-- Posted Sunday, 12 April 2009 | | Source: GoldSeek.com
DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
Financial and Geopolitical Intelligence
To successfully play the ongoing but fitful Bear Market Rally and to get out or get short in time, it is essential to understand the Main Drivers of Equities and Commodities performance in 2009. That is, it is essential to first understand the underlying causes of the increasingly dismal Economic Performance we earlier forecast for 2009. Among them are:
1) The Debt Burden of the U.S. Government (and therefore the U.S. Taxpayer) burgeoned in 2008, and is still burgeoning in 2009. The U.S. Taxpayer has been forced to borrow trillions to fund the Bailouts, Guarantees, Loans and Authorizations. Deleterious U.S. Federal Reserve policies (see below) are the Primary Cause of the crises which led to those borrowings.
The U.S. Government’s Debt Burden has grown far beyond its capacity ever to repay without a dramatic degradation in the purchasing power of the World’s Reserve Currency, the U.S. Dollar. That is because trillions more U.S. Dollars must be printed and borrowed from the private-for-profit U.S. Fed to meet ongoing obligations.
Of course, U.S. Taxpayers must pay “interest” to the private-for-profit U.S. Federal Reserve on those borrowings, thus further increasing the impossibly high debt burden.
Indeed, given that the present value of all the downstream-unfunded U.S. Government liabilities was (at the end of 2008) well in excess of $60 trillion, a further dramatic destruction of the purchasing power of the U.S. Dollar is “baked into the cake.” One of the several negative consequences of the ensuing crises will be the further impoverishment of those reliant on U.S. Dollar income - - mainly the U.S. Taxpayer/Consumer, and certain Investors around the world.
Thus one consequence of these Fed-facilitated credit and monetary excesses is that the economic and investment landscape has now been seriously damaged for many years to come. That is why the ongoing fitful Rally is doomed to be just a Bear Market Rally.
2) Foreign Central Banks Dumping U.S. Agency Debt and considering alternatives to the U.S. Dollar. Exerting further downward pressure on the U.S. Dollar, Foreign Banks (accelerating) dumping of Fannie Mae and Freddie Mac debt recently approached $200 billion. Predictably, the main buyer is the U.S. Fed itself. That is, The Fed is increasingly monetizing debt. Moreover Russia, China and others are actively considering U.S. Dollar alternatives.
3) The Generator of 70% of U.S. GDP, the U.S. Taxpayer/Consumer/Debtor, is increasingly Financially Imperiled.
And the Obama Administration’s actions have provided very little help for the average U.S. Taxpayer/consumer, and none looks to be coming any time soon. But there can be no lasting economic recovery unless the economic health of the U.S. Taxpayer/consumer begins to improve.
Indeed, as the ongoing Crises indicate, believing the claim that “The System has been saved” by the 2008 and 2009 bailouts of Favored Financial Institutions is Delusional. In fact, the Bailouts have done no such thing, but have mainly served to “Save the Bacon” of the Wealthy in certain Fed-Favored Financial Institutions. Goldman Sachs was, for example, the recipient of about $12.9 billion in Bailout Funds funneled through AIG!
Thus, given the continuing deteriorating health of the economy and the consumer, coupled with 19% (and increasing) Real U.S. Unemployment (see below), more defaults and a continuation of the ongoing economic and financial crises are sure to come.
Specifically, the aforementioned will continue to cause defaults in the vast ($683 Trillion) OTC Derivatives Markets (see www.bis.org. Path = Statistics > Derivatives > Table 19 ff.) and increasing and continuing weakness in the Economy and Equities Markets.
In sum, the deterioration of the Economy and Markets has only just begun and will likely take several years to bottom.
The aggregate effect is that we will be operating under the threat of Systemic Collapse for quite some time. Thus, the Assumption that the Strategy of investing-as-usual to “Buy and Hold” for the long-term will generate profit, will, in many cases, be an utterly false and profitless fantasy. Therefore, to successfully play a Bear Market Rally one must trade it, not invest in it.
4) The True State of the Economy is much worse than the Official Figures suggest.
Indeed, as the Real Numbers mentioned below demonstrate, our ongoing economic and financial crises are not merely a “normal” business cycle Recession, but System-Threatening Crises. Knowing these Real Numbers facilitated Deepcaster’s recommending “Opportunities in the Impending Perfect Storm” - - the title of his early September, 2008 (pre-Crash) Article warning of the impending Crash (available in the Articles Cache at www.deepcaster.com) -- and five subsequently profitable short positions, at that time.
