Is The Banking Cartel Failing? What Next?
Stock-Markets / Credit Crisis 2010 Apr 16, 2010 - 01:42 PM GMTBy: DeepCaster_LLC
“The mortgage chief of the second largest U.S. bank was mobbed by angry borrowers after he invited customers to speak to him if they feared foreclosure of their homes…
"He ran. He ran like a dog with its tail between his legs," said Bruce Marks of the Neighborhood Assistance Corporation of America (NACA), which helps homeowners avoid foreclosure. "He was scared to death because he doesn't really want to talk to homeowners."”
“Mortgage Banker Mobbed by Furious Borrowers”
Moneynews, 4/14/10
A Cynic might be tempted to say that the Mobbing of the Mortgage Banker is yet another Gold-Positive Development. One wonders what the (former) Homeowners will do when most finally notice the Purchasing Power of their Fiat Currency is seriously Eroding.
With Real U.S. Consumer Price Inflation at 9.47% (Shadowstats.com – see below), such a realization may not be Far off.
Two weeks ago, we wrote of the Impending Test of Cartel* Strength. In last week’s article, we chronicled the increasing number of Exposés of the Fed-led Cartel’s Gold and Silver (and other Markets) Price Manipulation Regime which were appearing in the Mainstream Financial Media.
And on Sunday, April 11, 2010 an Exposé of Cartel Market Rigging Broke into the Mainstream Media itself with the New York Post article “Metal$ are in the Pits: Trader blows whistle on Gold and Silver price manipulation”. We credit the Lealers of the Gold Anti-trust Action Committee as the prime movers behind this much-needed Media Coverage.
And now one wonders how Irate Homeowners will respond to learning about Market Rigging in High Places.
All this immediately raises questions: is this the beginning of the end of effective Cartel Suppression of Precious Metals Prices? What are the consequences? How can Investors Profit and Protect?
*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 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.
Consider:
Gold and Silver’s Fundamentals have been quite Bullish for a very long time – no change there and no further comment needed.
Key Technicals (but not all – Gold and the HUI’s Full Stochastics are on a “Sell” as we write) are increasingly Bullish. Indeed, dramatically so since last week. For example, last week’s Head and Shoulders (bearish) top-in-formation has now morphed into an inverse (bullish) Head and Shoulders nearing completion.
Seven weeks ago, we forecast that Gold looked to be moving back up “into the $1100s”. And so it has, closing at or above $1100/oz for those seven weeks. And (before The Cartel Takedown Attack following the announcement of the SEC suit against Goldman Sachs for Fraud) it appeared to be making that “Teaser Spike” we spoke of, with June Gold closing at $1159.60 on April 14.
Yes, The Fed-led Cartel is under increasing pressure.
Not only is The private for-profit Fed still furiously battling behind the scenes (for a result favorable to them – e.g. No ‘Audit the Fed’ Bill) on the Financial “Reform” Bill still in process in Congress. (See Deepcaster’s “Surmounting The Armageddon Scenario & Cartel ‘End Game’” (02/26/2010) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.) But also Mainstream Financial Media reports are increasingly both damning and revealing. For example:
- A Metals Trader in London claimed his colleague at JP Morgan bragged of their ability to knock down the Silver price at will (Motley Fool/Barker) and his testimony was submitted to the CFTC
- and there was a “liberal” Media report that Gold and Silver Prices are being suppressed (Huffington Post / Lewis)
- and a report that a “Silver Short Squeeze could be imminent” (National Inflation Association / Paul)
- And now the New York Post article
Will The Cartel be unwilling or unable to effect any more significant sustained Takedowns due to the increasing “Sunlight” and increasing Buying of Physical Precious Metals?
Consider that in spite of all the aforementioned, The Cartel still remains Potent. Today’s (April 16, 2010) $25 Takedown shows they can still create a “One Day Takedown Story”.
And we should not fail to recall the fact that The Cartel generated $50 down days for Gold in early December, 2009 and early February, 2010 -- still strong evidence that The Cartel can still affect the Precious Metal prices (albeit with increasing difficulty).
But can they sustain a Takedown for a month, or even a week? We are increasingly skeptical.
And, given their Increasing Media Exposure, do they Dare even attempt to implement another Major Sustained Takedown, say to the $800 to $850/oz level as we earlier forecast?
Last week we wrote, “For us the price performance in the next few days or very few weeks will provide the Answer. A convincing Breakout over the previous nominal high – that is a breakout into at least the upper $1200s/oz for Gold would suffice.
