Markets Warnings & Opportunities Alert!
by DeepCaster LLC, deepcaster.com | May 21, 2010Print
“…reporting of contained CPI inflation by the U.S. government should be relatively short-lived, as global financial market concerns eventually shift from systemic solvency issues in Europe to those in the United States. Concerns for U.S. stability eventually should dominate most other market issues…
Indeed, the greatest risk to global markets and systemic stability and solvency remains the United States. Already in the midst of an intractable fiscal disaster (see the Hyperinflation report), the U.S. economy is on the brink of an intensified/renewed economic downturn. Such is signaled by annual contraction in real (inflation-adjusted) M3, a solid leading indicator to U.S. economic activity…
As the federal budget deficit and Treasury funding needs explode in the year-ahead, eventually domestic and foreign balking at buying U.S. Treasuries should become widespread, with Fed becoming the buyer of last resort, monetizing that federal debt. Coincident with that likely will be heavy dumping of the U.S. dollar and dollar-denominated paper assets. Such should spike U.S. money supply and dollar-based oil prices. The pace of inflation would tend to pick up significantly in response to these circumstances, setting the stage for the hyperinflation referenced earlier.”
“U.S. Remains the Proverbial Elephant in the Bathtub”
John Williams’ Shadow Government Statistics, Commentary Number 297, 5/19/10
“This is not a typical retracement…
We are in uncharted waters on account of several issues, including what is going on in Europe and other important structural regime changes. In economic terms, European developments are unambiguously bad for global growth…
This will amplify the impact of higher global risk aversion…
…markets around the world are now pricing in the structural headwinds, doing so in a rather volatile fashion…”
M. El-Erian, PIMCO, 5/21/10
And Credit is becoming increasingly expensive in Europe. The dollar-Libor-OIS spread (the measure of Banks’ reluctance to lend) jumped to 25.3 basis points Wednesday. Not good for business.
The Markets, and Deepcaster’s Alerts, have been signaling Warnings of Major Trend Changes in key Sectors. More importantly, these Signals portend much more Dramatic Changes to come soon. Thus we consider several Major Markets Sectors which we cover, Forecasts of their Future Performance and Opportunities for Protection and Profit.
Gold and Silver
Gold has recently reached a nominal high of $1,237/oz, whereas Silver, although up too, has lagged somewhat behind. And there are Manifold Causes for Gold, the Ultimate World’s Reserve Currency, to have hit record highs. Among them are the increasingly threatening Sovereign Debts bubbles, the as-yet-unresolved System-Threatening Financial Regulation Issues, and a Middle Class and Housing Market that are not recovering.
But in spite of all the Causes for Gold and Silver to continue to skyrocket, they have pulled back recently – Gold is down by nearly $60/oz as we write. In light of all the aforementioned Gold-price positive, Market-Negative developments, Why?!
The Major Factor is the Active Suppression of Gold and Silver Prices (as we and other commentators have increasingly noted in recent years), effected by a Fed-led Cartel of Major Banks and their agents and allies, whose main motivation is to prevent the increasing recognition of Gold and Silver as ultimate Stores and Measure of Value (as the World’s Reserve Currencies), so that their Fiat Currencies and Treasuries Securities have greater legitimacy, and the Mega-Bankers’ Profits remain unimpaired.
*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, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2009 Letter entitled "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the ‘Alerts Cache’ and ‘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. 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.
Until a few weeks ago, that Cartel* had considerable success in periodically taking down Gold and Silver prices with relative ease, especially at certain times at which Revelations of a weakening financial system have indicated that Gold and Silver should skyrocket.
One case in point is the Bear Stearns collapse in the Spring, 2008, which, given that it reflected the increasing fragility of the Financial System, should have been accompanied by a Gold launch. Instead there was a considerable Gold Price takedown catalyzed by The Cartel.
Even so, notwithstanding Cartel Manipulation, when priced in ounces of Gold, the U.S. S&P has lost a whopping 78% of its value since 2002, as J.S. Kim points out.
Moreover, in recent weeks, as the evidence (collected over many years by the Gold Anti-trust Committee Action and others) of Cartel Manipulation Gold and Silver markets has been increasingly reported, even recently in the Mainstream Media, we have seen a significant Reduction in the Potency of the Cartel.