It is thus another Naïve and False Assumption that the Official Figures accurately reflect the state of the Economy and Markets - - including for example, that the current Recession is merely a normal “business cycle” phenomenon.
Making matters worse, Investors and citizens-at-large are misled by Official Statistics which have been gimmicked, as shadowstats.com demonstrates. Consider the following Real Numbers from shadowstats which calculates key statistics the way they were calculated before the political gimmicking began in the 1980s and 1990s:
Consumer Price Inflation (CPI) was about 11% for much of 2008, rather than the 5% to 6% figures which have been reported as Official Statistics. It is still about 8% in early 2009, rather then the near-zero reported by official sources. Thus, the consumer must cope with diminished purchasing power as well as the threat or reality of job loss.
U.S. Unemployment has (according to Official Numbers) been ranging 4% to 6% from 1995 to 2007, spiking “only” to about just under 7% in late 2008. In fact, Real U.S. Unemployment as of early April, 2009 now exceeds 19% and is still increasing. Thus the consumer (70% of U.S. GDP, we reiterate) is increasingly unemployed, under-employed, and indebted.
As well, the Delusion of Economic Growth claimed by Official Statistics is just that - - a Delusion. Real GDP has been negative since 2004. Official Figures indicate GDP is now flat. However, 2009 GDP is actually a negative 4%. Thus the consumer is faced with a deteriorating economy, as well as diminishing job prospects and purchasing power.
As well, the 2008 U.S, Federal Deficit, rather than being $1 trillion as earlier reported officially, is well over $5 trillion (and increasing) if one includes Social Security and Medicare. And, if downstream-unfunded U.S. obligations are included, the U.S. National Debt is at least $66 trillion!
All of the foregoing Genuine Numbers are calculated by shadowstats.com which calculates them according to traditional methods used in the 1980s and 1990s, before The Political Adjustments currently being utilized began. Given the foregoing Numbers, it is clear that the ongoing Rally is a Bear Market Rally.
5) Over and Covert Market Intervention and Data Manipulation by a Fed-led Cartel* of key Central Bankers and their Allies and Factota serve to hide key negative market, financial and economic realities from investors around the world much to their detriment.
The Fed-led Cartel’s Covert Interventions work to periodically take down Precious Metals prices, control the levels of Equities Markets and manipulate the price of Crude Oil and other Assets. The Cartel apparently employs at least three vehicles to conduct their Covert Market Interventions.
a) At least $683 trillion in Dark OTC Derivatives positions (as of June, 2008 as reported by the BIS (www.bis.org)
b) The Repurchase Agreement (Repo) Pool
c) The TLSF Pool
For details on each of these three Vehicles and on this Interventional Regime in general, see Deepcaster’s December, 2008 Letter and July, 2008 Letter in the ‘Latest Letter’ cache at www.deepcaster.com.
Three (of several) key negative consequences of this Overt and Covert Interventional Regime are that:
a) It prevents genuine market forces from operating
b) It makes the financial and economic systems and investors reliant on, and, simultaneously, vulnerable to the Cartel’s Market Intervention Regime and on gimmicked, and quite inaccurate, Official Statistics.
c) It presents a false picture of Economic and Financial Realities and prevents the Market from purging unsuccessful businesses, lightening debt burdens, and generally making wise business and financial decisions, thus postponing any possible recovery for years.
However if one regularly tracks The Interventionals, as Deepcaster does, that gives one an edge in investment and trading selections. Indeed, as of the beginning of September, 2008 (i.e. before the Fall Market Crash) Deepcaster had recommended five “short” Equities Positions. Those positions were all subsequently liquidated showing substantial profit. See Deepcaster’s Front Page (www.deepcaster.com) for details.
6) No resurgence in the housing market in 2009. Home prices will drop another 15% in 2009 according to a recent Case-Schiller Report. Thus there will be no resurgence in the housing market to help bring us out of the Deepening Recession.
7) Defaults on credit obligations will continue to increase. There will be an additional $1.6 trillion in loan losses suffered by Financial Institutions in 2009, according to a Goldman-Sachs Report.
8) The crisis in Financial Institutions will last for years. The average banking crisis lasts 4 years according to a report by Professor Ken Rogoff of Harvard. Deepcaster reiterates that this ongoing crisis is much worse than average.
9) U.S. Manufacturing is Collapsing. The January 2, 2009 Institute of Supply Management Report recently showed a 29-year low. Such a result was predictable of course, given the U.S. Job Destroying Policies in NAFTA and related so-called “Free Trade” Agreements.
10) Declining government, personal, and corporate income are thus “baked into the cake” for 2009, given the foregoing.