But subsequent events have caused us to conclude that other recent events (e.g. Media Exposure) also support being less concerned about sustained takedowns.
Most Salient, exposure of The Cartel has continued to widen from the New York Post story to quite wide and negative Mainstream Media Coverage. And Goldman Sachs, widely regarded as a leading member of The Cartel has just been accused of Civil Fraud by the SEC for failing to disclose a Conflict of Interest in mortgage securities.
Even the normally Devoutly Mainstream MoneyNews.com has posted a story: “Gold Trader: Fed Keeping Gold Prices Low” (April 12, 2010).
And well-connected Newsletter writer Dennis Gartman – no friend of “Gold Bugs” -- has recently recommended going long Gold.
But most telling regarding the issue of Cartel Potency are two New Developments:
- Open interest totals on all Gold contracts shot up from 467,000 on March 30 to 521,000 on April 8. This means the Cartel has met paper Demand with paper Supply. But one wonders how many delivery demands will be made and how many deliveries will actually be made. Reportedly, a major Wall Street Firm recently defaulted on delivery of January mini-Silver Contracts!
- The Allegation that the London Bullion Market Association has only 1/100 the Physical Gold that they claim they do, is being circulated among the World’s largest Purchasers (or at least they believed they were the world’s largest purchasers of Physical). If the allegations are true they may own only paper promises. This should lead to greatly intensified demands for actual physical.
We conclude that the aforementioned developments, considered together, will tend to put a higher floor under Precious Metals prices, notwithstanding any Cartel Takedown attempts. And of course the Precious Metals’ Upside Potential is enormous.
Consequently, we change our long-standing view that The Cartel would/could take down the price of paper Gold to the $800-850/oz level.
Given recent Media exposure (of e.g. the Allegation that mere paper promises were being sold via the LBMA, not physical Gold), approach to the $800s level would attract too much attention, consequent buying, and especially, consequent demands for delivery of Physical. Therefore, a Takedown into the low $800s is now highly unlikely.
And Deepcaster and fellow Precious Metals Partisans have long held that the very best way to thwart The Cartel is to demand, and take, personal physical delivery (because, unfortunately, of evidence that certain Repositories practice what might well be called “Fractional Reserve Gold ‘Storage’” whereby several buyers all ostensibly “own” the same Gold).
Caveat: None of this is to say The Cartel cannot and will not launch further Takedown Attempts. We expect they will. Indeed today, April 16, as the news of the Goldman Sachs Fraud Charge surfaced Gold was taken down some $30 as we write. In a non-interventional universe, Gold should have risen on this news, ceteris paribus. But we conclude, given the above, that they will achieve limited and unsustainable Success.
Thus we doubt today’s Takedown can be sustained very long.
So, even though we believe future Takedown attempts could achieve limited success, the odds have changed in favor of us “Gold Bugs”.
Therefore, earlier this week we recommended “going long” (but in doing so taking account of the Strategy described in our “Defeating the Cartel... With Profit, Part 2” (06/19/2009) and “Defeating the Cartel... With Profit, Part 1” (03/28/2008) in the ‘Articles by Deepcaster’ at www.deepcaster.com), specifically, with a Recommendation that is resistant to, but not immune to, Cartel Price Manipulation. See our latest Alert in the ‘Alerts Cache’ at www.deepcaster.com for that Recommendation.
In sum, it IS becoming harder and harder for The Cartel to implement successful Takedown attempts, because more and more Investors are becoming convinced, rightly, that they should buy physical Gold and Silver on the dips, and keep it in their own possession or control. Indeed, today some physical (e.g. Bullion Coins) commands premiums of as much as 20% over the Paper Gold price.
But it is also important to recall that The Cartel’s “bottom line” is that it cannot afford for Gold and Silver to be seen as 'go to' assets in the face of a Cartel Takedown of the Equities (or commodities, for that matter) Markets. The Cartel’s entire Game Plan depends on the ability to continue to successfully suppress Gold and Silver prices.
Thus Cartel attacks on Gold and Silver will likely continue, but the “floor” down to which their Takedown Attacks can likely take paper prices, has risen. And the Upside of the Precious Metals is extraordinarily great.
Other Markets So what, if any, are the likely effects Media Exposure of The Cartel on other Markets such as the Equities Markets?
Indeed, there is considerable evidence The Cartel has been artificially boosting Equities prices for several months.
But, while this boosting can delay the inevitable, it cannot stop it.
It is important to reiterate that the Markets of 1987 and 2000 provide a significant Clue.
