Financial Markets & Economic Warning Signals Flashing, Prepare to Protect and Profit
Economics / Great Depression II Oct 02, 2009 - 04:21 PM GMTBy: DeepCaster_LLC
“August New Orders for Durable Goods Remained in Great Depression Territory…
Economic and Liquidity Crises Remain Ongoing No Recovery in New Orders or Housing Fed Pushes Monetary Base to Record High
From the series peak in 2006, the current order level is down by 28.6%, within great depression territory per SGS definition of a greater than 25% peak-to-trough decline in economic activity…”
BLS Revision Nightmare: March 2009 Payrolls Overstated by 824,000 Birth-Death Model Falsely Boosting Jobs Reporting in Recession Environment Monthly Jobs Loss of 263,000 (Payroll Survey) versus Monthly Employment Decline of - 710,000 (Household Survey)
JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS FLASH UPDATES - September 25 and October 2, 2009
“The Recession is Over” talk has become Chic among the Trendy Big Media Talking Heads.
The Fundamentals, Technicals, and Interventionals for the Equities Markets, and certain key Commodities, tell a different story.
Let’s consider certain of these Realities, and how we might best protect and profit.
Given that U.S. Consumer/Taxpayers, and, often, Mortgage holders, are 70% of the U.S. Economy, their present and prospective Economic Condition is quite relevant to future Economic and Markets’ Performance. This Sector has relied on and still to a large degree does still rely on credit, But:
“Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation…
Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).
"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness.” ”
US credit shrinks at Great Depression rate prompting fears of double-dip recession Ambrose Evans-Pritchard, International Business Editor, 14 Sep 2009
And from a Deepcaster reader:
“Evans-Pritchard suggests that the Fed has been forced to stop wholesale money creation [out of thin air] because of pressure from China, which fears dollar devaluation on account of its huge dollar holdings. Why don’t I believe that the Fed has slowed down its ‘quantitative easing’?
It’s because the US government is still spending far in excess of revenues, and where does it get the money to make up the difference except from selling bonds?
And who believes that foreigners and domestic buyers continue to be so stupid that they are buying those bonds in the required quantity? Since the Treasury has abdicated from printing its own money [Lincoln’s and JFK’s greenbacks], the Fed has to create money [out of thin air] to buy the bonds.
I think the Fed is still doing it, only more secretly, thus giving rise to the probably-false rumor that M3 is shrinking, or at least is rising at a slower pace. I am confident that increasing tons of electronic US$s are in central bank and banker hands, even if Main Street, USA, is hurting for lack of credit.
The risk of a double-dip Depressions is very real. Nevertheless, the assumption that it will be accompanied by price deflation may be misplaced. A double-dip Depression in an INFLATIONARY price environment seems as likely.”
This Astute Deepcaster Reader has got it right.
But a key consideration is that the Inflation we are Now (still!) experiencing is Hidden by the gimmicking of Official Statistics.
Shadowstats.com calculates the numbers the old-fashioned way they were calculated before the era of “Political Statistics” began in earnest in the 1980’s and 1990’s. An apparent goal of this distortion of key Statistical Realities is to hide Unpleasant Facts (e.g. the dramatic reduction in $U.S. Dollar purchasing power) from Investors world-wide.
Indeed, it is essential for Investors today to get the Real Numbers versus the gimmicked Official Statistics.
Consider, for example, the Official Statistics versus the Real Statistics courtesy of Shadowstats.com
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported September 16, 2009 -3% 5.5% (annualized September Rate)
U.S. Unemployment reported October 2, 2009 9.8% 21.4%
U.S. GDP Annual Growth/Decline reported September 30, 2009 -3.9% -6%
So we are facing the worst of both Worlds – living with the deflation-like consequences of an increasingly slowing and deleveraging economy, but in a fundamentally price-inflationary environment. In other words we are facing a Hyperinflationary Depression and it is hard to see how it can be avoided given the following overview courtesy of Ambrose Evans-Pritchard.
“Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise…
Unemployment benefits have masked social hardship unto now but these are starting to expire with cliff-edge effects. The jobless army in Spain will be reduced to E100 a week; in Estonia to E15…
Car sales were up 28 percent in August, but only by stealing from the future…
Weaker US data is starting to trickle in. Shipments of capital goods fell by 1.9 percent in August. New house sales are stuck near 430,000 -- down 70 percent from their peak -- despite an $8,000 tax credit for first-time buyers. It expires in November.
We are moving into a phase when most OECD states must retrench to head off debt-compound traps.
Britain faces the broad sword; Spain has told ministries to slash 8pc of discretionary spending; the IMF says Japan risks a funding crisis.
If you look at the sheer scale of global stimulus this year, what shocks is how little has been achieved. China's exports were down 23 percent in August; Japan's were down 36 percent; industrial production has dropped by 23 percent in Japan, 18 percent in Italy, 17 percent in Germany, 13 percent in France and Russia, and 11 percent in the US.
