-- Posted Friday, 23 May 2008 | Digg This Article
| Source: GoldSeek.com
DEEPCASTER LLC
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DEEPCASTER HIGH POTENTIAL SPECULATOR
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Is “Your” Unallocated Gold Used For Bank Reserves?
Or For Gold Price Manipulation?
Major banks have kept more than $35 billion in writedowns off their Income Statements according to recent regulatory filings.
Fortunately, more investors are becoming increasingly skeptical of the numbers issued by major financial institutions as well as by governments, the (private for-profit) U.S. Federal Reserve and other Central Banks, and the various data-generation agencies such as the U.S. Bureau of Labor Statistics.
Fortunately, we say, because a necessary condition for protection and profit in the markets is knowledge of the financial and economic realities which the aforementioned entities are inclined to distort or obscure.
Indeed, Data Manipulation (and Market Intervention, for that matter) has become so pervasive that even The Establishment Media occasionally reveal these unpleasant Realities. Bloomberg.com, for example, recently widely broadcast their story that a number of big banks were hiding $35 billion in writedowns by keeping them off their Income Statements. (Bloomberg, 5/19/08)
While the Big Banks are including these writedowns in their Balance Sheets as required by accounting rules, keeping them off their Income Statements can certainly mislead investors.
For example, Citibank subtracted $2 billion from equity for the declining value of home loan bonds in its quarterly report to the SEC on May 2nd without mentioning the deduction in their Earnings Statement or in their conference call with investors that followed, according to Bloomberg.com.
The staggering magnitude of both the disclosed and hidden writedowns is reflected in the following figures regarding just four of the many Banks which have hidden writedowns (all numbers are billions of U.S. Dollars).
Remarkably, the Bloomberg story also notes that the “…Balance Sheet adjustments are in addition to the $344 billion of writedowns and credit losses already reported on the Income Statements of more than 100 banks…(and)….the Balance Sheet writedowns also reduce equity, which needs to be replenished. Adding the $35 billion leaves the banks with $116 billion mountain of losses to climb…(emphasis added)”
And this is The Nub of the matter so far as investors’ profit and protection is concerned.. Not only have these losses been hidden from investors but the lost equity will “need to be replenished.”
Often this replenishment entails raising more capital by, for example, selling shares to Sovereign Wealth Funds, or by making additional stock offerings. This, of course, dilutes current investors equity.
If that were not bad enough, the new capital rules for determining what banks can count as capital “already relies significantly on self-modeling by the banks.” Deepcaster has earlier commented extensively (see “Articles” Cache at www.deepcaster.com) on why this “self modeling” is often a de facto “Marking to Myth.” So, if anything, the risks may be greater in the U.S. today than they were in Japan in the 1990s, which was afflicted by the “disease” of refusing to recognize losses.
Specifically, the new Bank Capital Accounting Regime known as Bosel II…allows financial institutions to use in-house risk models instead of “just” relying on external credit ratings in calculating their risk weighted capital requirements.
Couple these financial Myth-Making techniques with the fact that major banks are involved in huge dark liquidity transactions (see Deepcaster article of April 8, 2007, “Profiting from Dark Liquidity and Other Systemic Risks” in the Alerts Cache at www.deepcaster.com) and one must conclude the average investor (or sophisticated investor for that matter) finds it is practically impossible to determine just how to value, or evaluate the risks relating to, such a bank or any entity which is involved in transactions with such a bank.
So what about Gold held by banks and other financial institutions? Many investors who hold Gold in unallocated accounts think that that Gold actually is physically present in that financial institution. Well, it may be and it may not be. Consider that “unallocated gold is the most widely traded form of gold in the world. When this gold is in your name but unallocated to you, the regulator considers it part of a bank’s liquid reserve” (emphasis added) according to The Mogambu Guru.
So one net effect of unallocated Gold “ownership” is that the bank or other financial institution, which is the “custodian” of “your” unallocated Gold, is free to “count” it as part of its Reserves.
Another way at looking at this stunning fact is “this makes unallocated gold an attractive way for the bank to maintain its regulated liquidity, because you have paid for your gold, and the bank is free to use your money, while it is also able to add your unallocated gold holding to its own reserve.” http://www.dailyreckoning.co.uk/gold-investment/to-trust-or-not-to-trust.html.
And, even more outrageous, some Banks are apparently charging storage fees on clients’ Gold (and Silver) which has been counted as part of the Bank’s reserve, or perhaps on Gold (or Silver) which doesn’t even exist except on paper.
“I found it appalling that Morgan Stanley would claim to store silver that didn’t exist and even have the chutzpah to charge for the storage…In fact, in the court documents summarizing the proposed settlement, one of Morgan Stanley’s defenses was that they were not doing anything unusual by charging storage on metal that didn’t exist, as this is a widespread industry practice.” Ted Butler in http://www.investmentrarities.com/10-23-07.html.
