-- Posted Friday, 12 December 2008 | 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
Were you one of the investors who read our Forecasts in early 2008 for Equities and Commodities Takedowns, but felt somewhat powerless to protect your Retirement Assets from those Forecast Takedowns that were likely to (and did) come later in the year?
Several of Deepcaster’s friends felt they were in “Fund Prison” because their Retirement Funds were locked up in 401(k)s, 403s and other Retirement Assets Holding Entities with limited alternatives. They had no option to profit or even protect their hard-earned accumulated wealth from the Equities and Commodities Markets Takedowns they believed (correctly) were coming.
Are you one of the ones who had to sit there helplessly watching through the August, September, October and November 2008 Takedowns, as your hard-earned accumulated savings over decades were cut by 40% or 50%, because your only alternative to staying in deteriorating Equities in your retirement funds was to go into cash? And cash is no secure haven either, as we point out below.
Did this sad situation exist because the structure/and or provisions of your Retirement Plan did not allow taking positions which would hedge, or better allow you to profit on the downside? Well you are certainly not alone. But there is something you can do to make it unlikely that this will happen to you again and as well to allow you to profit.
First, consider the problem common to many of these accounts holding Retirement Funds. While typical Retirement Accounts holding mutual funds can be profitable sources of building wealth over the years, if and when the Equities Markets are in an uptrend, their relative inflexibility can be lethal when markets move lower as they did in the Fall, 2008.
Consider, for example, a report entitled “The Dividend Yield: Stock Mutual Funds and ETFs That Generate Income” by John Markese in the November 2008 AAII Journal. Mr. Markese does an excellent job describing some of the “top” funds that produce income. The only problem is the Total Return of every single of these “top” funds year-to-date was a negative number. Indeed, most funds were down double-digits in Total Return (i.e. depreciation plus yield year-to-date).
The problem, of course, is the False Assumptions behind providing only certain “long” funds as alternatives for employees’ Retirement Account selections. Consider that under the “Prospectus Objective” columns some typical listings were “growth” or “growth and income” and “equity income.”
Consider as well, there are other funds not listed on this particular list which are characterized as “value funds.” The fact is that providing only “growth” and/or “growth and income” and/or “value” Funds as alternatives doomed such Funds to be losers because:
- There is no “growth” in the U.S. economy, and has not been for many months. Indeed, Real Economic Growth, contrary to the Official Figures showing modest 1% - 2% growth, is actually a negative 3% according to shadowstats.com which calculates GDP the old-fashioned way - - i.e. using traditional methods which predate the gimmickry introduced in the 1980s and 1990s by administrations of both parties. When Real Economic Growth is a negative number that tends to indicate that earnings of most typical corporations will be down. Reduced earnings thus usually mean reduced Equities prices overall.
- Regarding “value,” for example, how can one expect to make money on Equities which were, at the beginning of 2008, already quite over-valued in large part because The Fed has for years been printing a tremendous amount of money (with M3 growth actually running at 11% a year per shadowstats.com) and facilitating far-too-easy credit. And how can a fund truly be a “value” fund when many of the entities in it are leveraged to the hilt with hot borrowed money and are now left holding the bag because they cannot amortize their loans currently, or refinance or get additional financing due to the ongoing credit freeze-up?
Thus, if your Retirement Funds were locked into a “growth” or “value” Fund Prison in a typical 401(k) or 403 plan, your only option was to liquidate all your funds, go into cash and tolerate little or no significant income plus a degradation of the purchasing power of that cash. Thus you are likely sitting on quite large losses for 2008. And your retirement security and plans have just taken a big hit.
Worse yet, the prospects for Equities appreciation do not look promising, for years.
Of course, the reality is that Equities and Equities Markets have bullish and bearish trends. The current Bull Market which ended a few months ago just happened to endure for a number of years longer than normal in part because of the multi-market Intervention by, and policies of, The Fed-led Central Banker Cartel* (see below). But now we are in a very nasty Bear Market – probably the nastiest Bear Market since the Great Depression.
Would it not have been far better to have had the option, in Spring, 2008 say, to buy “short” or “double-short” Exchange Traded Funds with your retirement money not only so you could hedge your retirement fund assets, but also profit on the way down?
Indeed, Deepcaster recommended such profitable hedges to Subscribers before the Takedowns and went into September, 2008 having recommended a grand total of 5 (five) short Equities positions. Deepcaster’s subscribers have subsequently been able to take profit on all 5 of them.
The Hard Realities about the markets these days are that markets are at least as likely to decline dramatically as they are to increase, and perhaps more so in the future. So if you want to protect and enhance your Retirement Assets and make money in the markets you need to act on the following Guidelines:
1) If your retirement plan (or applicable regulations) does not provide you with investment vehicles (e.g. “short” ETFs) to allow you to “go short,” lobby the Trustees (and/or regulators) hard to get them to provide alternatives which allow you to do so. Failure to successfully lobby to get “short” alternatives will doom you to further losses if (or, as likely, when) the markets fall further.
