to momentum as data released today should have been somewhat negative for sterling. British factory orders unexpectedly fell in July, but currency traders largely ignored this data and continued to make bets the pound will rise. The BOE will meet next on August 2nd but will probably wait until September to make their next move up.

Two other currencies which have been benefiting from interest rate differentials are the New Zealand and Australian dollars. The New Zealand dollar moved over .81 cents for the first time last night before moving back down in early European trading. The Australian dollar also continued to gain and hit a new 18-year high. Both currencies continue to benefit from some of the highest interest rates in the industrialized world. The New Zealand central bank is expected to boost its key rate a quarter of a point this week. New Zealand’s dollar will extend its rally to 83 cents, said John Key, the leader of the nation’s opposition party and former European head of global foreign exchange at Merrill Lynch.

The Aussie dollar gained yesterday after a govt. report showed producer prices rose by more than economists expected in the second quarter. A report tomorrow is expected to show Australian inflation accelerated last month. Australia’s consumer price index probably gained 1 percent in the second quarter, compared with .1 percent in the first three months of the year. These higher inflation numbers will continue to push the Reserve Bank of Australia into raising its overnight cash rate at their next meeting on August 8.

In preparation for my presentation later this week at the San Francisco Money Show, I ran a spreadsheet calculating the currency returns for all of our different Index CDs. I was happy to see that all of these indexes had returned over 9% annualized on a year-to-date basis. The Commodity Index was the top performer, with a currency-only return of 9.63% during the first seven months. Our new WorldEnergy Index was second with a currency return of 9.29% and the Prudent Central Bank was number three at 8.54% so far in 2007. Even more impressive are the total returns (including interest) for these Index CDs. The Commodity Index was still the top at 14.38%, followed by the WorldEnergy at 13.61% and then the Prudent Central Bank at 12.09%. GREAT STUFF!!

Currencies today: A$ .8847, kiwi .8082, C$ .9565, euro 1.3812, sterling 2.0602, Swiss .8298, ISK 59.15, rand 6.8237, krone 5.7313, SEK 6.6390, forint 178.15, zloty 2.7226, koruna 20.4079, yen 120.80, sing 1.5059, HKD 7.8217, INR 40.2325, China 7.5685, pesos 10.7742, dollar index 80.22, silver $13.335, and gold… $682.97

That’s it for today… We are back at full staff this morning, so it should be a better day on the desk. The big boss Frank Trotter emailed me from Vancouver last night where he is one of the key speakers at the Agora Wealth Symposium. He is expecting some great crowds out there. I still have to finish the presentation for San Francisco, so got to get to work! Hope everyone has a great Tuesday.

Filling in for Chuck Butler:

Chris Gaffney, CFA
Vice President
EverBank World Markets

The US Dollar: On the Edge of the Abyss

We are literally about half a point from seeing the US Dollar break its single most important support level. Here, eighty is the magic number, watch the USD fall below 80 and you have witnessed the beginning of the end of the dollar and the dawn of a terrific run in gold prices that will take the yellow metal to an all time high in a surprisingly short period of time.

Over the last year, as the chart below demonstrates, we have watched the dying dollar make lower lows and lower highs. The USD occasionally makes a pathetic attempt to break its 200dma, but that has only happened a couple of times over the last year. Indeed, the USD has not been above its 200 day moving average since the 50dma crashed down through the 200dma in early April 2006.

On the Edge of the Abyss

The USD has fallen over two points in the last fortnight or so, and this rate of decline will continue if it breaks the support level at 80. When the USD was testing this support at the beginning of 2005, it went on a terrific run to 92.63 but somehow we do not think that the dollar will be able to pull another rabbit out the hat as it did then. More and more investors are coming around to the fact that the USD is dead and people do not want to hold this rapidly devaluing paper anymore. When the USD breaks 80, the whole world will see a big sell signal and this influx of people dumping dollars will send the greenback down into the abyss and its anyone’s guess how far it can fall, but it will fall…a lot.

The US Dollar - On the Edge of the Abyss

However there is one fan of the USD, a fan that will try and keep the dollar up or at least “manage” its invertible collapse. That of course is the US Government. Armed with Ben Bernanke’s Plunge Protection Team, you can bet you bottom dollar (although shortly it might not be worth much) that they will do everything possible to make sure their currency does not have a full blown crash. They would rather that USD gradually floated down in a way that would benefit US exporters. Trying to manipulate the market is a dangerous game, as no person, company or government is bigger than the market and eventually the market will fight back and win.

In fact the more an entity tries to suppress something, whether this be the financial market or something as simple as an idea, the more drastically the suppressed force will fight back. Therefore all the Plunge Protection Team are doing by trying to prop up the dollar or the stock market is delaying the invertible and making the backlash reaction all the more dramatic. You can try to push the bad times back, but this will just make the bad times worse when they eventually come around.

It is crucial to remember that the United States on America is not the only government with an interest in which way the dollar goes. With their hands on over $1.2 trillion dollar bills, the Chinese Government must also be watching the USD like hawks having lost $100 billion of value in less than a year. The government in China is very concerned at keeping “social unrest” at a minimum so how do you think the Chinese people will react if the USD continues declining further and further down bringing their foreign currency reserves closer and closer to worthlessness. China must be looking to transfer their dollars into something that retains its value or perhaps even increases in value, after all isn’t that what investments are supposed to do?

China will look to get out of dollars and into anything that isn’t falling as fast as the USD. The private equity group Blackstone, made the biggest US IPO of the year recently and Beijing swiftly swooped in and bought a 9.9% stake in the company, using $3 billion of its foreign exchange reserves. It is likely that we will see more examples like this of China buying companies, commodities and whatever they can to get out of the dollar. Gold and silver bullion or the mining companies in the precious metals industry are obvious candidates for a piece of China’s USD pie as they move up and as the greenback moves down so they are the most logical hedge against a declining dollar.

If China and other countries holding large USD reserves shift even a small proportion of their dollars into the precious metals, it will have massive effect on gold prices and silver prices. Governments aside, individuals around the world will be looking to trade any dollars they have for a piece of gold or some gold stocks rapidly increasing in value.

So do we think the USD will break 80 in the next few days?

No. The PPT will probably buy it back up a couple of points but then it will drift down again to test the eighty level and will probably break it in the coming months. However now is the time to buy gold and silver and gold stocks and silver stocks.

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Sam Kirtley