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 U.S. foreclosure filings in May nearly doubled in comparison with last year. According to a RealtyTrac report released today, notices of default, scheduled auctions and bank repossessions in May were up 90% year over year, and up 19% since April.
California, Ohio and Florida saw the most filings. A jump in foreclosures in the month that’s supposed to kick off real estate’s buying season… not good.
 The Dow lost another 120 yesterday. The dollar ticked higher against all major currencies. Gold was flat.
 Data released this morning showed retail sales in the U.S. rose in May as record gasoline prices lifted purchases at service stations.
“I don't think these are the type of retail sales which are positive for the U.S. economy,” commented EverBank’s Chris Gaffney, “but the news media will certainly make a big deal about how sales are up in the U.S. According to preliminary estimates, most retailers -- other than filling stations -- probably suffered as the high gas prices left Americans with little extra cash to spend at the mall.”
 The 10-year Treasury note continued its rise to a five-year-record 5.32% yield this morning. The bond’s yield has officially passed the Fed’s benchmark 5.25%, and is showing little sign of weakness. Among other influences, Alan Greenspan mouthed approbation… and sent bonds tumbling.
When asked to comment on the historically low premiums, Greenspan said, “It ain't going to continue that way. And indeed, all the spreads you are looking at, including your spreads relative to the 10-year, are going to start to open up and the 10-year is going to be moving as well.” And move they did.
 But the googly-eyed former central banker wasn’t done. "We cannot continue this rate of growth in China and the Third World. This cannot continue indefinitely," Greenspan said in a speech yesterday. "Some of these price-earnings ratios are discounting nirvana."
He suggested that the global liquidity boom, which he dates back to the end of the Cold War, is nearing its end. “Enjoy it while it lasts,” he concluded.
Wait a sec… “back to the end of the Cold War”… Isn’t that roughly when Greenspan took over as Fed chair? He showed up to the party, spiked the punch bowl, taught his younger frat buddy Bernanke how to do the same. Now he’s calling the cops.
 “For the first time since the kiwi was floated 22 years ago, the Reserve Bank of New Zealand intervened to sell NZ dollars to push down its value,” writes Randall Forsyth in his latest “Up and Down Wall Street” column in Barron’s:
“The kiwi had soared over 22% in the 12 months ended last Friday, to over 76 U.S. cents, a level that was ‘exceptional and unjustified in terms of the economic fundamentals,’ Alan Bollard, the central bank’s governor, said in a statement. At its nadir back in 2000, the kiwi fetched less than 40 cents.”
So Mr. Bollard is basically saying that he needs to work overtime in his efforts to erode the value of his fellow citizens’ savings. ”If I were a New Zealander,” Dan Amoss writes, “I’d be happy that my savings can buy far more goods and services than in 2000. But central planners think this sort of trend is bad and seek to ruin it.”
"Central bankers sometimes describe their activity as ‘more art than science,’” wrote our friend Antony Mueller on the Mises.org site yesterday, “which is implicit recognition of their ignorance. The ‘art of central banking’ is the art of pretending to know what one does not know. Not only is it not a science; it is not even an art. At best, it is alchemy; at worst, it is a gigantic cheat."
 “The GCC is a story that will soon be just as familiar to investors as India and China,” Chris Mayer predicted this morning of the Gulf Cooperation Council. The folks investing Harvard’s money are doing their part to help out.
The Harvard Endowment announced this week that they plan to invest $1 billion in GCC economies -- despite the fact they were down 50% in 2006. “In the economies of the GCC and North Africa,” explained Mohamed El-Erian, the Endowment’s chief strategist, “you have enough going on to accelerate the opening up of the investment management world, implying more sophisticated techniques, a broader set of players and great opportunities.”
“People will soon be able to say ‘GCC’ in polite conversation without having to explain what it is,” commented Chris.
 “Today, Venezuela produces about 1 million fewer barrels of oil than it did earlier this decade,” reported Christopher Hancock of Free Market Investor. Still, oil revenues prop up Hugo Chavez's political agenda. Nationalize this… take over that… censor all of them… and “give back to the people.” According to Mr. Hancock, the plan couldn’t possibly work, and the smart money is racing elsewhere.
“80% of Venezuela's households have difficulty covering the cost of food despite the fact that Chavez spends on the poor faster than he can print bolivares. Nationalist populism leads to massive wealth redistribution aimed at supporting government agendas, which, in reality, only leads to undercapitalization for future development. Eventually, the well runs dry. This story has been told time and time again in South America.”
Christopher suggests taking a look at Brazil, Peru and Costa Rica. “They seem to see the necessity of monetary and fiscal responsibility.” He recently published a report detailing a Chilean pick he believes to be the world’s greatest retirement stock. You can learn more here. >>
 Here’s a wacky bit of news. In 2005, the U.S. guv’mint suspected a Macau bank of laundering North Korean funds. Under the brilliant global jurisdiction of the Patriot Act, the U.S. froze $25 million of the bank’s North Korean assets. This week, North Korea announced they want their money back, or else the country’s nuclear program will continue.
The problem? North Korea insists they be reimbursed through a private bank, and nobody wants to be the guy signing the check. “No bank is willing to help return the money to North Korea,” reported NPR this morning. “Banks fear helping North Korea would taint the banks in the eyes of the U.S. Treasury Department, even though the request came from the U.S. State Department.”
