-- Published: Friday, 8 April 2016 | Print | Disqus
“…this is the most unsustainable situation I have seen ever in my career.”
Stan Druckenmiller, Billionaire Investor/Hedge Fund Manager
Mega Moves are coming in Key Sectors soon.
Investors who monitor developing Triggers, and especially one Mega-Move Trigger, will be positioned to profit handsomely and to Protect Wealth.
Those who do not, will likely be devastated.
Consider the Key Triggers. First a Trigger which is already being “pulled”.
“Globally, the oil and gas industry has issued $1.4 trillion of bonds and taken out further $1.6 Trillion in syndicated loans, driving the sector’s combined debt to $3 trillion.” (Bank of Intl Settlements in Basel, Switzerland).
And fully 175 Oil and Gas Exploration Companies are at High Risk for Bankruptcy in 2016!! according to a Deloitte Study.
Yes, indeed, a wave of Bankruptcies and Credit Defaults is coming. And Credit Defaults create a Domino Effect as Credit Counterparties Fail, and Defaults spread to other Sectors.
Over $10 Trillion in Credit Debt Vanished in the last Financial Crisis and more will Vanish in the coming one. Druckenmiller is correct. This is the “most unsustainable situation” savvy investors have ever seen.
And worse, unfortunately, Bogus Official Numbers emanating from the U.S., B.L.S., China and elsewhere will not give adequate Warning of Impending Mega-Moves. For the latest Real Numbers for the U.S., see the chart below from Shadowstats.com (Note 3).
One major consequence of the Concatenating Defaults will be that liquidity will decrease or simply become unavailable. Credit lines and cash will be reduced or unavailable à la Cyprus.
Profit and Wealth Protection Opportunity from Concatenating Default Triggers—Additional Opportunities to short this Sector will be coming soon. Deepcaster reiterates our Recommendation to rely as little as possible on credit (e.g., credit card) Transactions. And as much as possible on Physical Cash. Possession of Physical Cash (and Physical Gold and Silver) is the Necessary Condition for Maximizing personal and Financial freedom when the Credit and/or Equities Markets Crash and then Cash (liquidity) dries up.
Deepcaster’s Warning: Sometime in the next few months, you may be limited in the Amount of Cash you can obtain from your Bank or ATM.
This impending Liquidity Loss is one Very Great Danger of which we continue to speak. Already, the Velocity of Money is at an all-time low!
Former OMB Director, David Stockman, explains how the largest and Final leg of the impending Horrific Crash Cycle will likely occur.
“I do think that the banks have unloaded the worst of their stuff and today it is in mutual funds and ETFs, today it is in non-bank financial institutions, like all these companies that have come up overnight to make auto loans by selling junk bonds as a form of capital,” he said.
“The dangers of a run are far more serious now than it was with banks then. Back then, there never was a run on Main Street banks, it was only on a few hedge funds,” he said.
“This time you are going to have a run of $5 trillion or $6 trillion of mutual funds. This time you are going to have a run on the ETFs. There were only $1 trillion of ETFs in existence in 2008. There is over $3 trillion now and they are an accelerator mechanism,” he said.
“When everyone sells their ETFs, the managers have to go out and liquidate assets by selling the underlyings. The underlying assets are not nearly as liquid as the offer that anytime you want to sell your ETF there is a bid. Anytime you want to sell your mutual fund share, there is a bid … and I will tell you what … that is where the collision is going to come in the market.”
David Stockman, 02/11/2016
As well, consider another cause of the Impending Crash. Virtually unmentioned in the Main Stream Media is the fact that The Feds Zero Interest Rate Policy ZIRP has from 2009 onward had the effect of first pumping up Equities Prices artificially—a Bubble which exists today—and thus excessively—and certain Commodities Prices (e.g., Crude until the Summer, 2014) therefore encouraging excessive leverage (i.e., Debt!) in the Energy Industry and Commodities and Corporations in general. And all that encouraged “Excess” Production of Oil and Gas as well as Excess Borrowing in many Industries.
Once again, The Fed and cooperating Central Banks are the Rats in the Wood Pile.
Indeed, considering 34 different Commodity Producers in 4 different sub-sectors Commodity Producer Debt as a % of corporate credit outstanding has multiplied about 2.5 Times in 10 years. And those Producers’ Debt levels as a share of aggregate corporate Debt is up about 500% in 10 years and is higher than before the 2008/2009 Crash.
Our Forecast — much of this Commodity-related Debt will Default in coming months. And that will lead to Defaults in other Sectors.
And Corporate Bond Defaults will increasingly intensify downward pressure on Equities. This Vicious Circle has only just begun and will likely continue throughout 2016 and into 2017 with the Ultimate downside Target—Dow 6,000.
