-- Posted Friday, 14 November 2008 | Digg This Article
| Source: GoldSeek.com
DEEPCASTER LLC
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Many Otherwise Astute Investors were Blindsided by the Takedowns in the Equities and Precious Metals Markets in September, October and November, 2008. But they need not have been.
If these Otherwise Astute Investors had been tracking the Interventionals and monitoring the Genuine Key Statistics rather than the Gimmicked ones issued by Official Sources they would likely have seen the Takedowns coming and would not only have taken steps for Protection, but also for Profit.
Perhaps the single most important factor in the recent performance of certain Major Market Sectors is the Interventionals - - even more important than the Fundamentals or the Technicals. In order to understand why the Interventionals are the most important, it is essential first to examine how it is that investors typically do not get accurate Key Statistics from Official Sources.
Consider, for example, U.S. Consumer Price Inflation Data: the sky-high energy and food costs of 2007 and 2008 tend to belie what we were told by Official Sources about the CPI. According to Official Sources, from 1992 through the beginning of 2008 the CPI never went much above 4% but only bumped up to about 6% late in 2008. But these figures simply do not square with our own experience of the inflation of prices of practically everything. Nor do they square with certain objective measures. Fortunately, there is a service (shadowstats.com) which calculates CPI (and other important measures such as GDP, M3 and Unemployment) the old-fashioned way (i.e. the way it was calculated in 1980). Shadowstats.com’s most recent calculations of Consumer Price Inflation show that it was about 13% annualized as of mid-October, 2008.
Even more shocking is a comparison of the Official U.S. Unemployment Rate with the Real Unemployment Rate. According to Official Sources, from 2002 to late 2008 Unemployment never rose above 6% and only popped up to about 6.5% in the numbers released in November, 2008. But shadowstats.com calculates the Unemployment Rate including accounting for “discouraged workers” as well as making an adjustment for the Official Absurdity of the “net jobs birth/death ratio.” Calculated in this Realistic manner, we see that U.S. Unemployment has been above 12% since 2002 and has recently spiked to nearly 16% through September, 2008 according to shadowstats. That shocking rate means that 16 out of every 100 American workers are unemployed.
And, regarding U.S. Gross Domestic Product, the Official Numbers show GDP increases ranging between 1% and 2% annualized from the beginning of 2002. In fact, the Real Numbers show that Real GDP has ranged from 0 to a negative 2% since 2002, and as recently as late 2008 has spiked down to a negative 3%, as calculated by shadowstats.com.
Similarly, the Money Supply increase figures (M3) (which as of March, 2006 are no longer released by The Fed) spiked up to nearly 17% annualized in early 2008, and are still showing an outrageously high 11% annualized Money Supply Growth figure as of the end of September, 2008.
Other key figures are gimmicked or “spun” as well with the complicity of the Mainstream Media. Consider the cost of “The Bailout.” We are told that “The Bailout” cost will be $700 billion. But the true cost of The Bailout to American Taxpayers (and, indirectly to investors around the world) will be much higher. One recent estimate puts it at $3.5 trillion and growing. Consider:
“…The bailout bonanza has gotten so big and happened so fast it’s the true cost often gets lost in the discussion. Maybe Hank Paulson and Ben Bernanke prefer it that way because the tally so far is nearly $3.5 trillion, and that’s before a likely handout for the auto industry.
Yes, $3.45 trillion has already been spent, as Bailoutsleuth.com details:
ü $2T Emergency Fed Loans (the ones the Fed won’t discuss, as detailed here)
ü $700B TARP (designed to buy bad debt, the fund is rapidly transforming as we’ll discuss in an upcoming segment)
ü $300B Hope Now (the government’s year-old attempt at mortgage workouts)
ü $200B Fannie/Freddie
ü $140B Tax Breaks for Banks (WaPo has the details)
ü $110B: AIG (with its new deal this week, the big insurer got $40B of TARP money, plus $110B in other relief)
Tallying up the “true” cost of the bailout is difficult, and won’t be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009, hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.
At the very least, the possibility of the U.S. losing its vaunted Aaa credit rating – which determines the Treasury’s borrowing costs – cannot be discounted.
Moody’s has already said it’s not in jeopardy of being lowered. But we really can’t put much stock in what Moody’s – or S&P or Fitch – say after the subprime debacle, can we? More importantly, the price of credit default swaps on U.S. government debt has been on the rise since the bailout train got rolling, as Barron’s reports….”
“Bailout Price Tag: $3.5T So Far, But ‘Real’ Cost May Be Much Higher”
by Aaron Task in Newsmakers, Recession, Banking
Yahoo Finance, November 12, 2008
An important observation here, not only are the Official Data gimmicked, but the Official “Spin” of the private-for-profit U.S. Federal Reserve and certain Government Agencies like the U.S. Treasury is often more Distortion than Reality.
