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Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Investment Profit Vehicles for the Intensifying Financial and Economic Storm

Stock-Markets / Investing 2010 Dec 04, 2009 - 01:11 PM GMT

By: DeepCaster_LLC

Stock-Markets

Best Financial Markets Analysis ArticleA Great Collapse. The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing…debasing the U.S. dollar


Crises Brewed by Federal Government and Federal Reserve Malfeasance. The crises have been generated out of and are centered on the United States financial system, triggered by the collapse of debt excesses actively encouraged by the Greenspan Federal Reserve. Recognizing that the U.S. economy was sagging under the weight of structural changes created by government trade, regulatory and social policies — policies that limited real consumer income growth — Mr. Greenspan played along with the political and banking systems. He made policy decisions to steal economic activity from the future, fueling economic growth of the last decade largely through debt expansion.

The Greenspan Fed pushed for ever-greater systemic leverage, including the happy acceptance of new financial products, which included instruments of mis-packaged lending risks, designed for consumption by global entities that openly did not understand the nature of the risks being taken. Complicit in this broad malfeasance was the U.S. government, including both major political parties in successive Administrations and Congresses.” (emphasis added)

Hyperinflation Special Report (Update 2010) John Williams’ Shadow Government Statistics, December 2, 2009

“Employment and Unemployment Not Improving Despite Distortions from Seasonal Factors and Revisions Unemployment Rate 21.8%” (emphasis added)

SHADOW GOVERNMENT STATISTICS, COMMENTARY NUMBER 264 November Employment, Monetary Base, December 4, 2009

The Main Stream Media are whitewashing (and/or distorting or censoring) the increasingly Negative Fundamentals and Technicals for the Economy and Markets.

In fact, for example, Real Unemployment today is still at its highest level in decades -- 21.8% per shadowstats.com and is NOT at 10% as Officially reported. (see below)

Moreover, today’s vicious Cartel Attack on Gold, and the Prospective Dubai Debt Default are merely Harbingers of the Future for the Markets, Economy, and Financial System. Prudent Investors/Citizens should prepare for The Intensifying Storm.

But those who still have any capital left after the 2008 Crash need not have an entirely Gloomy Outlook.

There are Profit Vehicles with the potential for achieving Real Profits as The Storm intensifies; that is, for achieving profits in spite of U.S. Dollar (or other Fiat Currency) loss of purchasing Power, and real Inflation (U.S. CPI now running in excess of 7% per shadowstats.com – see below).

To identify those Profit Vehicles it is first essential to identify key Areas of Maximum Weakness in the Economy and Markets going forward.

These key Areas of Maximum Weakness provide Clues or Springboards for determining the most promising Profit Vehicles.

Deepcaster and several others (others, that is, who are not beholden to the Interests who control the MSM) have recently noted that

-­- Given increasing U.S. Unemployment (Real U.S. Unemployment is 21.8% according to shadowstats.com -- see below) that will cap spending in that Sector (the U.S. Consumer/Taxpayer) which is 70% of the U.S. Economy.

-- Moreover, the U.S. (and other) Consumers’ excess spending has for the past two decades been generated by borrowing encouraged by The Private for-Profit Federal Reserve (whose profits increase as borrowing increases). But additional Consumer credit is typically no longer available. Indeed consumer (and commercial) credit is contracting. Yet the U.S. Government is dramatically increasing its borrowing from The Fed, with the increased interest payment costs borne by the Taxpayer.

-- Mortgage delinquencies are at an all-time high and rising

-- With consumers who are decreasing spending, how can most companies generate increasing earnings? And how can governments cope with decreased tax revenues?

-- Business credit is contracting and Commercial delinquencies are rising

-- Given the U.S.A.’s $12 TRILLION National Debt and $60 TRILLION plus downstream unfunded liabilities, the U.S. Dollar is probably doomed in the long run, unless it is soon linked to Gold and Silver.

-- The Emerging Market BRIC counties are not likely to be able to pull the international economy out of the intensifying Depression.

-- The BRIC leader, China, for example, continues its capital expansion projects when it already has an overcapacity.

-- And Chinese Equities Markets are quite overvalued.

-- Japan’s national debt is 200% of GDP.

-- Similarly U.S. Equities are now overvalued too, with an average P/E Ratio in the high twenties (See Deepcaster’s recent Articles e.g. “Fairy Tale Antidotes” in the ‘Articles by Deepcaster’ cache at www.deepcaster.com).

-- And typical signals of recovery are not signaling. Housing starts are Flat, as are Retail Sales, as is Manufacturing.

So, given the foregoing, the following are key potential Profit Vehicles:

Short and leveraged Short ETFs

Deepcaster and other notable commentators have observed that several Market Sectors are quite overbought. Fortunately, there are now available a variety of short and leveraged short ETF’s.

While these certainly are useful for Portfolio Hedging, they can, and in select cases should, be bought for their Profit Potential. (Deepcaster had five short recommendations in place by September, 2008, just before the Market Crash. All were subsequently liquidated profitably.)