Now two unaddressed Factors are likely timing and extent of these prospective moves. These we monitor daily and aim to give you our best forecasts regularly.
Equities-in-general have now completed two legs down (in August 2015 and January 2016) of several to come. Indeed, the third leg down may have already begun.
See our April Letter and Alerts for further detail on our Analyses and Forecasts.
The Cartel (Note 1) itself is yet another Trigger for Mega Moves, especially as it continues its ongoing efforts to suppress the price of Gold and Silver.
With considerable Cartel help, Gold has crashed back down to support just above $1200ish recently because: 1.) the $US strengthened temporarily and 2.) The recent Equities Mini-Bounce has ostensibly reduced the need for Safe Havens according to the Main Stream Media.
But notwithstanding this Takedown, Gold and Silver have already begun their Great Launch UP. Gold has rebounded to $1250ish just in the past month.
Looking ahead The Fed and ECB and Banks of China and Japan will be most reluctant to raise rates due to the decelerating Economy. And this refusal to raise rates is $US Negative and Precious Metals Prices Positive.
But as the recent Takedowns and Bounce Backs Demonstrate, that Launch UP will be characterized by Extreme Volatility and The Cartel will exploit every Opportunity to take the Precious Metals down, just as it has recently.
But consider the Overview—Gold and Silver’s recent Launch up has resulted from the following Triggers all of which tend to push the Precious Metals up:
- Increasing Risk to Credit Markets/Banks illustrated by Deutsche Bank’s problems and increasing Default Risk Worldwide
- Negative data out of China and especially evidence they are rapidly exhausting their Foreign Asset Reserves but NOT achieving the desired effect of boosting either their Markets or Economy!
- Japan’s Negative Rate Move
- Weakening Economic Data which is leading to lower Equities Prices and Crude Oil Prices
- The increasing likelihood The Fed will not raise rates any time soon
- Extreme overleverage resulting in the developing Credit Default Crisis
- The Fed’s Negative Interest Rate Threat
- Bearish Corporate Earnings Trends
- Ongoing Currency Wars—Central Banks competing to devalue their Currencies by printing/digitizing ever more Fiat Currency into Existence.
All the above are leading to a Flight to the Safe Havens of Gold and Silver.
And note that this Flight has been so strong that The Cartel has only been able to suppress the upward Momentum somewhat (bounces down to $1200 but not below) but not totally stop it.
Nonetheless, they will keep trying.
And, The “Smart Money” is starting to recognize that The Cartel is having an increasingly difficult time suppressing Precious Metals prices because there is an increasing “shortage” of deliverable above-ground physical. The U.S. Comex recently reported there were 542 long paper claims on gold ounces, for every ounce of Physical in their Inventory!
Yet there is one Mega-Trigger which will provide such a strong Impetus that The Cartel will be unable to stop the Precious Metals from Spiking Up to new highs and that Mega-Trigger is fast approaching—see Deepcaster’s April Letter for details.
Indeed, the U.S. is suffering an increasing Gold supply Deficit—50% larger in 2015 than 2014—118 Tons higher than Total Supply.
Silver’s shortfall is even greater.
The Timing of the Spike up to new highs for the Precious Metals (as well as of Equities Sector Moves) is a function of the confluence of the aforementioned Fundamental and Technical Factors, factors which Deepcaster has monitored with profitable results—See recent Profits Taken (Note 2).
Yet another Factor/Trigger is Chinese and Japanese and Eurozone Economic Difficulties which have resulted in modest $US strength until very recently.
Notwithstanding what they say, the Chinese continue to weaken their currencies as do other Major Nations — Every Country — Devaluation is a Potential Trigger. The Currency (Purchasing Power Devaluation) Wars continue.
We have already noted that sophisticated Investors see what is coming and are beginning to pull their money out of Junk and Corporate Bond Funds. However, this is only the first beginning sign of the Great Credit Collapse coming — the Impending Bond Collapse and Slowing Growth resulting in Earnings Declines and thus Equities Crashes are two of the Great Sector Mega Moves of which we speak. And of course, they provide Shorting Opportunities … stay tuned for these.