Recall, for example, the case that The private-for-profit U.S. Federal Reserve and the Bush Administration made just a few weeks ago that the U.S. Taxpayer-funded $700 billion bailout was essential “to save the financial system” and, further, that the centerpiece of that plan - - buying toxic bank assets, especially defaulted mortgages - - was essential for the plan’s success. Deepcaster and a few others identified those claims as nonsense at that time and indicated that the plan would not work to solve the very real Systemic Crisis.
In any event, as of November 12, 2008, the Treasury reversed itself indicating it would not buy any bad bank mortgage assets.
But buying bad mortgage assets was the main point used to sell The Plan to a clueless Congress to begin with!
The financial system is at increasing risk for sure, but it is mainly because of the actions of The private-for-profit Fed and the Bush Administration.
Neither The private-for-profit Fed’s nor the Bush Administration’s plans or actions thus far will solve these crises, but will likely only make the international banking Cartel and certain favored financial institutions wealthier. See “Private Ownership of U.S. Fed Unsustainable” (1/04/08), “Profiting From the Push to Denationalize Currencies and Deconstruct Nations” (6/06/07) and “Strategy Beyond the Bailout Outrages for Profit and Protection” (9/12/08) in the Articles Cache and the July, 2008 Letter “Market Intervention, Data Manipulation Still Accelerating - - Increasing Risks, The Cartel End Game and Latest Forecast” in the Latest Letters Cache at www.deepcaster.com. [BTW: increasing numbers of citizens are becoming aware that The private-for-profit Fed is the Primary Cause of U.S. Financial Systemic Problems and are planning “End The Fed” demonstrations in 22 U.S. cities on November 22, 2008, the anniversary of President Kennedy’s assassination. Kennedy was killed shortly after authorizing issuance of “U.S. Notes” which would have “competed” with Federal Reserve Notes as The Currency of the U.S.A.]
The Bottom Line is that, given the Fundamental Realities reflected by these Authentic Numbers and “un-spun” Official Claims, the tanking of the Equities Markets beginning in early-September through November could not only have been expected, but also seen as highly probable. But the typical investor did not have the benefit of these figures or the perspective on Financial Realities which they reflect.
Yet having access to Authentic Statistics is a necessary, but not sufficient, condition for accurate forecasting.
The other necessary condition is to track the Interventionals. As an indicator regarding the importance of tracking the Interventionals, it is essential to consider the price performance of the Precious Monetary Metals.
For example, consider how Gold and Silver, those Safe Haven Precious Metals, performed during the Equities Market Takedowns of recent months which were accompanied by massive Bailouts and great Financial Uncertainty.
Remarkably, during this period of Market Turmoil the Precious Metals have eroded from their mid-summer highs of about $1000/oz. for Gold (and $20/oz. for Silver) to down near $700/oz. for Gold (and under $10/oz. for Silver) as we write in early November. So what about the Safe Haven status of these metals?
Consider that all the Chaos in the Financial Markets, particularly at the time of the Bear Stearns debacle in March, 2008, should have sent Gold skyrocketing well over $1000/oz. But Gold and Silver tanked in March, 2008 rather than skyrocketing. Why?
There is overwhelming evidence that Gold and Silver prices are capped and regularly taken down by a Fed-led Cartel* of Central Bankers working hand-in-glove with their favored Primary Dealers and Financial Institutions.
For sure, as the economic and financial crises worsened from the March, 2008 through the present, the Traditional Safe Haven Assets Gold and Silver should have skyrocketed. But instead of skyrocketing Gold has suffered about a 30% loss since its mid-Summer, 2008 highs and Silver Bullion about a 50% loss. No phenomenon other than Market Intervention by such a Cartel could explain these otherwise outrageously anomalous figures.
The motivation for such Takedowns is not hard to understand. The Cartel does not want to allow Gold and Silver to acquire increasing (and justifiable) legitimacy as Stores and Measures of Value vis-à-vis their paper Treasury Securities and Fiat Currencies.
Thus, it is critically important to monitor the Interventionals as well as Real Statistics regularly. Indeed, Deepcaster does pay careful attention to tracking the Interventionals and the Genuine Statistics. Indeed, this tracking was a primary cause of Deepcaster’s moving into early September, 2008 having recommended five short Equities positions of various kinds. To date, four of those Equities positions have been liquidated for a profit. Tracking Cartel Interventionals and monitoring Real Statistics, in addition to considering the Fundamentals and Technicals, facilitated that result.
In sum, tracking the Authentic Statistics and the Interventionals as well as the Fundamentals and Technicals is essential to making prudent and profitable investment and trading decisions.
Deepcaster
