-- Posted Friday, 18 May 2007 | Digg This Article
DEEPCASTER LLC
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Gold has made a significant turn down in recent days as Deepcaster forecast. But why?
Consider that since February, 2006 the United States' M3, Real Consumer and Producer Price Inflation, Current Account Deficit, Budget Deficit, Trade Deficit, and Downstream Unfunded Liabilities have all been increasing.
All this and other similarly negative data, particularly those highlighted in Deepcaster’s May Letter and first May Alert, should have served to send the shares of Gold Producers with large Reserves soaring! Yet On February 2, 2006 the Shares of Newmont Mining topped out at just over $62/share, and have been in a well-defined downtrend channel in the nearly 16 months since then. They closed earlier this week, May 15, 2007, near $40 per share, and looking lower.
How can this rationally be explained? Newmont has an $18 billion market cap. It produces and/or explores on four continents. It has proven and probable gold reserves of over 93 million ounces. It owns a refining business, and produces or manages portfolios in other natural resources businesses. Its operating margin is over 24% and its profit margin over 12%. And it has a 1% dividend yield.
On the negative side it has a diminishing earnings growth rate and a somewhat pricey Price/Earnings ratio of 28. But do these negatives justify its losing approximately 35% of the value of its February 2, 2006 share price in the subsequent 16 months, particularly in light of its golden reserves and the worsening economic climate indicated above? We think not.
Indeed, Deepcaster believes that the recent increasing bullion price weakness and gold producer share price decline probably have a lot to do with gold's being a disfavored asset of The Cartel of Central Bankers.
And we have laid out the evidence for this in several Monthly Letters and Alerts over the past year. See especially our October, 2006 Letter entitled "Mega Manipulations: Juiced Numbers IV – How the Government Gets the Statistics It Wants, Markets Get Manipulated, Citizens Get Deluded and Worse, our "Profiting from the War against Tangible Assets" (1/5/07), and Deepcaster’s aforementioned May, 2007 Letter and Alert.
Doubters that Gold Bullion and Gold Producer Shares are the victim of periodic price takedowns by The Cartel are also encouraged to view the substantial evidence of the Gold Antitrust Action Committee at www.gata.org, to the contrary.
And consider also the ostensible precious metals share “lending” agreement between Oppenheimer & Co. and J.P. Morgan Chase. No one has yet be able to provide any credible argument yet that such an agreement has any goal or effect other than actually or potentially being an instrument to take down precious metals share prices.
But before we describe how you might multiply your profits from Gold, and in light of the apparent ongoing Interventions, we believe you would be amused and instructed by the report of New York Post Financial Writer John Crudele on his attempt to get information about the Plunge Protection Team (PPT). In Deepcaster’s view the PPT (otherwise known as the Working Group on Financial Markets) is the U.S. Federal Reserve-led leader of the Central Bankers Cartel.
“My request for information about the actions of the secretive Working Group on Financial Markets at the Treasury Department ‘seems to have fallen through the cracks,’ according to the wording of an internal government document I just got my hands on…
That document, dated April 5, 2007, indicates that the Treasury’s Disclosure Services division spent quite a lot of time discussing the request I made last summer under the government’s Freedom of Information Act…
It’s now more than a month since that meeting and I still haven’t received documents or even an official letter…
Back when Goldman Sachs chairman Henry Paulson took over as Treasury secretary nearly a year ago, I did a multi-column investigation of the Working Group on Financial Markets, which is also endearingly nicknamed the Plunge Protection Team…
Other newspapers have since reported that - - unlike his predecessors - - Paulson calls frequent meetings of the Plunge Protection Team, which now seems to include Wall Street big shots as well as top officials such as Federal Reserve Chairman Ben Bernanke and New York Stock Exchange Chairman John Thain...
I believe the Plunge Protection Team has emergency powers to protect the stock market if the situation warrants it. (Incidentally, I wholly support such action.) But I also believe that the Plunge Protectors - - left unchecked - - could cause a tremendous loss of confidence in our financial markets. And they could create the very national security problems they think are fixing…
That’s why I’ve asked for the minutes of meetings of the Plunge Protection Team on very specific dates when the stock market pulled a couple of rabbits our of its hat…
At that meeting it appears that the folks at Treasury decided that my “request does not meet the criteria for an expedited request and asked the OGC (Office of General Counsel) [for] concurrence on April 4. Expedited!…
The request for this information was made last July!…
I also got the impression when I spoke with a Treasury official last week that my request was about to be turned down…
I’m not surprised. Congress has tried to crack the mystery of the Plunge Protection Team and failed.”
Indeed, it is no surprise to Deepcaster that John Crudele’s request was denied, given the evidence for the depth and breadth, and thus the importance, of the Ongoing Manipulations.
Multiplying Profits from Gold
Unfortunately, there is no substantial evidence that The Cartel is less successful today at taking down the price of gold bullion and shares whenever they desire, than they have been in the last few years. The Gold Bullion price takedown of the past few days is yet another example.
So how should Hard Money/Tangible Assets Partisans, of which Deepcaster is one, react?
Take heart! There is a two-pronged strategy to “Beat the Dealer” as it were, or, at least, to potentially profit from The Cartel’s moves:
1. Buy shares of "junior" Gold exploration and development companies with relatively large reserves (and which otherwise qualify as sound prospective companies with large upside potential). These “large reserves” companies tend to be relatively resistant to Price Takedowns compared to the Big Boys like Barrick and Newmont.
Deepcaster provides a list of such companies in its April 2007 Letter. Of course, timing is key in acquiring such shares - - they should be acquired near the bottoms of Takedowns.
2. Play the short side. One can sell short, preferably near tops of course, the shares of the large producers such as Newmont or Barrick. These large producers tend to be especially susceptible to Cartel Takedown.
For the intrepid and experienced there are also options. DHPS speculators who followed Deepcaster’s May 2, 2007 recommendation likely made about 60% profit if they bought and sold the Newmont puts on May 16, 2007 as Deepcaster suggested.
Of course, one must employ not only Fundamental and Technical Analyses, but also Interventional Analyses (as Deepcaster does) to determine the timing for going short.
Conclusion:
If the Biggest Market Player in the Precious Metals Markets makes the market price, and that biggest player is The Cartel (acting through its Primary Dealers), then is it not rational to play along? That way one can profit on the way up and the way down, provided one gets the timing right.
To prevail in this Interventional Universe it is essential to carefully consider, along with Deepcaster, the Fundamentals, Technicals and, especially, the Interventionals, to play this "Multiplying Profit" game successfully.
Deepcaster
DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
Financial and Geopolitical Intelligence
-- Posted Friday, 18 May 2007 | Digg This Article