One other Cause of the Reduction of that Cartel Potency (a Cause which is also very Gold- prices friendly), is the allegations which have been given increasingly broad distribution that not all the major Gold funds and Repositories actually have as much Real Physical Gold as they claim. This of course has been surely been communicated to Major Buyers, who now are much more likely to demand to take physical possession, a Wise Strategy in our view.
In light of this, what are the prospects for Gold and Silver prices? Indeed, in our view, not only are Gold and Silver prices clearly on a bullish trend, for reasons we indicated in our recent Alerts, but, with one Major Caveat, we expect that Trend to continue.
The Caveat is that the aforementioned Revelations and the consequent dramatically increased demand for “Physical” does not mean The Cartel cannot still effect Takedowns and ongoing Price Suppression. This week’s Takedown ($60/oz as we write) bears witness to this continuing Cartel Potency.
The aforementioned Revelations merely mean that it is now more difficult for them to achieve Takedowns of the Depth and Duration of their Takedowns in earlier days.
In light of this continuing, albeit weakened, Potency, Deepcaster has developed a Strategy which allows one to purchase Precious Metals near the interim bottoms of Cartel Takedowns. In addition to that Strategy, we have identified a certain form of Gold and Silver that is resistant to Cartel Price Takedowns.
A Key Component of that Strategy for constructing a Precious Metals Portfolio is to segregate “Core” Holdings from Speculative Holdings. For further details, see our latest Alerts “Real Moves & Fake-outs Launching; see Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds; & Buy Reco.” (Week Ending May 14, 2010) and “Cartel Failing? Precious Metal Buy Reco! Forecasts…” (Week Ending April 16, 2010) in the ‘Alerts Cache’ and “Profiting from Cartel Intervention” (06/30/06) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
In sum, we are quite Bullish on Gold and Silver prices, but with the aforementioned Caveat.
What we forecast several months ago now has begun. That is the Takedown of the Equities Markets. (Indeed, they have been boosted up these past 14 months by Cartel Intervention as they are being propped up today, May 21, 2010.) It was then, and is now; still clear to us that the ostensible Economic Recovery is a Delusion and that Equities Markets would reflect that eventually.
Thus, the Key Question is down how much and for how long?
Consider that the Equities Markets have encountered increasingly intense headwinds as we have noted above. As well, the Eurozone problems have not been resolved – just kicked down the road thus creating an even bigger problem looming on the horizon. And other Nations have untenable Sovereign Debt problems, not just the PIIGS.
And looming above all of these is the China Bubble and the U.S. Sovereign Debt Elephant.
Indeed, the Main Problem Bubble is that China is in a Very Substantial Bubble. As we earlier noted, Shanghai real estate rose 20% since the beginning of the year. And Chinese real estate in general has risen nearly 13% the past year. At the same time, money supply is shrinking in China. China has rising imports and falling exports, not a healthy sign for an export driven economy.
And its two largest Export Customers – the Eurozone and the U.S. – have faltering economies. Already Chinese Equity Markets are anticipating a Bubble Pop, and have retreated recently.
Thus, given the fact that China is still seen as the main engine of world growth and world commodity consumption, any major slowdown in the Chinese economy would have dramatic effects on the commodities and equities market worldwide. Indeed that slowdown is here.
And regarding the U.S., Building Permits are down a whopping 11.5% for April, 2010 and Unemployment Claims and Manufacturing Sector layoffs up – No recovery indicated there.
One further important observation regarding the timing of the recent Equities Market Takedown is appropriate here.
As regular readers know, The Cartel has considerable influence over the Equities Markets Price Levels. We and others such as F. William Engdahl have provided evidence that the there are often Equities “Markets crashes and Takedowns” just preceding crucial governmental decisions. This week, of course, the crucial decisions were the final shape of the U.S. Congress’ financial “reform” package as well as the German Parliament’s decision regarding whether or not to approve the Eurozone Greece Bailout plans.
Surprise, surprise, we have indeed had another Market Takedown immediately preceding the crucial decision in the U.S. Congress regarding the financial reform package and the approval of the Eurozone Greece Bailout plans.
And now appears that Senator Chris Dodd’s (D-Conn) “Empower the private for-profit Fed, don’t Audit it” Bill will, unfortunately, be the one which passes the U.S. Congress.
