Financial and Geopolitical Intelligence

“The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bail-outs, and ballooning deficits almost everywhere.

Unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. Those that cannot print money to tide them through, either because they no longer have a national currency (Ireland, Club Med), or because they borrowed abroad (East Europe), run the biggest risk of default.

Traders already whisper that some governments are buying their own debt through proxies at bond auctions to keep up illusions – not to be confused with transparent buying by central banks under quantitative easing. This cannot continue for long.” (emphasis added)

“The Capital Well Is Running Dry And Some Economies Will Wither”

Ambrose Evans-Pritchard, April 26, 2009

The Telegraph, London

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5220118/The-capital-well-is-running-dry-and-some-economies-will-wither.html

Essential Background for laying out the Highlights of our Markets Outlook and Strategy for Profit and Protection is the following Realistic View of our Economic Outlook.

In Fact, the world has already nearly run out of sufficient Real Capital – i.e. that generated by Savings and Productivity increases, as opposed to Debt “Capital” – Fiat Money and Borrowing.

Indeed, in recent years the world has been increasingly awash with Ersatz Capital – for example, the Fiat Capital created for free by the printing presses (and keyboard entries) of the Private-For-Profit U.S. Federal Reserve (and its allied key Central Banks and favored Financial Institutions) – and loaned to U.S. Taxpayers at interest.

“Loaned” – “Aye, there’s The Rub” to apply the words of the Great Shakespeare.

“Loaned” Capital when printed for free out of thin Air by the Private-For-Profit Fed, is not Real Capital, but can easily become a one-way Ticket to National Bankruptcy, Hyperinflation and Economic Collapse. (See “Coping with Power Moves in The Cartel’s ‘End Game’” 4/24/09 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.) It is still possible to revoke this ‘One Way Ticket’, but Time is running short. (See “Coping with Power Moves...”)

Indeed, The Primary Enabler of the recent years’ Orgy of Excessive Credit, Excessive Debt , and expansive Monetary Expansion was, and still is, The Private-For-Profit U.S. Fed and its allied key Central Banks and Favored Financial Institutions that is, The Fed-led Cartel*.

But an even Greater Threat than Inadequate Capital is the fact that major nations do not have Capital Assets and Reserves to cover their actual and prospective Derivatives Defaults. Deepcaster’s long-time readers will recall that we keep them regularly apprised of the ever-increasing Total of Over The Counter (i.e. generally unregulated and not publicly traded and therefore “dark”) Derivatives.

As of the most recent public reporting (June, 2008) by The Bank for International Settlements (the Central Banker’s Bank) there were $683 Trillion in OTC Derivatives Outstanding (www.bis.org, path: Statistic è Derivatives è Table 19 ff.)

Yet, a recent report reflects that The Fed has moved “only” about $2.2 Trillion of (de facto) Toxic Derivatives onto its balance sheet. With over $683 Trillion outstanding the likelihood of a continuing Derivatives Disaster of greater magnitude is very high.

The Elephant-in-the-living-room OTC Derivatives Threat is likely to prevent any overall healthy International Recovery for Years to come, because the Major Nations do not have enough assets and reserves to cover ongoing Derivatives Default.

Not even the most savvy investors are immune. Warren Buffet’s (who once called derivatives “time bombs”) Berkshire Hathaway reportedly held (at year-end 2008) some $67.3 Billion in Notional Value of Derivatives but only $25.5 Billion in cash. No wonder Berkshire Class A shares moved down over 30% since last September.

When aiming for Profit and Protection Deepcaster suggests that the Investor be quite attentive to these two aforementioned Great Threats.

Bear in mind that the aforementioned Toxic Derivatives are primarily the Creature of The Fed-led Cartel and its favored Globalist Financial Institutions.

And if lack of adequate Capital and the ongoing Derivatives Defaults were not sufficient Challenges, Investors also must take Account of Gimmicked Official Statistics.

Among the most misleading of statistics is the Fiction propagated by Officials Source and the Big Media that we are presently in a deflationary economy rather than an inflationary one. In fact, on a net basis monetary inflation and credit inflation exceed the amount of deflation resulting from the contracting economy and recent drop in equities and commodities prices, inter alia.

