Investor Opportunities and Threats, Market Forecasts
Stock-Markets / Financial Markets 2011 Mar 25, 2011 - 06:57 PM GMTBy: DeepCaster_LLC
“Sir Alan Greenspan spent almost 20 years serving his masters who own the Federal Reserve, JPMorgan Chase, Goldman Sachs, Citigroup and many more. The Fed has no independence – it takes orders from these banks and brokerage houses. This same group controls Congress by paying off 95% of the representatives and senators via campaign contributions and via lobbying. Thus, with the assistance of the Fed, Wall Street and banking, they not only control money, supply, credit, interest rates and Washington, but they control our entire economic and financial scene and the lives of every American. Booms and bubbles can be blamed on politicians, but the real culprits behind the scenes are Wall Street and banking in which we spent 29 years of our lives and for many of those years owned our own firm. If you do not know and understand these realities you should not be an investor or a financial and economic journalist.
Our whole existence as a nation is controlled from behind the scenes by personages and groups most people have never heard of. All of what you see just didn’t happen; it was planned that way. People must understand that creating money out of thin air to fund astronomical deficits has to end in failure and ruin. We are now in an inflationary depression that will probably graduate into hyperinflation and then descend into a deflationary depression. This is what these elitists have done for centuries and have more often than not gotten away with it. This time it will be different.
We started warning people more than 50 years ago that the path America was taking could only end in tears. The days of inflation and social and political misery are finally upon us and as a result, so is social dislocation worldwide…
…Sooner or later there will be a major worldwide meeting to revalue, devalue, and to multilaterally default. This can be the only solution to 40 years of profligacy and fiat currencies. The present cover-ups by central banks, Wall Street, banking and the City of London won’t last much longer. Unemployment worldwide and higher inflation are worsening and can only end in social and political dislocation. How can a government such as the US continue to spend in excess of 60% of revenues and expect others then the Fed to purchase their bonds?”
Bob Chapman, The International Forecaster, 3/23/11
“The U.S. Dollar is being devalued by the Federal Reserve…
QE2 is nothing more than devaluation of the Dollar for the benefit of only Wall Street Money Center banks. This is a fraud on the American people who will get nothing from QE2, no jobs, no reduction of their debts, no increase in the value of their homes, no reduction of taxes, no cash, nothing. QE2 is also responsible at least in part for massive food and energy inflation which is damaging global economic growth. How? Because Wall street has found itself with too much cash after selling fixed income Treasury and garbage securities to the Fed, and has bid up commodity prices with this cash as it seeks trading profits from commodity purchases with this newfound cash. Bernanke will one day be known as the man who was a key catalyst driving global economies into the abyss.”
McHugh’s Weekend Market Newsletter, 3/18/11
“There is a growing market awareness that the banks have sold short over $200 billion to $400 billion in silver, while all the world's silver mines only produce about $30 billion of silver annually. Market participants are now taking on the cornered banks, putting them into an epic short squeeze of having to deliver silver that does not exist in quantity even remotely compared to the amount of money that exists that can buy silver…
An investment into physical silver is now going to be a guaranteed win if you can manage to ride out any temporary price dips that the manipulators manage to paint the tape with. Silver buyers are ready to buy on the dips, and so, in 2008, when silver dipped, silver ran out, and premiums on physical silver reached as high as 50-70%. Such premiums may well return if the banks continue to foolishly fight rational market prices.”
“Silver Shortages (Again!): (It's like March, 2008, all over again!)”
Jason Hommel, Silver Stock Report, March 19, 2011
“There is nothing inherently wrong and certainly nothing "illegal" about J.P. Morgan Chase (JPM) gaining a vault license for storing and taking delivery of gold/silver/platinum/palladium from the futures markets known as NYMEX/COMEX. However, the speed, timing and manner in which the exchanges just granted it troubles us…
Allocated storage, however, is the norm for precious metals vaults licensed by NYMEX and COMEX… It is true that NYMEX/COMEX warehouse supplies are wholly insufficient to cover the number of short contracts the exchange allows its clearing members to write. However, at least the numbers are transparent and published…
Allocated storage, under the common law, is known as a "bailment." When precious metal is allocated, the vault is the "bailee" and the owner is the "bailor". The bailee is keeping the property safe for the bailor and, in return, it charges a fee for its services, but the property belongs to the bailor at all times. The property cannot be legally leased, loaned, borrowed or used in any way without overt consent by the bailor. Whereas unallocated metal is an asset that is seized by a vault's creditors in bankruptcy, allocated metal is immune from this.
A bailment cannot be legally seized or encumbered by the bailee's creditors…
But now J.P. Morgan has its own vault license, and the manner in which it seems to have obtained it, is troubling. The bank can now, potentially, deliver short obligations to itself. Yes, you read that correctly. The bank itself, if it still holds short silver positions, and/or the hedge funds… can now deliver the alleged metal to J.P. Morgan's own vault.