In sum, Prospects for Equities are dismal.
For our view regarding likely Downside Equities Target Levels and Timing, see our ‘Latest Letters’ Cache and ‘Alerts Cache’ at www.deepcaster.com.
Market Weakness flows from Fundamental Weakness in the Economy and Economic Prospects. In other words, despite the Mainstream Media “Happy Talk”, the Reality of the International economy and therefore the Markets are bleak. See the comments and data from Shadowstats.com above and below.
But this provides Profit Opportunities on the downside which we identify in our Alerts.
U.S. Treasury Securities
Given the tremendous and recent continuing injection of liquidity via money “printing” and lending by Central Banks, and given burgeoning Sovereign Debts, one might think that, for example, U.S. Treasury Securities would be yielding much more than they are.
However, as we earlier correctly forecast (and in the face of much “Expert” Opinion that Yields would increase in the short-term), long-dated U.S. Treasury Securities have strengthened recently (thus their yields have dropped). This results not merely from Supportive Cartel Intervention (highly likely) but also the fact that U.S. Treasury Securities are still considered worldwide among the least risky of the risky, Treasury Securities. The consensus view is that is if you want to buy paper, they probably are the least risky of the risky.
But, given increasing Indebtness and unresolved Economic and Financial Problems, U.S. Treasury Strength cannot last. For our Forecasts on the likely Timing and Targets for long-dated U.S. Treasury Securities Moves, see our latest Alert “Essential (!) Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds” (week ending May 21, 2010) in the ‘Alerts Cache’ at www.deepcaster.com.
In our view, Crude Oil is the Canary in the Coal Mine, so far as being a leading Indicator of the Future of certain other markets is concerned. As we earlier correctly forecast, Crude has recently topped and fallen – nearly $20 recently. More Major Moves are upcoming soon. For our views in regarding short, mid and long term for Crude Oil Prices, go to www.deepcaster.com and click on the ‘Latest Letter’ Cache and ‘Alerts Cache’.
The U.S. Dollar is the least Weak of the inherently flawed Major Fiat Currencies. Since 57.6% of USDX (U.S. Dollar Index) market basket is determined by the Euro value, and since the Euro has been weakening recently, this has benefited the U.S. Dollar. But given the defects inherent in Fiat currencies, coupled with Sovereign Debt and many other issues, the Dollar rally cannot last forever. We have indicated Targets and Timing for likely Moves in the U.S. Dollar in our most recent Alerts.
If one considers the Real Numbers as oppose to the Bogus Official Statistics, the Economic Outlook is much less rosy than the Bogus Statistics would suggest. Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s before Interventions began in earnest. See chart below.
Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual Consumer Price Inflation reported May 19, 2010
2.24% 9.46% (annualized May 2010 Rate)
U.S. Unemployment reported May 7, 2010
U.S. GDP Annual Growth/Decline reported April 30, 2010
These Real Numbers Portend More Trouble Ahead for the Economy and Markets.
The private for-profit Fed and allied Central Banks’ monetary policies have been extraordinarily accommodating recently. With a near 0% interest rates within the U.S., Mega-banks can make at least 3% (or much more with leverage!) on their money with virtually no risk – such a deal!
But the Banks increasing liquidity is not making its way into the broader economy. Small businesses and Middle Class Taxpayers are being starved of capital. And although major corporations have recently been reporting stronger earnings, the evidence (cf. above) indicates this is mainly the result of Temporary government stimulus and is not reflective of a sustainable Healthy Recovery.
In sum, there are Very Serious Warning Flags on the horizon, which includes Major Trend Changes in certain key Sectors we follow. Thus Timing will be particularly important so far as choosing Market entry points in concerned. To see our forecasts for Timing and Sectors Selection for the sectors we cover and our Investment and Trading Recommendations, go to www.deepcaster.com and click on ‘Latest Letter’ Cache and ‘Alerts Cache’.
In sum, as we earlier Forecast the second half of the 2010 to be far more Volatile than the first half, and that those who are unprepared will likely suffer considerably.
But those who are forewarned with a Realistic Perspective, Accurate Data, and Sensible Forecasts, can expect to achieve not only Wealth Protection, but also considerable Profit.
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