-- Posted Friday, 16 November 2007 | Digg This Article
| Source: GoldSeek.com
DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
Financial and Geopolitical Intelligence
The initiation this week of Level 3 Assets Disclosure reveals yet another Systemic Threat to add to the ones described by Deepcaster in its November, 2007 Letter and first November Alert.
The newly effective Accounting Rule - - Financial Accounting Statement 157 - - requires that banking and related companies divide their tradable assets into 3 categories according to how easy it is to obtain a market price for them. Level 3 Assets are those for which there is no public market.
Since there is no public market for Level 3 Assets, they must be valued internally according to a bank’s own proprietary model. Thus, for valuation purposes, these Level 3 Assets are “marked to model” and NOT “to market.” That is to say, they are “marked to myth.”
The problem is that the big banks are loaded with these “assets” which are marked to model/myth. If the highly limited private market fails, as it did in the mid-August 2007 credit freeze-up, model/myth valuations could dissolve into nothingness. No market, no value!
Lest one think this is a merely academic problem, consider a leading investment bank: Goldman Sachs. As of the end of Q3, 2007, its L3 “assets” were about $72 billion - - no small figure, even for Goldman.
Ominously, Goldman’s $72 billion of L3 “assets” were 200% of its capital of $36 billion.
Typically, a bank’s vulnerable Level 3 Assets are credit and credit default derivatives. And that is why they are so toxic. Not only is there no public market for these, but also their inherent leverage can become lethal when unanticipated developments occur.
Should any rational investor invest in a company whose L3 “Assets” values, for which there is no public market, were more than even 100% of its capital? Deepcaster thinks one should be most reluctant to do so.
Couple the L3 “Assets” threat with the mortgage rate reset threat, and the exploding OTC derivatives threat, and all the other threats which Deepcaster has catalogued in its November, 2007 Letter and elsewhere (and which The Fed-led Cartel* of Central Bankers has facilitated) and it is clear that investors and citizens alike face serious systemic threats, which could topple the financial system at any time.
So how should a rational investor cope with this massive systemic risk?
The short (and at this time inadequate) answer is to buy tangible assets: the precious Monetary Metals Gold and Silver, and strategic commodities like Crude Oil.
Indeed, the Fundamentals for Gold, Silver and Crude Oil are extremely bullish!
This answer is both correct and inadequate.
It is inadequate because of that nasty little beast threatening all major markets: Cartel Intervention*.
Deepcaster’s earlier Forecasts for Cartel-initiated Takedowns of Gold and Equities in “the first two weeks of November, 2007” are being fulfilled. Indeed, Deepcaster’s evaluation of The Interventionals has facilitated its profitable recommendations which are listed at www.deepcaster.com.
In connection with Cartel Interventions, Deepcaster reiterates (see its November, 2007 Letter) its warning that the Monetary Metals and Strategic Commodities are the “Mortal Enemy” of the Banker Cartel’s Fiat Currency and Treasury Securities Regimes. The Cartel will attack its Mortal Enemies at every good opportunity.
So the threshold questions, at any given time, must be:
Today, does The Cartel have the Interventional Firepower to take down, say Crude Oil (or any other tangible asset)? And, if so, today do they have the opportunity and motivation to do it?
Regarding Gold and Crude Oil, though the Fundamentals are quite bullish, we must not forget the $450 billion and $6 trillion, respectively, of derivatives (as reported by The Bank for International Settlements - - the Central Bankers’ Bank: see Deepcaster November, 2007 Letter) which stand ready at any time to effect such Takedowns.
Deepcaster’s latest Forecasts posted at www.deepcaster.com respond to the following crucial questions: Has the “Takedown Time” for Gold and Crude Oil really arrived? Or were the recent $40 drops in Gold and $8 in Crude earlier this week merely “corrections” from which Gold and Crude will launch higher? If $800 Gold and $90 Crude were genuine interim bottoms investors should go long. If not, the longs could be slaughtered.
Only by analyzing The Interventionals can one develop a well-substantiated answers to these key questions.
Best regards,
Deepcaster
November 15, 2007
*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Central Bankers to read Deepcaster’s November, 2007 Letter containing a summary overview of Intervention entitled “Market Intervention and Data Manipulation - - Consequences & Forecast for Gold, Crude & Equities and The Cartel End Game” at www.deepcaster.com/Latest Letter. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”
DEEPCASTER LLC
www.deepcaster.com
Wealth Preservation Wealth Enhancement
Financial and Geopolitical Intelligence
Gravitas, Pietas, Virtus
-- Posted Friday, 16 November 2007 | Digg This Article | Source: GoldSeek.com