Some of you will remember the period leading up to the Market Crash of 1987. For months, the Fundamentals and Technicals deteriorated while the Equities Markets continue to rise.
The same was true of the period leading up to the Internet Bubble Burst of 2000. The bubble “should” have burst earlier than it did. But the shorts had to wait for months before profiting.
In our view, a similar situation exists today. The Stimulus Bills and Cartel Interventions have created a “Sugar High” in the Markets.
And it is surely in The Cartel’s interest to implement a Holding Pattern until the Financial 'Reform' bill painfully making its way through Congress is fairly well defined, and in a way not injurious to The Cartel.
The private for-profit Fed is pulling out all the stops to avoid an Audit, which is all the more reason that there should be one. Without an Audit, the private for-profit Fed can continue to favor the Mega-Banks (several of which are likely its own shareholders and likely the beneficiaries of the $1.7 Trillion in Toxic Securities which The Fed has bought) and continue to implement policies which seriously injure the middle class and most Investors, worldwide.”
But it is highly unlikely this Cartel generated Sugar High in the Markets will last given all the Economic and Market Fundamentals, which we and other writers have given considerable exposure in recent article.
Market Crashes and Takedowns typically strike suddenly, before one has time to “get short, or exit longs”.
Thus, in our view we are in the eye of the Markets’ Hurricane, but that eye is slowly, but inexorably moving. We shall soon be in the Hurricane again. We define “soon” in our latest Alert.
In conclusion, we reiterate that certain Gold Bullion (i.e. low-premium-to-melt) coins command up to a 20% premium over the Spot Price. These premiums reflect both the value of buying Physical and holding it in your personal possession and the fact that the price of Bullion (and numismatic) Coins is not as easily suppressed by The Cartel as the paper price of Bullion Funds or Gold Miner Shares. That is, premiums for physical tend not to be suppressed proportionally to a Takedown of the Spot Paper Price.
This is not to say one should not own shares of Miners with quality Management and high Reserves. One should. But one needs to be careful regarding the timing of such acquisitions (see our Strategy regarding Timing referenced above).
Yet another reason to buy and hold physical Gold and Silver and Producer Shares is as a hedge against inflation. Real Inflation is much higher than the Bogus Official Statistics indicate. In order to make profitable investment decisions, it is essential to have the Real Data, such as that provided by Shadowstats.com on the U.S. Economy. Shadowstats.com calculates Statistics the way they were calculated before Official Manipulation began in earnest in the 1980s and 1990s.
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported April 14, 2010
2.31% 9.47% (annualized April 2010 Rate)
U.S. Unemployment reported April 2, 2010
9.7% 21.7%
U.S. GDP Annual Growth/Decline reported March 26, 2010
0.06% -4.62%
Finally, we recommend that you not keep your Physical Gold and Silver in Bank Vaults for the following reasons enunciated by Jim Rickards.
“Interviewed by Eric King of King World News, Jim Rickards, senior managing director of the Omnis Inc. consulting firm in McLean, Virginia, says:
-- Far more claims to gold have been sold than can be delivered upon.
-- To save the dollar the United States will be forced back on a gold standard with convertibility and gold revalued to $5,500 per ounce.
-- China's need for gold to back its own currency and hedge its U.S. debt exposure is massive but the metal isn't available even as the Chinese government is commandeering the output of Chinese mines.
-- And gold owners should keep their metal in vaults not operated or controlled by banks, since keeping gold in bank vaults negates gold's purpose as a wealth preserver outside the banking system, which is vulnerable to a run on gold banks.”
“Don't keep your gold in bank vaults”
Jim Rickards, King World News via GATA, 4/13/10
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) and S604 in the Senate; and The Abolish The Fed Bill is H.R. 2755.Unfortunately these bills have been watered down in this session of Congress. But the battle is not yet over. Insist on a stand-alone vote on these bills. www.carryingcapacity.org is a nonprofit organization which actively supports these “Audit the Fed” 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 (and the recent U.S. Dollar bounce) The Cartel is sacrificing the U.S. Dollar over the long-term 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.
Additional insights and details regarding the Strategy for protection and profiting in spite of The Cartel’s “End Game”, 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.
Details of the Strategy designed to profit in spite of Cartel Intervention specifically in the Precious Metals markets are described in “Defeating The Cartel…With Profit” (3/28/2008) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.
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 albeit to a more limited degree than heretofore.
In sum, 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.
Best Regards,
By DEEPCASTER LLC
www.deepcaster.com
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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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