Call this a "V-shaped" recovery if you want. Markets are pricing in economic growth that is not occurring.
The overwhelming fact is that private spending has slumped in the deficit countries of the Anglosphere, Club Med, and East Europe but has not risen enough in the surplus countries (East Asia and Germany) to compensate. Excess capacity remains near post-war highs across the world…
Fed chairman Ben Bernanke spoke in April 2008 of "a return to growth in the second half of this year", and again in July 2008 that growth would "pick up gradually over the next two years."
He could have thought such a thing only if he was ignoring the money data. Key aggregates had been in free-fall for months.
I cited monetarists in July 2008 warning that the lifeblood of the Western credit was "draining away." For whatever reason (the lockhold of New Keynesian ideology?) the Fed missed the signal…
But you ignore the data at your peril.
Draw your own conclusion. Western central banks will have to "monetize" deficits on a huge scale to stave off debt deflation. The longer they think otherwise, the worse it will be.”
Huge monetizing still needed to avert debt deflation Ambrose Evans-Pritchard, The Telegraph, London Saturday, September 26, 2009
Indeed! … Central Banks will have to Monetize Debts on a huge Scale to Stave off Crises!
But one critical “Hooker” is that it is now Apparent that certain Leading Central Banks -- primarily The Fed – have for years already been monetizing debt covertly.
This Monetization is Part and Parcel of their Overall Scheme of Overt and Covert Markets Intervention and Manipulation.
But in conducting this increased monetization The private for-profit Fed (doubtless with cooperation from its Cartel* of key Central Bankers and Favored Financial Institutions) appears to have cleverly used the Monetization as yet another tool to continue to manipulate the Markets, especially Equities, to their Fed-desired levels.
*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, 2009 Letter entitled "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" 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.”
It is not too much of an oversimplification to say that throughout the Summer, 2009 the Fundamentals and, often, key Technicals, signaled that the Equities Markets should take a dive.
Yet The Cartel Intervenors have kept Equities headed up, riding on massive sugary injections of liquidity and Intervention. Indeed there is a remarkable correlation between the rallying performance of the Equities Markets since March, 2009 and The overt implementation of the Fed’s monetization, which also began in earnest in mid-March, 2009. (The evidence indicates that Covert Monetization has been going on for years.)
Recall that “quantitative easing” just means Fed monetization of U.S. Treasury Debt – the private for-profit Fed prints (keystrokes) money out of thin air to buy U.S. debt thus keeping interest rates lower than they would otherwise be. But while very negative long-term financial and economic systemic consequences flow from this monetization, in the short-term the consequences can appear beneficial. Witness the Equities Markets Rally.
To be numerate about it, consider the Key correlation between the post mid-March, 2009 Equities Market Rally and Monetization. Since the beginning of the overt Quantitative Easing (March, 2009) the value of Total Securities Held Outright on the Fed’s Balance Sheet (the public Balance Sheet, that is, -- even Congress has not been able to coax The Fed to reveal its private balance sheet) has increased by $917 billon – from $580 billion to about $1.5 Trillion as we write.
In the same period the S&P increased from 720ish to over 1025 as we write.
How has this monetization likely become reflected in the S&P?
The Fed’s Primary Dealers (read Goldman Sachs, J.P. Morgan Chase et. al.) “rent” U.S. government securities and then collateralize them. They use the proceeds to make the Equities Markets indices rise (since Mid-March, 2009) in spite of Fundamentals and Technicals which, sans Interventions, would dictate otherwise.
Thus it appears the Fed is using Monetization as yet another Tool – in addition to TOMO’s, POMO’s, the TARP, and the TALF etc. (see Deepcaster July, 2009 letter in the ‘Latest Letter’ cache at www.deepcaster.com for more details) – to manipulate the Markets.
Of course, this chicanery is lethally detrimental to the U.S. Dollar in the long run and to the financial system and economy as a whole. It is Moral Hazard in spades.
In particular, it is injurious to holders of the U.S. Dollar-denominated assets such as investors world-wide, and U.S. dollar-reliant retirees. The purchasing power of their Dollars continues to diminish, as Rep. Ron Paul has pointed out, but is somewhat masked by the gimmicking of Official Statistics. (see below)
On the other hand, those who are aware of the Cartel Manipulation “Game” can use the knowledge to their advantage in profiting and in protecting wealth.
The Strategy – Guidelines for Identifying Opportunities for Profit and Protection
- 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 is a good starting point.
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 can save one much financial grief as well as position one for profit.
- Take Account of both Overt and Covert Cartel Intervention. Many of these same investors who suspect Official Statistics also rightly suspect that the private-for-profit U.S. Federal Reserve in conjunction with certain other Central Banks and Favored Financial Institutions overtly and covertly manipulate Major Markets. But they might not be aware that covert Market Interventions 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. Consider one example of Cartel Intervention: the Traditional and Legitimate Safe Haven from inflation, deflation, and risk, is Gold. Yet, Gold has, 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. in 2008) when it should have skyrocketed.