11) Multi-trillion U.S. Dollar “printing” to fund bailouts, loans, and guarantees will ensure increasing monetary (and eventually accompanying price) hyperinflation and an Economic Depression.
One reflection of Monetary Hyperinflation is The Fed’s Balance Sheet which exploded to over $2 trillion in 2008 and is expected to exceed $5 trillion in 2009.
12) M3 creation is over 8% as of March, 2009, according to an April 5, 2009 shadowstats.com report.
Of all the factors listed above, one factor will perhaps above all others is serving to move the Equities Markets into a Bear Market Rally (ie. an unsustainable rally) mode in 2009. That factor is the addition of trillions of “printed” and borrowed Dollars into the economic system via the U.S. government bailouts, guarantees, loans, etc. and the prospective Obama Stimulus Program.
We reiterate that most of this is being funded from monies created out of thin air by the private-for-profit U.S. Fed and lent to the U.S. Taxpayer at “interest.”
Nonetheless, all this “borrowed” money will provide additional liquidity to the commodities and equities markets.
Identifying Opportunities
In order to identify opportunities investors should:
1) Get the Real Data. As many Investors suspect, Crucial Official Government and Agency Economic and Financial Data are of highly questionable validity. The Data set forth above from shadowstats.com reflect an alternate source providing Real Data.
Thus, to make informed decisions, educate yourself about the realities of the marketplace using Alternative Data Sources such as Deepcaster, Gold Anti-Trust Committee (www.gata.org), and shadowstats.com. Gathering and staying attuned to authentic information regarding the marketplace (and the economy and politics) can save one much financial grief as well as positioning one for profit.
2) Take Account of both Covert and Overt Cartel Intervention. Many investors who doubt the accuracy of Official Figures also rightly suspect that the private-for-profit U.S. Federal Reserve and/or Central Banks overtly and covertly manipulate Major Markets. But they might not be aware that covert Market Intervention and Data Manipulation are likely far more pervasive than generally believed, as detailed in Deepcaster’s articles mentioned above.
As well, such investors may not have thought systematically about how one copes with, and profits from, such Intervention and Data Manipulation.
The Traditional and Legitimate Safe Haven from inflation, deflation, and risk is gold. Yet Gold has, nonetheless, even during the recent periods of extreme financial market turmoil, been taken down in price from its highs of over $1000/oz down to around the mid-$700 level (e.g. 2008) when it should have skyrocketed.
Considering one example, in early March, 2008 Gold was over $1000/oz. when the Bear Stearns Crisis revealed the fragility of the Financial System. Gold should surely have skyrocketed then. Instead, it was brutally taken down. Were its price not manipulated, Deepcaster’s view is that its price would be over $3,000.00 per ounce.
Deepcaster and others, including the Gold AntiTrust Action Committee, have offered considerable evidence that the Cartel* of Central Bankers and Favored Financial Institutions are the culprits behind these dramatic and devastating Takedowns. See Deepcaster’s Alert of 12/25/07 “A Strategy for Profiting from Cartel Intervention in Gold, Silver, Crude Oil and Other Tangible Assets Markets” in the Alerts Cache at www.deepcaster.com.
But there is a Profitable Refuge from Market Intervention and Data Manipulation. That Profitable Refuge lies in the Strategy described in the aforementioned Alert, certain characteristics of which we outline here:
3) Recognize that the “Buy and Hold” strategy rarely succeeds anymore. The Eminence Grise of Newsletter writers, Harry Schultz perhaps put it the best when he recently stated that “buy and hold no longer works anymore, even with Gold.” Recent Market Developments should suffice to demonstrate this principle!
4) Track the Covert Interventionals as well as the Technicals and Fundamentals. Tracking the Footprints, as it were, of the Covert Interventionals (e.g. the Repo and TSLF Pools) daily can often, but not always, give one excellent clues about The Cartel’s next likely Interventional Moves - - such clues are essential to preserving wealth and making profits. Deepcaster’s tracking of The Interventionals, for example, allowed him to recommend five short equities positions going into September, 2008, all of which he has subsequently recommended be profitably liquidated.
5) Perhaps most important, be prepared to go both long and short Major Market Sectors - - long near the bottoms of Interim Takedowns and short near Sector Tops. The Interventionals are essential to helping identify these tops and bottoms. In Deepcaster’s view, it will be increasingly difficult to achieve a net profit for one’s portfolio if one is unwilling and/or unable to “go short.”