So far as Monetary Growth is concerned, annual U.S. money supply growth (M3) is actually about 8% as of April 18^th, 2009 according to a shadowstats.com report (shadowstats.com is a service which reports on key statistics as they were calculated prior to official gimmicking which began in 1980’s and 1990’s). Understandably, The Fed adopted the policy of concealing Official M3 beginning in March, 2006. Such a high rate of Monetary Inflation inevitably leads to significant Price Inflation.

Moreover, while Official Statistics show Consumer Price Inflation has dropped to flat (i.e. to zero), Actual Consumer Price Inflation as calculated the old fashioned way by shadowstats.com shows annual Consumer Price Inflation is still just under 8%.

Similarly while the Official Figures show that the U.S. Unemployment rate at about 8.5%, the Actual U.S. Unemployment Rate is nearly 20% according to shadowstats.com, as of their April 3^rd, 2009 reports.

Thus, significantly, The Economy is in much worse shape than Official Statistics reflect. Whereas Official GDP Growth Reports have bounced around a negative 1% over the past year, Shadowstats.com shows the annual GDP contraction to be a negative 5.1% contrary to recently released figures showing a negative 2.62% year-to-year. The economy is contracting dramatically.

And while recently released Official Figures show First Quarter 2009 GDP down by 6.14% annualized, shadowstats.com estimates the Real Contraction was in excess of 8%.

In sum, the Unpleasant Reality is that we are entering into a Hyperinflationary Depression as described in detail in Deepcaster’s recent article “Profit and Protection in Today’s Great Depression” (2/20/09) in the ‘Articles by Deepcaster’ cache www.deepcaster.com.

Yet one other significant Reality with which investors must cope is the ongoing Overt and Covert Major Market Interventions by The Fed-led Cartel of Central Banks and favored financial institutions, some of which serve as The Fed’s Primary Dealers. Not only do these regular Market Interventions serve to cap Gold and Silver prices (as more and more investors are becoming aware), but also serve to control the prices of Crude Oil and the Equities Markets, among others.

“A leading economist believes the International Monetary Fund (IMF) is "manipulating" the financial troubles of emerging and low-income nations to grab more capital for itself, and to keep the nearly defunct global lending bureaucracy alive for years to come.

According to economist Judy Shelton, whose remarks were published in The Wall Street Journal, the IMF has been stealthily moving to secure its own survival by seeking permission to engage in gold sales…

But, Shelton argues, "the real objective" of bureaucrats at the Washington D.C. institution is to set up a "permanent endowment fund" for the IMF.”

“Expert: IMF Manipulating Gold in Power Grab”

Gene J. Koprowski, April 30, 2009

http://moneynews.newsmax.com/streettalk/imf_gold_power_grab/2009/04/30/209253.html

*We encourage those who doubt the scope and power of Overt and Covert Interventions 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 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” in the “Latest Letter” Cache 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.”

Indeed, even without examining the issue of Intervention carefully, one can intuitively conclude Gold and Silver prices must regularly be being capped. For example the past nearly 14 months since the collapse of Bear Stearns has revealed an unprecedented chaos and uncertainty in the financial markets and in the economy. This has resulted in a tremendous increase in Fiat currencies and in the public revelation of the Monetization  (already ongoing, in fact for a long time) of ever increasing trillions of dollars in debt.

All of this of course should have launched Gold and Silver to the moon, and certainly well above the inflation adjusted high of 1980 for Gold and Silver. (That inflation adjusted high today is estimated to be between $2,300 and $2,400/oz.) Indeed, according to Deepcaster’s estimates Gold should be at least $3,000/oz. today and would be were it not for major and ongoing Covert Interventions by the Cartel*.

Deepcaster has developed a Strategy designed for profiting from Cartel Interventions described in “Defeating The Cartel…with Profit” (3/28/08) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com. Also available are Deepcaster’s latest Forecast for the Gold, Silver, Equities, Crude Oil and U.S. Dollar Markets in the May, 2009 Letter in the ‘Latest Letter’ cache at www.deepcaster.com.

With this background in mind, we set forth Highlights of a General Strategy for protecting ones Assets and Profiting as we continue to face these very challenging times.

Strategic Guidelines for Identifying and Realizing Profit Opportunities

Be Just as Willing to “Go Short” as to “Go Long”.  Given the Foregoing Economic and Financial Market Realities, there will be many months and probably several years before a durable healthy uptrend of the markets-in-general is possible.  Indeed, the Current Primary Trend is still ‘Bear Market’. Thus, one must be just as willing and able to “go short” as to “go long”.  Fortunately, there are unprecedented opportunities to “go short” (as well as long) via, for example, literally scores of short Exchange-Traded Funds.  Carefully chosen and timed, these can be excellent vehicles for garnering profit in “fear markets” as well as bull markets.  For example, Deepcaster entered last September (just prior to last Fall’s Market Crash) having recommended a total of five short positions, of which several were Exchange Traded Funds.  All of those subsequently were liquidated for significant profits.