For 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 today.
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, which inter alia provides a Strategy for insulating oneself from Cartel Takedowns and building a Core Position in Gold and Silver.
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:
- 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 stated that “buy and hold no longer works anymore, even with Gold.” Recent Market Developments should suffice to demonstrate this principle!
- Track the Covert Interventionals as well as the Technicals and Fundamentals and Overt Interventionals. 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 Move - - such clues are essential to preserving wealth and making profits. Deepcaster’s tracking of The Interventionals, for example, allowed him to recommend five short positions going into September, 2008, (i.e. before the Market Crash) all of which he has subsequently recommended be profitably liquidated. Deepcaster’s recent article “Cartel Angst Equals Investor Advantage” (9/18/2009 can be found in the ‘Articles by Deepcaster’ cache at www.deepcaster.com) lays out a specific strategy for use in investing and trading in the heavily manipulated Gold and Silver Market.
- 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” as well as “long”.
The Blossoming of the 200% and 300% (and other) leveraged ‘short’ and ‘long’ ETF’s described above provide a superb opportunity to go short and long with ease, but not, as we explain in recent articles, without risk.
- Be aware of and Active in 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 key Central Banks is the protection and enhancement of the legitimacy of their Treasury Securities and Fiat Currencies as Measures and Stores of Value. Therefore, one can understand that one of their Major Goals will be to attempt 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 prices and, since July, 2008, of Crude Oil, become understandable. Moreover, such an insight applied daily to the market can result in a tremendous edge in understanding market performance, present and future.
As well, regarding the assets at The Cartel’s disposal, if one tracks the Repurchase Agreement and TSLF Pools regularly, as Deepcaster does, and is aware of the other Interventional tools that The Cartel has at its disposal, then one gains a considerable edge.
- Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of The Cartel. It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets and/or Retirement Accounts only to have those assets effectively de-valued by Cartel Takedowns, U.S. Dollar Devaluation and other Cartel actions. This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them. In order to help prevent this and similar outrages, we recommend taking three steps:
- Become involved in the movement to Audit and then abolish the private-for-profit U.S. Federal Reserve as Deepcaster, former Presidential candidate Rep. Ron Paul, and legendary investor Jim Rogers, all have advocated. The ‘Audit The Fed’ Bill is H.R. 1207 (and has over 280 co-sponsors in the House) and S604 in the Senate; and The Abolish The Fed Bill is H.R. 2755. www.carryingcapacity.org is a nonprofit organization which actively supports these bills.
- Join the Gold AntiTrust Action Committee, which works to eliminate the manipulation of the Gold and Silver markets (www.gata.org). GATA is a nonprofit organization, which makes a great contribution by gathering evidence regarding the suppression of prices of Gold, Silver and other commodities.
- Work to defeat The Cartel ‘End Game.’ Deepcaster has laid out the evidence regarding the Ominous Cartel “End Game” in “Coping with Power Moves in the Cartel's 'End Game' “ (04/24/2009) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com. Clearly The Cartel is sacrificing the U.S. Dollar to prop up Favored International Financial Institutions and to maintain its power. But this sacrifice cannot continue forever. See Deepcaster’s July 2008 Letter in the ‘Latest Letter’ Archives at www.deepcaster.com
Conclusion: If this aforementioned Strategy is employed effectively, it can result both in an increasing Core Position in Gold and Silver, and in considerable profit along the way.
Additional insights and details regarding this Strategy, which are essential to profiting from The Cartel’s Policies, are laid out in Deepcaster’s article of 3/06/09 entitled “Investor Advantage: Revisiting The Cartel’s ‘End Game’ ” in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.
Protection and profit require Proactivity and attention to the Interventionals, Fundamentals and Technicals, not “Buy and Hold.” We reiterate, “Buying and Holding” for the long term rarely succeeds anymore as current market conditions attest. The one exception to this is physical Gold and Silver acquired near the Interim bottoms of Cartel Takedowns and intended to be held for the long term as a part of one’s Core position.
Indeed, the Key Point of the Strategy for Protection and Profit is careful attention not only to the Fundamentals and Technicals but also to the Interventionals. These Overt and Covert Cartel-generated Interventions have the power to move markets as those who study the matter can attest. Thus, the Key to Profit and Protection is a Strategy: Successful Investors must become Long-Term Position Traders, with their trading choices informed by the Interventionals, as well as the Fundamentals and Technicals. Moreover engaging in the Actions suggested above can help prevent The Cartel’s obtaining Superpower status, and aid in achieving wealth protection and profits as well.
“The only thing more certain than Death and Taxes is that when anyone from the Federal Reserve speaks or writes, it is with the specific purpose of misguiding the public.” John Pugsley, Chairman, The Sovereign Society
Best Regards,
By DEEPCASTER LLC
www.deepcaster.com
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© 2009 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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