Indeed, in order to profit from the next dramatic market decline, it will be essential to be prepared to go short! Fortunately, in recent years, we have seen the advent of the increasing use of Exchange Traded Funds and Exchange Traded Notes. One great advantage of these is that they are designed so that investors will not likely lose due to the time and risk premium erosion which one has in Options. Moreover, some of the funds called “Double” Funds provide an opportunity to obtain twice the leverage of the anticipated move whether short or long. [Indeed, now there are “Triple” Funds.] So Deepcaster and others are increasingly recommending these Funds as an alternative for those who do not like the risks of Options. These funds allow investors to go short or long with ease. Savvy investors should consider them. [ Caveat: Some of these funds do not perform as prescribed; thus Due Diligence is essential. ]
6) Be aware of the overall Geopolitical Landscape in order to gain an adequate understanding of how that Landscape might affect the present and future direction of the Markets. It is essential that one understand the motivations of the major players in the market and the resources at their disposal.
For example, a major motivation of the U.S. Federal Reserve and other Central Banks is the protection and enhancement of the legitimacy of their Treasury Securities and Fiat Currencies as Measures and Stores and Value. Therefore, one can understand that one of their Major Goals will be to continue to attempt to de-legitimize Gold, Silver and the Strategic Commodities, including especially Crude Oil, as Stores and Measures of Value. With this in mind, the periodic Takedowns of Gold and Silver and Strategic Commodities become understandable. Moreover, such an insight, coupled with attention to The Interventionals, and applied daily to the market can result in a tremendous edge in understanding market performance, present and future.
7) Opportunities from Overt and Covert Interventions. One key to short-term opportunities comes from considering The Bailouts, Excessive Credit Creation in recent years and Monetary Hyperinflation. As of the latest figures, annual Money Supply Increase (M3) is still over 8% (as reported by shadowstats.com). Indeed, earlier in 2008 M3 was at a record high of over 17% annualized. Of course, this Rampant Monetary Inflation has shown up in Real Consumer Price Inflation and will continue to be massively inflationary.
Contrary to the Official Figures “asserting” that CPI is now virtually zero, Real Consumer Price Inflation, at the beginning of April 2009 is still over 8%, as calculated by shadowstats.com. [Note: Even though Oil price drops and market losses are deflationary, on a net basis we are still experiencing hyperinflation, mainly as a result of the private-for-profit Fed-instigated Bailouts and Excessive Money Printing.]
So, whence come the opportunities?
The fact is that the private-for-profit Federal Reserve and U.S. Treasury have rolled over the generally clueless Congress (Ron Paul and a very few others excepted) and their actions are guaranteeing massive monetary, and therefore eventual price, inflation. The Fed’s balance sheet has grown dramatically.
This exploding Fed balance sheet is massively inflationary. The Fed increases its balance sheet by buying “assets” (albeit some “assets” of dubious value). How do they do this? They print money out of thin air! Deepcaster and others have shown what an unsustainable Ponzi scheme this printing out of thin air is (see “Private Ownership of U.S. Fed Unsustainable” of 1/4/08 in the Articles Cache at www.deepcaster.com).
Nonetheless, by massive loans, equity purchases and injections and expansion of the actual Money Supply at a rate of over 8% annually. The Fed has guaranteed massive inflation in future months and years. Similarly, key Central Banks around the world that have conducted similar actions and have thus bolstered massive inflation. What this means is that, in the long run, the U.S. Dollar and many other major currencies will buy less, much less, in the future.
However, given that the financial system and key heavyweight investors are awash with printed and borrowed money, certain Key Sectors should explode upward very soon until the long-term negative Economic Fundamentals drag them down again. Of course, this will not happen in one fell swoop, it will happen in Spurts. And, indeed, we think the first Spurts from this Monetary Inflationary Juice are imminent. Indeed, we have recently forecast that this should be reflected in higher Equities prices very soon in certain Key Sectors identified in Deepcaster’s latest Letter and Alerts posted at www.deepcaster.com.
Thus, these considerations provide speculative investment opportunities, certain of are identified in Deepcaster’s April 2009 Letter and Alerts available at www.deepcaster.com. The Rampant Monetary Inflation reflected in M3 and in the various bailouts and loans are in the trillions of Dollars. And this tremendously increased monetary base is available to temporarily inflate the paper value of the Equities and other Markets, when money managers first think the markets have a chance for a sustained (for a few months, or even a few weeks only) Rally, and, when The Cartel Interventional Regime “agrees” with them. We have thus forecast Major Moves in certain key Sectors soon.
Deepcaster
April 10, 2009
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 Sunday, 12 April 2009 | Digg This Article
| Source: GoldSeek.com