Thus the prime question for investors is: If numbers issued by major banks and governments and agencies cannot be relied on, and if the gold you think you own may be used by a bank for its reserves, or may not even exist, what is an investor to do?
The first essential step for protection and profit is quite simple. First, make a diligent attempt to get the un-spun facts. One generally reliable source of Real Data regarding Precious Metals is the Gold AntiTrust Action Committee which has an excellent archive (www.gata.org). Regarding Economic Statistics and alternate U.S. government and agency figures, shadowstats.com is an excellent source (www.shadowstats.com). [By the way, shadowstats.com shows that Real Consumer Price Inflation is nearly 12% annually, Real Unemployment over 12%, real annual GDP growth a negative 2%, and Real Annual Money Supply (M3) Growth at over 16%. But we cognoscenti were already intuitively aware of these orders of magnitude, were we not?]
Moreover, Deepcaster regularly publishes and uses Data Manipulation and Market Intervention information from these and other sources and has written a comprehensive overview of Market Intervention and Data Manipulation entitled “Market Intervention Accelerating: Stunning Data Releases Show Risks, Consequences and The Cartel End Game” available in the Articles Cache at www.deepcaster.com.
Considering these and the few other generally reliable sources of economic and financial information is most helpful, but is also distressing.
That is, an unvarnished look at the consequences of the ongoing Realities of Data Manipulation and Market Intervention is not pleasant. But since knowing what is likely ahead helps one prepare to cope with the future, we present long-range Forecasts in the form of quotes from shadowstats.com and Deepcaster.
“But for systemic intervention and manipulation by the Federal Reserve, it appears we might be contemplating a collapsed U.S. banking system and a looming deflationary great depression that could have dwarfed the bad times of the 1930s. Such is the good news. The bad news is that with those same systemic interventions, the Fed is locking in a hyperinflationary great depression in the decade ahead, with the turmoil possibly breaking by 2010 or earlier.” (emphasis added)
shadowstats.com, Issue Number 39, January 2008
“The mounting evidence is that The Fed-led Cartel* is knowingly creating conditions designed to force the U.S, to eventually have to choose between a hyperinflationary great depression and The Cartel’s ominous “End Game,” which Deepcaster has described.”
Deepcaster, February 14, 2008
Insulating and Profiting
In addition to obtaining reliable information as suggested above, Deepcaster recommends the following approach for insulation and protection.
1) Locate one’s capital primarily in tangible assets which are in great and relatively inelastic demand, and in
2) The Consumer Staples Sector, and in the
3) Precious monetary metals (e.g. Gold and Silver) near the interim bottoms of Cartel-generated takedowns. But the timing and specific selection here are key.
For additional details on this approach see Deepcaster’s 12/23/07 Alert entitled “A Strategy for Profiting From Cartel Intervention in Gold, Silver, Crude & Other Tangible Assets Markets” at www.deepcaster.com.
In the long run, Deepcaster believes one can find no better “Safe Haven” than in the Precious Monetary Metals, Gold and Silver, as well as in Strategic Commodities.
BUT we must emphasize one important caveat regarding finding a “Safe Haven” in Precious Monetary Metals: in the short run they are subject to the considerable price manipulation by The Cartel* of Central Bankers.
*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.”
___
Several times in recent years investors who have committed their capital to the Safe Haven precious Monetary Metals sector have been both disappointed and betrayed because massive Cartel-induced Takedowns of the prices of the Precious Monetary Metals dramatically reduced their net worth.
But consider that recently the Fundamentals for Tangible Assets, including the Precious Monetary Metals, have become ever more bullish. This is reflected in the recently rising prices of Tangible Assets to record levels for Gold, Silver, Crude Oil, certain agricultural products, and other Tangible Assets.
This consideration raises the question whether, in the impending next round, The Cartel Price Suppressors will win out and once again successfully suppress Precious Metals and other Tangible Assets prices, or will blazingly bullish fundamentals propel them further up in price? Deepcaster provides his most recent Forecast in his Latest Letter and Alert posted at www.deepcaster.com.
Whatever the answer, the mounting evidence is that the Fed-led Cartel is knowingly creating conditions designed to force the U.S, to eventually choose between a Hyperinflationary Great Depression and the Cartel’s ominous “End Game,” which Deepcaster has described in its January, 2008 Letter and its Alert of 8/13/07 entitled “Massive Financial-Geopolitical Scheme Not Reported by Big Media.”
One of several key components of this Scheme is to replace the U.S. Dollar with the Amero, a new Fiat currency un-backed by Gold or Silver. Indeed, the Swiss Investment Management Firm, Swiss Portfolios, discusses the Amero as if its coming were a Fait Accompli.
And notwithstanding all the foregoing, the powers that be are playing possum:
“It’s one thing to identify a problem. It’s another thing to know exactly what to do about it.”
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, 23 May 2008 | Digg This Article | Source: GoldSeek.com
