-- Posted Friday, 16 May 2008 | Digg This Article
| Source: GoldSeek.com
DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
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Financial and Geopolitical Intelligence
Historically, and for good reason, Gold and Silver have served as the traditional Measures and Stores of Value in many civilizations. And their main competitor, un-backed Fiat Currencies, have always lost the competition to be The Ultimate Store and Measure of Value, eventually collapsing in value.
But are there, in the late 20th and early 21st century, new candidates for the title of Ultimate Store and Measure of Value? Some would argue that there are two new candidates - - the Energy Sector (particularly Crude Oil) and the Agricultural Sector, or Green Gold as we call it.
Thus we will sketch a few factors to help in comparing these Sectors in the current economic and market context. Since a detailed comparison would be a huge subject, we do not pretend to make an exhaustive analysis, but merely to offer a few insights for consideration.
Predictably and appropriately, Gold (and Silver) staged a massive rally to a new nominal high by mid-March, 2008. Indeed, at that time, Gold had broken out over $1000 (and Silver over $21). This pre-mid-March run-up in Gold and Silver prices in fiat currency dollars was quite predictable and to be expected given the increasing stresses in the financial markets, the massive mortgage market mess, the slowing of the U.S. economy, and the massive printing of currency by the Federal Reserve with M3 increasing at over 16% annually, just to name a few negatives.
But in the period beginning in mid-March, 2008 Gold (and Silver) suffered several Takedowns which left Gold making wildly volatile swings in the $800s by mid-May. And these Takedowns occurred during the period of increasing Systemic Risks, which, in a truly free market, would have sent Gold and Silver soaring.
As Deepcaster and a few others have pointed out, there is clear and convincing evidence that these Takedowns are the result of The Cartel* of Central Bankers and their Allies intervening in the Gold and Silver markets to take them down. The motivation for these Takedowns is quite understandable. Gold and Silver are the great rivals of The Cartel’s Treasury Securities and Fiat Currencies for legitimacy as the Ultimate Stores and Measures of Value. Deepcaster has developed a strategy for profiting from such Cartel Intervention laid out in detail in its Articles of December 21, 2007 “Profiting From Cartel Intervention” and March 28, 2008 “Defeating The Cartel…With Profit” available in the “Articles” cache at www.deepcaster.com.
*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Central Bankers and Allies to read Deepcaster’s January, 2008 Letter containing a summary overview of Intervention entitled “Market Intervention, Data Manipulation - - Increasing Risks, The Cartel End Game, and Latest Forecast” at www.deepcaster.com>LatestLetter. 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.”
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Thus, given the Precious Monetary Metals susceptibility to potent Cartel Takedowns should we consider the Energy Sector, and particularly Crude Oil, to be a better Store and Measure of Value?
Crude Oil, as we write, has hit record highs, and appears in an unstoppable uptrend. However, the fact of slowing economies, particularly the U.S. economy, coupled with the (temporarily) rebounding Dollar as the World’s Reserve Currency and ample aboveground supplies, does not bode well for continued high Crude Oil and Energy Sector Equities prices in the next few months.
That is, while for the long-term Deepcaster is extremely bullish on Crude Oil and other Energy Sector prices, in the short-term (i.e. the next few months) there is considerable risk to the downside in the energy Sector. And when we couple that downside vulnerability with the consideration that Crude tanked to below $15/barrel in 1999, we realize that the Energy Sector is likely not the best Store and Measure of Value.
By comparison, and were it not for Cartel Intervention, the Precious Monetary Metals serve as a Store and Measure of Value in recessionary times as well as boom times. That is, Gold and Silver are indeed Measures and Stores of Value in both times of economic slowdown and rampant monetary inflation.
But, consider whether the Agricultural Sector now becomes a competitor, in general, to Precious Metals as a Store and Measure of Value? At first blush, the Agricultural Sector appears to have key advantages.
First, regardless of the state of the economy, people’s First Priority is food. They will move to acquire food prior to any other uses of their assets. And the demand for food is increasing. The world’s population is increasing by about 80 million per year and the United States’ by about 5 million annually. [About 90% of the U.S. population growth is from legal and illegal immigration (about half from each) over the past decade.]
Indeed, if current trends continue, the United States will have 1 billion people by 2075, a near tripling from its current population.
Moreover, almost all the prime farmland around the world is already under cultivation. Substantially increasing yields would require additional energy–intensive inputs such as fertilizer, and the use of more marginal land for food production. In other words, given these realistic constraints, food production has just about peaked. That is, we are at or near “Peak Food.”
This worldwide agricultural outlook and the U.S. and world population numbers virtually guarantee that the demand for food will continue to increase. As well, the use of food as fuel (as in corn for ethanol) serves to push prices higher. Yet with increasingly impoverished people in various areas of the world and a slowing economy, some high-end costly foods (such as meats) may take intermittent hits in certain areas.
Complicating the outlook in the short-term is Deepcaster’s expectation that the U.S. Dollar will rebound over the next few months. A rebounding U.S. Dollar could well result in somewhat lower food and energy prices for U.S. Consumers. But a strengthening U.S. Dollar coupled with an increasing cycle of food hoarding and then sudden release (as we have already seen this Spring in the rice and grain markets), suggests that although the food markets are in a long-term uptrend, there will likely be serious and devastating price drops (as for rice in the week beginning May 12, 2008) as well as spikes up in price.
Thus, in the short-term, we expect food prices to be increasingly volatile but generally following an upward trend (because agricultural markets are treacherous, Deepcaster recently recommended a broad-based Agricultural Sector Exchange Traded Fund as a way of spreading the risk, but anticipating a reward at the end of The Food Line).
In sum, while the Agricultural Sector in general represents excellent long-term value its great and increasing volatility does not well qualify it as a Store and Measure of Value.
So, while food and energy are excellent investments for the middle and long-term, in the short-term we can expect a treacherous markets for each Sector. Therefore Gold and Silver must be considered the “winners” in any competition for being the Ultimate Stores and Measures of Value, subject to interventional considerations.
Specifically, one should continue to acquire Gold and Silver for one’s Core Position at the interim bottoms of Cartel Takedowns, as well as long speculative positions at interim bottoms and short speculative positions at interim tops as described in detail in our 12/23/07 Alert “A Strategy for Profiting From Cartel Intervention in Gold, Silver, Crude Oil and Other Tangible Assets Markets” available at www.deepcaster.com.
For the long-term, holding core positions in Gold and Silver as well as positions in Agricultural and Energy assets should, if the investments are well timed, be superb places to be for the bulk of one’s investment capital. Indeed, given the demographics and present and prospective Resource Shortages, in the long run the aforementioned three Sectors are better places to be than in various forms of darkly liquid (or illiquid) investment paper “backed” with other paper.
Deepcaster
May 16, 2008
DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
Financial and Geopolitical Intelligence
Gravitas, Pietas, Virtus
-- Posted Friday, 16 May 2008 | Digg This Article | Source: GoldSeek.com
