|
-- Posted Friday, 27 March 2009 | | Source: GoldSeek.com
Now that we are at the Threshold of a Bear Market Rally, many Investors are wondering what Strategy they can employ to avoid a repeat of 2008’s catastrophic destruction of up to half of their Portfolios’ values. There is such a Strategy for Protection and Profit, which we outline here. Understanding the Strategy requires, first, a consideration of what constitutes ‘Real Wealth’. Since their October, 2007 highs; The Equities Markets have fallen by 45% to 50%. But if those highs had represented Real Wealth, they could not have fallen so far, so fast. Thus, it is essential to focus on understanding, and then acquiring and enhancing, Real Wealth, not illusory paper ‘Wealth’. Regarding the threshold consideration of what constitutes ‘Real Wealth’ we could not disagree more with Private Equity Blackstone Group CEO Steven Schwarzman, who recently stated: “’Between 40 and 45 percent of the world’s wealth has been destroyed in little less than a year and a half,’” Schwarzman told an audience at the Japan Society. ‘This is absolutely unprecedented in our lifetime.’” Stephen Schwarzman, Blackstone Group Deepcaster’s contention is simple: the “Wealth” that was destroyed was not Real Wealth, but rather “Paper/Electronic Wealth” (“Paper” Wealth hereafter); otherwise, it could not so easily have been destroyed. In fact, there are opportunities to insulate oneself from the risks of holding one’s ostensible “wealth” in Paper/Electronics, which the recent Takedowns have revealed to be less valuable than earlier thought. Indeed much of the Paper, which recently suffered dramatic Takedowns, has thus been de-legitimized as a SECURE repository of wealth. Moreover, employing a strategy which provides insulation from such Takedowns also provide Opportunities to Profit.
But to insulate oneself from the risks and to position oneself to take advantage of these Opportunities for Profit one must first understand the requirements which Paper must meet in order to genuinely represent value which is likely to endure.
First, thinking one's wealth resides SECURELY in Paper Assets-in-general (or, even more intangibly, in electronic data stored on some Remote Server) is often unjustified, and, quite risky, as the Market Savagings of the past year have shown.
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 dramatic Takedowns of the past year, 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 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:
4. 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 almost 8% annualized (and spiked to 13% in 2008!), according to the very credible statistics of shadowstats.com
5. Fiat Currency Purchasing Power Degradation: 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.
6. Overt and Covert Market Intervention by the Fed-led Cartel* of Central Banks in the Precious Metals, Strategic Commodities, and Equities Markets. Such Market Intervention has (and can still) convert otherwise “Safe Haven” Assets into quite vulnerable, and for significant periods of time, de-valued “Assets.”
*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Key Central Bankers and favored financial institutions to read Deepcaster’s December, 2008 Letter containing a summary overview of Overt and Covert Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2008 Letter entitled “Market Intervention, Data Manipulation - - Increasing Risks, The Cartel End Game, and Latest Forecast” at www.deepcaster.com. 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.” Thus, the Strategy of protecting Real Wealth in today’s Depression also requires a Strategy to cope with The Cartel* and other forces which would wrest it from you. Thus, to realize a Genuine Profit, an investment must overcome all six of the aforementioned, not to mention overcoming typical adverse market action as well.
Given the above hurdles and the magnitude of recent Takedowns, one inference is clear: A 'Buy and Hold' Strategy rarely works anymore.
Thus The Solution to the aforementioned Challenges must be A (different) Strategy. Successful Investors must be long-term TRADERS with a long-term perspective. For more specific detail see Deepcaster’s 3/28/08 Alert "Defeating the Cartel...with Profit" in the “Alerts Cache” at www.deepcaster.com. 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, but 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.
- 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 increasingly legitimized 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* 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. Indeed, 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 then earlier Forecast. 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. As well, the Capping of Gold prices in the $950’s/oz. beneath the 21st century highs of over $1,000/oz., and after the Fed’s late March, 2009 debt-monetization Announcement/Admission demonstrates The Cartel is Still Potent. Gold should be at $3,000/oz. today. And it would be but for Intervention. Moreover, the exponentially increasing numbers of “Paper” Derivatives required to implement each successive Takedown of Precious Metals or price control of other Markets is also a clear reflection of the increasing Threat of Systemic Collapse. The Cartel-engineered Global Financial Regime built on Darkly Liquid Paper and Fiat Currencies and $683 trillion of dark 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. - 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. Similarly, Cartel Intervention also dramatically affects the Equities Markets, so these Caveats apply to them as well. (See Deepcaster “Defeating The Cartel…with Profit (March 28, 2008) in the “Articles by Deepcaster Cache” at www.deepcaster.com). 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.
- “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 to Data Manipulation and Cartel Market Interventions, 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 acquiring and enhancing Real Wealth. Deepcaster, LLC March 29, 2009
-- Posted Friday, 27 March 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles
|