2) “Buy and Hold” rarely works anymore, as market action in the past few months has dramatically illustrated. Deepcaster outlines a Strategy below, for coping with this reality.
3) Be prepared (and equally comfortable with) to go short with a large portion of your funds, including Retirement Funds, if possible, at opportune times. If your Retirement Funds are locked into an account which does not allow you to do this, you may well want to consider alternatives such as a Self-Directed IRA.
The Good Old Days of seemingly never-ending primary uptrends in the markets are over. And, given the economic crises which aren’t going be healed any year soon, they are likely over for good.
Don’t misunderstand, there is nothing wrong with a Good Growth Fund or Value Fund when the market and the economy are growing and when stocks in general are not overvalued.
But when that is not the case you need to be able to exit long funds quickly, and to purchase to “short” funds of which there are an increasing number. A recent count reveals “scores” of such funds.
4) And consider another unpleasant fact: even if the Funds in which you are locked rally, those may well only be paper rallies. That these paper rallies will likely be generated mainly by vast recent increases in fiat currency printing, or by borrowing, rather than actual increased purchasing power resulting from increased productivity.
5) Moreover, if one cannot “go short” and can only convert securities positions into cash, then the cash one could obtain (and must continue to hold) in Retirement Accounts from liquidating any securities will probably continue to dramatically decline in purchasing power, further impoverishing especially retirees’. Indeed, in the past 5 years the purchasing power of the U.S. Dollar has declined over 30% and, notwithstanding the recent temporary Dollar bounce which Deepcaster forecast, the U.S. Dollar is likely doomed as a result of the (now $8.4 trillion and counting) bailout money, government loans, guarantees, and past Fed easy money and easy credit policies.
6) Insist on a re-definition of the “Prudent Investor” rule to allow taking short positions in Retirement Accounts. There is one incontrovertible argument for this: Is it not highly imprudent to stay in a market that is likely only to continue to decline?
7) Coping successfully with the declining Purchasing Power of Fiat Currencies referred to above is a bit more complicated, but can be done.
Consider first that 'Paper/Electronic Assets' typically have NO INTRINSIC VALUE.
Indeed, Paper/Electronic Assets typically have no value at all unless they REPRESENT (or can, if liquidated, reliably generate) 'Purchasing Power' to obtain goods and services, or ownership rights in tangible assets.
Here we do NOT focus on Paper representing Ownership rights in tangible assets. We focus instead on publicly traded securities which, for example, typically represent 'Equity' Ownership in various business enterprises.
And we focus more narrowly on those Equities which, prior to the recent Takedowns, were thought to be Secure Repositories of Wealth but which, as those Takedowns have demonstrated, were not. We characterize these “Assets” as “De-legitimized Paper.”
As the recent Market Takedowns have demonstrated, the value of Equity Ownership of De-legitimized Paper measured in market terms is often not SECURELY determined -- it fluctuates according to the vagaries of the marketplace. Recently that market fluctuation has, for most such securities, been down by as much as 40% to 50% from highs just a few months ago.
Consider also that to have relatively secure REPRESENTATIONAL value a publicly traded security must:
- Be able to be LIQUIDATED for SIGNIFICANT value (i.e. Profit, or, at least, not a significant loss) in the market, and/ or
- Pay dividends, and/or
- Have genuine appreciation potential.
But as the recent Market Crashes show, many Paper securities do NOT RELIABLY have ANY of the above. They have thus been shown to be De-legitimized Paper.
In addition, many publicly traded Securities (i.e. Paper) which can be liquidated for a NOMINAL profit (i.e. considering appreciation and dividends together) do NOT have a REAL Profit but rather only an illusory one, because of three additional factors:
Inflation - - Investments, which are subsequently liquidated, must, to show a genuine profit, show a profit in excess of Real Consumer Price Inflation. But Real Consumer Price Inflation is now running at 12% annualized (contrary to the Official Gimmicked Numbers), according to the very credible statistics of shadowstats.com. See Deepcaster’s July, 2008 Letter (“Market Intervention, Data Manipulation Still Accelerating - - Increasing Risks and The Cartel End Game”) for a full discussion of Market Intervention and Data Manipulation.
Fiat Currency Purchasing Power Degradation: As we noted above, the U.S. Dollar has over the past six years lost over 30% of its purchasing power, notwithstanding its recent (and temporary) bounce, which Deepcaster earlier forecast.
Thus, to realize a Genuine Profit or just preserve genuine wealth, an investment must overcome all of the aforementioned hurdles, not to mention overcoming typical adverse market action as well.