Only a fool would ignore the testimony given at the CFTC hearing held on March 25, 2010, or the fact that J.P. Morgan Chase is being sued, in two different class actions, accused of being a racketeering and corrupt influenced organization (RICO). Both lawsuits claim that the bank is using allegedly immense silver short positions in various venues, including COMEX, to manipulate prices.
If a short seller must deliver a commodity, and the commodity is not readily available, there is no better way to buy extra time than to be able to deliver into its own vault. Most of the metal will never leave the vault, and most delivered metal that will leave the vault won't leave right away. Indeed, paperwork tasks of transferring title can consume a few days…
Why was JPM awarded a vault license almost overnight, avoiding the lengthy vetting process others must undergo? Why did it happen in the middle of a major COMEX silver delivery month, during a massive worldwide silver short squeeze, at a time when physical silver is in severe shortage?”
“Will JPMorgan Now Make and Take 'Delivery' of Its Own Silver Shorts?”
Avery Goodman, Seeking Alpha, 3/22/11
The next 6 months – April through September, 2011 – are Absolutely Crucial for Major Markets because:
- Q.E. 2, which has kept the Equities Market and Certain Commodities Prices artificially pumped up for months, is scheduled to end in June. Will there be a Q.E. 3 and, if so what Consequences for Inflation?
- Cartel Market Manipulation continues to distort Natural Market Action, resulting in increasingly Risky Bubbles and Imbalances. One such Bubble is in the U.S. long-dated Treasuries Market; thus it is understandable why PIMCO recently sold all its long U.S. Treasury Positions.
- Black Swan Events, for example the Arab Revolutions, and (the third largest Economy’s) Japan’s Tragic Quake/Tsunami/Nuclear Meltdown, are Market Threatening problems which will be Ongoing for quite some time
- Hyperinflation increasingly Threatens in many countries around the World – Real U.S. Consumer price Inflation recently increased to 9.6% as of February 2011, from 9.07% as of January per Shadowstats.com
- The Unsustainable Sovereign Debt Bombs in the PIIGS will begin to detonate very soon and other countries are not far behind. (Indeed, the Portuguese Prime Minister just resigned over the Debt Crisis.)
- Ever-Greater Political Tensions are developing as Politicians wrestle (largely unsuccessfully) with a massive budget deficits and constituent anger
- Food Price Inflation continues, as a primary cause of Social Unrest in many countries
- Social Unrest is already rising in several countries
- The U.S. Housing Market (driver of Most prior Economic Recoveries) is falling farther into the doldrums with February New Home Sales falling 16.9%!
Significantly, all the foregoing Simmering Crises and/or important Negative Consequences from them are likely coming to a Head in the next six months.
Forecasts regarding Timing and Targets of Market Moves within these 6 Months will especially Crucial. Consider the Factors which will determine Market Moves in the Following Sectors:
Equities
For Equities, the foregoing Ongoing Crises/Black Swan Events should be sufficient to chop Equities down over the next few weeks.
Indeed, we think it likely that the next few weeks or very few months, may see a situation so dire that The Fed will eventually (but likely not right after Q.E.2 expires in June) launch Q.E. III with Equities and Hyperinflation boosting consequences. Be sure to stay tuned for timing and Targets forecasts.
Short Term, The Cartel* has engineered an Equities Rally via POMO-Pumping and a Weaker U.S. Dollar. Of course, it is possible that this Engineered Rally could push Equities 10% higher – we provide Forecasts in our Latest Letter just posted at www.deepcaster.com in the ‘Latest Letter’ Cache.
Indeed, on March 22, 2011, for example, the Fed’s POMO purchased $7.56 Billion in Treasury Coupons.
And on March 23, 2011, in spite of:
- a massive drop in Home Sales
- an increase in WTI Crude to over $105/bbl.
- record increases in PIIGS debt and
- the worsening Bahrain (a larger producer than Libya) Crisis
The Dow rallied up over 70 points.
Gold & Silver
Jason Hommel’s description (above) of the Situation regarding Silver is essentially Correct.
But one crucially important factor is not mentioned – the “Margin Call” Effect, as we call it, which allows The Cartel* to drive Precious Metal prices down via Paper Contract Selling, even though they may be basically out of Physical Metal.
*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, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" 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.
Here is how it works: assume, that The Cartel will conduct an intensified all-out Precious Metals Price Suppression attack contemporaneously with a Major Equities and (most) Commodities Price Takedown occurring in the next 6 months.
This would create Margin Calls in Leveraged Accounts (Many who trade regularly) and necessitate leveraged Hard Assets Holders (e.g. of Gold and Silver) selling their Hard Assets to meet those Calls.