Market Financial and Economic events of recent years demonstrate that ‘Buy and Hold’ rarely works anymore. Thus ETFs are a good way to play negative market prospects as well as positive ones. (For further info on ETFs see Deepcaster’s Article “A Profit Tool and Strategy for Coping with The Cartel” in the ‘Articles by Deepcaster’ cache at www.deepcaster.com)

Depression Resistant Sectors e.g. Utilities

Certain Sectors will weather the intensifying Stagflation better than others.

Bill Gross, The “Bond King” and Chief investment officer of PIMCO, recently identified Utilities as one of them.

“With yields so low and risks so high in the current market environment, utility stocks represent an attractive investment, says Pimco managing director Bill Gross.

“So where does that leave you, the individual investor, the small saver who is paying the price of the .01 percent (money-market rate)?” the superstar bond fund manager writes in a commentary on the investment company’s Web site.

“Do you buy the investment-grade bond market with its average yield of 3.75 percent? Do you buy high yield bonds at 8 percent and assume the risk of default bullets whizzing at you? Or 2 percent yielding stocks that have already appreciated 65 percent from the recent bottom?”

The simple answer, he says: no…

“Why not just buy utilities…” “

Gross: Buy Utilities Stocks Now Dan Weil, Newsmax.com, 11/23/09

Deepcaster recommended a Utilities ETF to Subscribers several Months Ago.

 

Certain Countries (and their Currencies) Will Fare Better than others – e.g. Brazil

Certain economies will hold up better in an intensifying Depression than others. These countries should be distinguished from the leading BRIC – China, and from the former Asian Tiger—Japan, both of which have serious problems of going forward. We believe Brazil presents a unique opportunity, relatively speaking, to weather the coming Depression fairly well.

Several points about Brazil. Perhaps most important is that Brazil’s consumer economy is relatively non-leveraged compared to all the other major economies in the world. The Brazilians pay cash for most items, such as for example, real estate purchases. The credit excesses of the major industrial economies, simply has had a minimal effect in Brazil.

Brazil is a major commodities country and an exporter of natural resources and farm products. It has the resources to be self-reliant and its exports are merely icing on the cake. Also, many of its consumers are in better shape than those of the industrialized countries. The credit card debt of the average Brazilian consumer is miniscule i.e. about 1/40th of Americans’.

That said, Brazil is not without problems. It has a huge and growing underclass and is over-populated in terms of infra-structure. Nonetheless, we expect to recommend investment in key Brazilian companies soon.

Finally, there is one Sector that we cannot omit, because for the long term it is essential.

Gold and Silver

Deepcaster has for years been a long term bull on Gold and Silver. Gold and Silver have been historically been and are today, The Real Stores and Measures of Value, that is to say that they are Real Money as opposed to the Fiat currencies (Colored Paper = Intrinsic Value Zero) and Treasury Securities of the U.S. Federal Reserve and various other Central Banks around the world.

Given the vast overexpansion of credit and monetary stimulus of recent years, and coupled with huge, and increasing, government and private debt, it is no surprise that Gold and Silver have rocketed to 21st century highs.

However, Gold and Silver investing has been and still is a tricky business, because a Cartel* of Fed-led of Central Bankers and Allies has been for years been involved in the suppression and the taking down of Gold and Silver Prices, and still attempts to do so to this very day. (Indeed, as we write, The Cartel has viciously taken down the Gold price nearly $50. See Deepcaster’s Strategy for Protecting and Profiting from the Cartel attacks in “Gain from The Cartel Game Plan” (9/4/09) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.) While there is considerable evidence that The Cartel* grip on Gold and Silver is weakening, it is not entirely clear that the grip has been broken.

*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.”

Indeed, it is not clear how much longer the Cartel will be able to continue to suppress Gold and Silver prices. Deepcaster’s latest Forecast in this regard is available in the ‘Alerts Cache’ at www.deepcaster.com.

That said, for the long term there is no better Depression-Resistant Asset Class than Gold and Silver.

Yet the fact that Gold has not even climbed back to its inflation-adjusted 1980 high (about $2300/oz.) shows us The Cartel is still active. Thus we strongly advocate purchasing physical Gold and Silver at the bottom of Cartel generated price dips.

The Reality Sector

On a final note, one other Sector deserves attention. We intentionally reiterate for our regular readers the importance of getting Real Numbers as opposed to the gimmicked Official ones. Real Statistics are available via Deepcaster, the Gold Anti-trust action committee and the Sterling Information provided by shadowstats.com (which calculates them the old-fashioned way they were calculated before the political gimmicking began in earnest in the 1980’s and 1990’s). Here according to shadowstats.com are the latest Real Numbers, which are essential to making wise investment and trading decisions.

Official Numbers      vs.      Real Numbers

Annual Consumer Price Inflation reported November 18, 2009

-0.18%                            7.13% (annualized November Rate)

U.S. Unemployment reported December

4, 2009 10%                                21.8%

U.S. GDP Annual Growth/Decline reported November 24, 2009

-2.51%                            -5.71%

Conclusion: Armed with these aforementioned vehicles, one has an enhanced opportunity to protect and profit as we suffer the intensifying storm.

Best Regards,

By DEEPCASTER LLC

www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
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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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