Given the above hurdles and the magnitude of recent Takedowns, we reiterate one inference: Any 'Buy and Hold' Strategy is probably doomed to failure.
Thus The Solution to the aforementioned Challenges must be A Strategy. Successful Investors must be long-term TRADERS with a long-term perspective. Moreover, that Strategy must not only take account of Fundamentals and Technicals, but also Interventionals.
In addition, there is a strong preference in that strategy that one’s Paper Assets be linked to Tangible Assets as we describe below.
Generally speaking, with only the three Major Caveats listed below, the more closely one's assets are linked to Tangible Assets, and especially to those Tangible Assets which are in great and relatively inelastic demand, the more secure and potentially profitable one's investments will be, in the long term.
This means, for example that investors should focus on Precious Metals, agricultural products, consumer staples, energy and similar tangible assets Sectors, BUT considering the three Caveats below.
1) Beware of Cartel Intervention in the Precious Metals Markets. Tangible Assets, and especially the Precious Monetary Metals Gold and Silver, are the “Mortal Enemy” of the Fed-led Central Bankers as Deepcaster pointed out on several occasions. This is because if Tangible Assets become even more legitimized as Alternative Stores and Measures of Value to the Bankers “Paper Assets” (i.e. Treasury Securities and Fiat Currencies) the Bankers lose power, influence and profit.
Therefore it is understandable that the Cartel of Central Bankers periodically makes major and often successful attempts to take down the prices of the Monetary Metals, Gold and Silver, and Tangible Assets such as the Strategic Commodity Crude Oil.
For example, in the week (ending 3/21/08) of the Bear Stearns collapse (when Gold and Silver should have skyrocketed), The Cartel did effect a major Precious Metals Takedown with massive Market Intervention, as Deepcaster earlier Forecast, just to take one example.
Therefore, regarding TIMING one’s purchases of these assets, and especially Precious Monetary Metals, it is essential to consider not only the Fundamentals and Technicals but also the Interventionals. Otherwise one and one’s Tangible Assets Portfolio can be caught in a Cartel-generated Takedown, with severely negative results.
The March 19 and 20, 2008 Takedown of Gold, Silver, Crude Oil, and Commodities in general are an Object Lesson in the still-potent Interventional Power of The Cartel.
Moreover, given the exponentially increasing numbers of “Paper” Derivatives required to implement each successive Takedown, it is also a clear reflection of the increasing Threat of Systemic Collapse. A Financial Regime (or, for that matter, an economy) built on Darkly Liquid Paper and Fiat Currencies and $683 trillion of OTC Derivatives (see www.bis.org, follow the path: statistics>derivatives>Table 19) is not indefinitely sustainable. See Deepcaster’s 2/15/08 Article “Profiting and Protecting From Collapsing Paper” at www.deepcaster.com.
2) Beware of Cartel Intervention in Other Markets. Cartel Takedowns are not limited to Precious Monetary Metals and Strategic Commodities. Though these are the Ultimate Stores and Measures of Value, given repeated Cartel Interventions, the timing of their acquisition is key. Similarly, Cartel Intervention dramatically affects the Equities Markets, so these Caveats apply to them as well. The Cartel is now in the process of effecting a general Commodities Price Deflation as earlier forecast by Deepcaster. This process should continue for several months until the Commodities Bull Trend is allowed to resume.
3) We repeat again, “Buy and Hold” increasingly means to “Hold and Lose.” There is a maxim that “smart money is always long-term money.” Indeed, that saying has until recent years often been true, provided that the smart money was also proficient in finding and investing in “value” investments.
Alas, that maxim is increasingly NOT true. One primary reason is traditional measures of the value of a particular investment have mainly been contextual, rather than inherent. But the economic, financial, and market system within which these contextual measures have been determined is increasingly vulnerable, as described above. The Chinese Yuan re-peg to a market basket of currencies several months ago, and the general trend away from the U.S. Dollar are only two signs that the U.S. Dollar-as-World-Reserve Currency system is beginning to crumble before our very eyes - - and the evidence is increasingly before us. When coupled with monetary and price inflation (dollar-denominated, especially) and the unprecedented Market Takedowns of recent months, simply buying and holding many assets will increasingly not be profitable, and in many cases will be a losing proposition.
In sum, employing all of the above Guidelines greatly improves the probability of achieving Real Profits and avoiding Real Loss. For more specific details regarding employing the Interventionals, as well as Fundamentals and Technicals, to make investment choices, see Deepcaster’s Article of 3/28/08 entitled "Defeating the Cartel...with Profit" in the 'Articles by Deepcaster' Cache at www.deepcaster.com.
If one can succeed in liberating one’s assets choices from the strictures of a “Fund Prison” one can progress not only to wealth protection, but also to fund profits.
Deepcaster
December 12, 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, 12 December 2008 | Digg This Article | Source: GoldSeek.com