The Same Scenario would tend to negatively affect the Shares Mining as well, which are, after all, Stocks, thus negatively affecting their prices much more than Bullion.
Moreover, the Fact that Silver is an Industrial as well as Monetary, Metal Means it could likely be Taken down more than Gold Bullion.
We may well expect an even more Vigorous Cartel Attack on Precious Metal prices and especially on Silver to launch in the next few weeks.
Thus, we expect the next few weeks will provide a test of The Cartel’s Price Suppression Power. The Question is “Can The Cartel take these Precious Metals Prices down significantly again, and, if so, how low?”
There is one Major Countervailing Bullish Force in the Silver Market: the Physical Silver Supply Crunch to which Hommel and Goodman refer.
This Physical Shortage and (justifiably) increasing Investor demands to take Delivery and Personal Possession have so far continued to drive Silver higher. We note that to date ongoing Price Suppression Attacks have not been able even to significantly depress Paper Silver Contract Prices either. See our latest letter for Forecast Timing and Targets.
U.S. Dollar
The U.S. Dollar is bouncing around just below its Recent-Years-Low of 75.63 basis the USDX.
Had The Fed not been leading a U.S. Dollar Destructive (and therefore U.S. Sovereignty and Economic Health-Destructive) Policy in the last few years, the U.S. Dollar would have strengthened in the previous three weeks because it would have been seen as a Safe Haven refuge. Indeed, it was not until the Japanese Radiation-fear inspired Markets Takedown last week that the U.S. Dollar has showed some “Safe Haven” Strength.
But it has weakened again.
Alas ‘No More’ for the strong U.S. Dollar of Decades past!
But Short-Term and Long Term Prospects for the U.S. Dollar are not necessarily the same. The U.S. Dollar looks to be bouncing off a recent low. And short-term among the Fiat Currencies, it looks to be the best Safe Haven given the ongoing Crises.
Crude Oil – WTI
Crude is moving up again well over $100/bbl. as we write, with Brent Moving recently over $115/bbl.
So long as the Libyan War and other Mideast Civil Unrest is the focus of Instability in the Mideast, Crude Levels will stay elevated or increase.
If one were to be able to remove the risk premium, WTI Crude would be moving below $90/bbl, now, because above-ground supplies are quite ample, for now.
But the Risk Premium is High and Increasing.
Until and Unless the Risks of a Wider Conflict are Reduced, Crude could keep rising.
Interest Rates (U.S. T-Notes & T-Bonds)
The U.S. Treasury Market is a Bubble kept inflated by The U.S. Fed via Purchases of those Treasuries. Increasingly, The Fed is The Primary Buyer.
Nonetheless, short-term as we earlier forecast, U.S. Treasury Securities have significantly benefited from Flight to (ostensible) Safety buying as we earlier forecast, notwithstanding continuing U.S. T-Securities-degrading Q.E.2. The yield on the bellwether 10 year Note has dropped to 3.38% as we write.
With the Increasing likelihood of long-duration Crises in Japan and the Mideast, plus the Prospect of an Equities Takedown, this short-term Trend of modest strengthening of long-dated U.S. Treasury Securities (and therefore somewhat lower Mortgage Interest Rates) could Continue.
To see our Forecast for Interest Rates on, say, 30 yr. Home Mortgage (which are typically pegged to 10 Yr. Note Yields plus a premium of course) go to www.deepcaster.com and click on the ‘Latest Letter’ Cache.
In any event, Long-term the Prospect of Hyperinflation should begin to drive values much lower and therefore, yields much higher, in years to come.
Stay tuned for forecast timing and targets.
Key Commodity
What “Mystery Commodity” is telling us these days: Economic Stagnation is Coming? (Indeed, in our view Hyper-Stagflation is Coming.) See our latest Alert.
Inflation Resistant Investments with Profit Potential
More than Energy or Even Precious Metals, Food and Potable Water must be at the top of Consumer Shopping lists everywhere around the world. With demand increasing from the 80 million plus annual world population increase, and increased resources of a growing Middle Class, especially in BRIC countries, to buy more and better Food, Food Producers are in the Catbird Seat.
Thus, we have recently recommended two such Food Producers and one Water Producer and Management Company, all of which we believe to be deeply undervalued, in our latest Letter and Alerts.
One is China’s largest producer and Seller of Fresh Fruits and Vegetables. It also grows Rice and breeds and sells livestock and has over 20,000 employees.
It recently had a P/E Ratio under 4 and profits have grown over 20%/yr.
As we write it is trading at around 65 cents per share U.S. or just below $5 HK, near its 52 week low.
Given that P/E Ratio, profit Growth and share price, you can see why we call it a “Sleeper” Subsector.
Gold, Silver, and Food and potable Water Producers are the Way to Wealth Preservation and Enhancement in Times of Turmoil such as these.
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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