Buy and Hold Rarely Works Anymore.  As the market performance in the past year has demonstrated, those who adhered to the Outdated Strategy of “Buy and Hold” likely got smashed.  Many have lost up to 50% of the price “value” of their portfolio with little prospect of recovery (absent employing Strategies suggested here).  (See “Opportunities to Escape Paper ‘Wealth’” (11/7/08) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.)  What many of these investors did not realize, and hopefully now realize, is that we are now in a radically different economic, financial, and market environment which will, with very few exceptions, make “Buy and Hold” a very unprofitable strategy for several years.

The Basic Reality:  Hyper Stagflation.  We are in an Apparent Deflationary Environment (e.g. energy prices have dropped dramatically and the Equities Markets and other “Assets” have lost Trillions in Nominal Value).  This Apparent Deflationary Environment masks an underlying Hyperinflationary Reality - - the Trillions in Fiat Currencies which are being printed and lent in a futile (in the long term) Attempt to stimulate the Economy are greater than the Trillions lost in Equities Markets Takedowns and other Asset Devaluations.  Thus The Basic Long Term Trend is for a Hyperinflationary Economic Decline (that is, a Depression) - - the worst of both Worlds.  We expect $20 hamburgers in three or four years.

Raise Cash - - Cash is King in this Credit Squeezed Environment.  What Cash?  So long as the deleveraging continues the U.S. Dollar should remain relatively strong.  When the deleveraging is perceived to be beginning to end, we expect the U.S. Dollar to begin its collapse.  In such an environment the Swiss Franc is the currency of choice.  Of course, the ultimate Money is the Precious Monetary Metals, Gold and Silver but, given The Cartel’s* periodic Interventions to drive their price lower we advocate acquiring them using the Strategy described in our Article “Defeating The Cartel…with Profit” (3/28/08) and “Coping with the Superpower-Cartel Threat” (1/30/09) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.

Liquidate Debt - - Debt is the Enemy of Cash in this Cash is King Environment.  Debt demands Repayment, with Cash that is ever harder to obtain.

Credit:  Use it or Lose It:  But only if you Must for Safety’s Sake.  Lenders are Cutting Back or Eliminating Credit lines and raising rates. (Outrageous, of course, since it is the U.S. Taxpayer who has bailed many of these lenders out!) So if you do not have a sufficient cash cushion and can foreseeably make the payments, consider borrowing from that credit line.  If you fail to do so, it may be reduced or eliminated.

Become more Self-Reliant.  The Hard “Econo-Reality” is that in this increasingly “Hard Times” Era of increasing unemployment and decreasing economic strength - - a “Hard Times” Era which will likely persist for several years - - there will be more, much more, potential for civil disturbances and reduction in, or outright cut-off of, basic public services, and essential supplies as well.  Given the increasing desperation of an increasingly large number of the population there will be more personal safety risks.  Public infrastructure services upon which we have come to rely such as utilities and roads are likely to be compromised periodically, and increasingly severely.  Public Health services will be compromised and thus the ability to combat pandemic will be diminished. Prepare for blackouts, periodic interruptions of water and food supplies, and civil, and very uncivil, disturbances.  Be prepared to combat increasing threats to Liberty and Privacy in the deceptive guise of Ostensible Security.  “Be prepared” is not just a wise motto for Boy Scouts.

Track the Interventionals and the Real Statistics.  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 that connection, Deepcaster has developed a detailed Strategy designed to profit from trading and investing in Gold and Silver in spite of the Interventions. It can be found in Deepcaster’s Articles “Defeating the Cartel…With Profit” (3/28/08) and “Coping With Power Moves In The Cartel’s ‘End Game’” (04/24/09), both in the “Articles by Deepcaster” cache at www.deepcaster.com.

In sum, in spite of Market, Financial and Economic Challenges it is possible to protect ones wealth and to profit.

Deepcaster

May 1, 2009

DEEPCASTER LLC

www.deepcaster.com

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-- Posted Friday, 1 May 2009 | Digg This Article