The possible solution? An unnamed Las Vegas casino may stage a buyout of Banco Delta Asia (the Macau bank that currently holds the frozen assets) in order to refund the money. What does it gain in the transaction? A nearly impossible-to-get Macau gaming license.
High finance and global intrigue in the war on terror… love it.
 By 2012, 30% of the U.S. corn crop will be used to produce ethanol, the Government Accountability Office warned earlier this week. If the ethanol boom doesn’t bust before then, American farmers will produce more than 11 billion gallons a year by 2012.
"Using more corn for energy production will likely exert additional upward pressure on corn prices, potentially influencing livestock feed markets and meat prices," the GAO said. Ummm… Really?
The GAO also reported the rush to expand E85 fuel (85% corn-based ethanol, 15% gas) could make the demand for corn worse, as ethanol is not a gallon-for-gallon replacement for gasoline.
Resource Trader Alert’s Kevin Kerr told The 5, “The farmers and car dealers I talked to ‘off the record’ told me that the E85 is terribly inefficient and that drivers will have to consume three times as much to stay on par with regular gas. Horsepower also sucks…”
“If E85 vehicles pick up in sales,” concluded Kevin, “the demand for ethanol will soar. Corn prices could double before imploding altogether. More likely, however, the whole ethanol craze will reach a pinnacle and costs will get to the point of absurdity for farmers and consumers.”
(Side note: Did you happen to catch Kevin on CNBC’s Squawk Box this morning? The man is made for TV. He was a child actor and grew up in LA with Christian Slater and Ricki Lake. Weird, I know, but it gets better. After quitting his acting gig, he earned a degree in philosophy from USC, and then migrated to New York, where he received hands-on training in the commodity pits from the legendary Paul Tudor Jones. But through it all, he kept doing voice-overs for commercials. Last year, he was the voice of the PGA on CBS. It’s not just for his trading record that we call him the Maniac Trader)
 “Teachers are as educated as you and education is the hope of the future -- why shouldn't they be making decent money -- shame on you!” one reader exclaimed. Teachers, as it turns out, are not a group to mess with. Our inbox was filled with one-liners from angry educators last night. Shame on us. But seriously, we only wish they were making decent money… but they can’t, they’re getting paid in paper dollars!
 “Why is it so shocking that the Canadian dollar will be on an even par with the U.S. dollar? The same for $100,000-plus teacher salaries?” asked a reader. “The U.S. dollar is going to the dogs like the 1923 German marks did. The loonie has backing. The dollar does not. The U.S. will have to open the printing presses sooner or later to pay the national debt or else repudiate it and really cause chaos.”
You don’t say. What do you think of the title IOUSA for the documentary we’re making?
 “I enjoy your 5-Min Forecasts, but I think you lack a little longer-term perspective,” opined one reader. “A trillion dollars in China's foreign reserves amounts to $800 per Chinese. That is not much of a cushion. As the fruits of their one-child policy and forced live birth abortion, where necessary, they will be facing a demographic crisis that will lead to riots, overwhelm the government and otherwise result in a possible ‘Black Swan’ (apologies to Taleb) outcome.
“Hundreds of millions of old people who, though they saved 25% of their incomes, will have no retirement benefits, no medical care and no nursing homes and will be cast aside by the communist government… Assuming the average worker saves 25% of his income for 35 years, that will be about $17,500 not counting interest, which is probably less than their inflation rate. That is not much of a cushion to fall back on, and I'd hate to face that unfunded deficit. We are in MUCH better shape than they are.”
Uh, you might want to check your math… the U.S.’s unfunded liability is $56 trillion, as we speak.
“Another point you fail to recognize is their total disregard for intellectual property. Except for homegrown technology, they will NEVER invent anything that has commercial applicability because as soon as it comes out, others steal it. No advanced fabrication techniques, no music, no film, no books, no magazines, no patents... they will be the manufacturing platform of the world, stealing others’ inventions until we get wise.
“I'm betting on the U.S., with an expanding younger population, intellectual capital, which, unlike oil fields, never have a ‘Peak Oil’ problem like Saudi, Mexico, etc., etc. Go long, USA!”
Odd logic considering the U.S. consumer-driven economy will suffer most as cheap oil becomes an even rarer find… but sure.
 “Just a humble reader here,” began a reader with a not-so-humble opinion. “I'm absolutely bullish on the U.S. dollar simply because the U.S. war machine has no match in the world, not even close. And they won't just sit there and watch the economy collapse -- far from it. So if there is no reason to start a ‘profitable’ war, they will create one, but the Germans will have to wait another 50 years to have their day in the sun.
“Go ‘Team America.’ If you know the theme song to the movie, go ahead and sing it now.
“You guys are my best source of information. Thank you for all you do.”
Cheers,
Addison Wiggin
The 5-Min. Forecast
P.S. We learned some terrible news this morning. Our good friend Chuck Butler, whom you read about often in these pages, has been diagnosed with kidney cancer. The cancer has metastasized to his hip. He’ll undergo surgery to remove his kidney tomorrow. And then work out a regimen for the cancer in his hip. Our thoughts, and wishes, are with him today.
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