As we forecast a few weeks ago, the High Yield Junk Bond Market has taken, (and will continue to take) a hit (from which Deepcaster Subscribers in position already profited. And this is only the beginning, because when Debt Defaults begin, they tend to Multiply in a “Domino Effect.” We are beginning a months-long Debt Deflationary Economic Contagion and it will be Brutal. At first, it will strengthen the $US and U.S. Treasuries, then severely weaken them eventually, as the serious Recession in the USA is fully revealed. As former OMB Director David Stockman says of our over-financialized Economy:
“There is going to be carnage in the casino, …”
“Sell The Bonds, Sell The Stocks, Sell The House – Dread The Fed!,” David Stockman, 12/18/2015
In sum, The Private-for-Profit Fed’s ZIRP has created Massive Bond (and Real Estate) as well as a Massive Equities Bubbles, by encouraging Speculation and Excessive Leverage with near zero-rate Money, while at the same time enriching The Fed’s Mega-Bank Shareholders, and devastating savers and retirees on fixed incomes.
In sum, consider the prospective Sector-Effects, Short- to Mid-term—private heavily-leveraged Debtors (e.g., Think Frackers in the U.S. and Emerging Market Debtors with $US-denominated Debt) will have begun to default on substantial tranches of their $9 Trillion! In US$ Denominated Debt will and those Defaults will begin to create another Mega Move — probably yet another Equities Crash Leg. Credit Defaults have a Domino Effect!
After that, (see our forecast) the U.S. Government (and other, e.g., European Central Bank Nations) Bond Bubble also will likely begin to burst because the $US will, by then, have begun to be substantially devalued. And we identify The Key Signal that the Sovereign Bond Bubble Burst is impending, in our April Letter. The foregoing will be Signals the Massive $555 Trillion Global Bond Bubble is Bursting. Truly a Mega-Move Impending.
In sum, in the next few months, we expect the $US to begin to Tank vis à vis the Precious Metals and eventually, vis à vis stronger (not now, but months from now) Currencies (e.g., the CHF & Canadian & Aussie $ and the [de facto Gold-Backed] Yuan). And the $US Drop will be amplified when The Mega-Trigger is activated (see above).
Mid- to Longer-term, the Euro and Yen too will also likely weaken vis à vis the aforementioned stronger Currencies and the Precious Metals. Indeed, the weakening vis à vis the Precious Metals has begun, albeit fitfully.
Stay tuned for more Profit and Wealth Protection Opportunities.
Best regards,
Deepcaster
April 8, 2016
Note 1: 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 July, 2014 Letter entitled "Profit, Protection, Despite Cartel Intervention" 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, including testimony before the CFTC, for information on precious metals price manipulation, and manipulation in other Markets. 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.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
Note 2: Our attention to Key Timing Signals and Interventionals and accurate statistics has facilitated Recommendations which have performed well lately. Consider our profits taken in recent months in our Speculative and Fortress Assets Portfolios*
• 30% Profit on Water Services Stock on March 11, 2016 after just 18 months (i.e., about 18% Annualized)
• 28% Profit on Water Services Stock on February 23, 2016 after just 16 months (i.e., about 18% Annualized)
• 50% Profit on Long Bond position on February 19, 2016 after just 2 days (i.e., about 8810% Annualized)
• 30% Profit on Short Financial ETF position on February 9, 2016 after just 18 days (i.e., about 655% Annualized)
• 30% Profit on Short Junk Bond position on February 8, 2016 after just 49 days (i.e., about 225% Annualized)
• 90% Profit on Short Small Cap Equities ETF on January 20, 2016 (i.e., about 30% Annualized)
• 75% Profit on Short Small Cap Equities ETF on January 15, 2016 (i.e., about 25% Annualized)
• 28% Profit on a Long Treasury Bond Treasury Bond Position on January 12, 2016 after just 71 days (i.e., about 140% Annualized)
• 45% Profit on Long Treasury Bond Treasury Bond Position on October 1, 2015 after just 22 days (i.e., about 775% Annualized)
• 265% Profit on Short NASDAQ Position on September 29, 2015 after just 57 days (i.e., about 1690% Annualized)
• 110% Profit on Short Russell 2000 Position on August 21, 2015 after just 3 days (i.e., about 13500% Annualized)
• 65% Profit on Short Russell 2000 Position on August 20, 2015 after just 2 days (i.e., about 12000% Annualized)
• 40% Profit on Short Retail Sector ETF Position on August 7, 2015 after just 4 days (i.e., about 3630% Annualized)
• 80% Profit on Short Retail Sector ETF Position on July 27, 2015 after just 6 days (i.e., about 4850% Annualized)
Note 3: Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported March 16, 2016
1.02% / 8.67%
U.S. Unemployment reported April 1, 2016
5.00% / 22.9%
U.S. GDP Annual Growth/Decline reported March 25, 2016
1.98% / -1.72%
U.S. M3 reported March 31, 2016 (Month of March, Y.O.Y.)
No Official Report / (e) 3.89% (i.e., total M3 Now at $17.252 Trillion!)
DEEPCASTER LLC
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