New 2012 Massive QE Investor Opportunities
Stock-Markets / Financial Markets 2012 Dec 30, 2011 - 03:02 AM GMTBy: DeepCaster_LLC
“Even as the Dow struggles higher, the internals of the stock market grow weaker. It’s as if a mortally wounded soldier, a bayonet thrust into his stomach, rises to make a final dash towards the enemy. With his last breath he still presents the picture of a fierce fighting man.” Richard Russell, 12/28/11
Yes, indeed, Equities Markets Internals are weakening.
And QE is burgeoning with the Massive EQE having just been launched.
Considered together these two developments Provide a Road Map for Key Markets’ 2012 Performance, and Opportunities for Profit.
Jim Rogers has it about right and his advice is consistent with our Agricultural Commodities Recommendation a couple of weeks ago.
“World markets may be riddled with uncertainty, but billionaire investor Jim Rogers anticipates gains in one sector for years to come.
"If I were buying anything I'd be buying agricultural commodities," he says. "Going forward we're going to have huge shortages of everything - including farmers - I think ag will be a great place for the next 10-20 years," he says.
But don't take that to mean that ag stocks are a buy - that's not what he means.
"Yale did a study recently showing that investors made 300% more by putting money in commodities themselves rather than commodity stocks - that is unless you're a great stock picker."
In other words, he'd play his thesis with commodities futures or ETFs that track them.
And his thesis is based on massive research, part of which involves the performance of commodities in the 1970's. "At the time economies did nothing and yet commodities went through the roof," he explains…
And largely Rogers is short because he is not optimistic about what's going to happen in the world over the next two or three years.
"I'm short emerging markets, short American technology, short European stocks - I don't see much reason to own equities," he says.
In a nutshell, Rogers expects global economic problems to get much worse.
But whether that happens or not he still thinks a long position in commodities makes sense. That's the one area of the market where he sees potential.
Here's why.
If his thesis doesn't hold and the economies of the world improve, "I'll make money in commodities because (increased demand will generate) shortages," he says. "But if the world doesn't get better, then governments print money and the way to protect against that is to own real assets."
In other words, he thinks commodities are a win/win.
And in case you're wondering about his thoughts on gold (CEC:Commodities Exchange Centre: GCCV1), Rogers says, "it would not surprise me to see gold go to $1200 - but if it goes that low I'd buy a lot more - gold has been up 11 years in a row it deserves a substantial correction."”
“Jim Rogers: Little Reason for Optimism in Anything but Agriculture”
http://finance.yahoo.com, 12/29/11
Rogers’ advice is good, so far as it goes, but there is much more of importance to consider.
Just last week, Phase 1 of potentially the Most Massive QE Program yet, launched.
And it promises to Alter dramatically Forecasts, Economic Activity and the Behavior of key Markets, around the World.
Last week, the ECB “loaned” some $490 billion Euros (about $637 billion) to European Banks for 3 years at 1% interest (such a “loan”!) – a Massive EQE (European Quantitative Easing).
It is anticipated (and probably covertly agreed) that the Banks would use at least some of these “loan” proceeds to buy Toxic Sovereign Debt, which Debt would be pledged as “Collateral” for these loans.
So it should not take long for the Bankers to figure out that they can make an easy and almost risk free 5% buying, say, Italian Debt yielding 6%.
Further, consider that this is expected to be just the first of several similar Long Term Refinancing Operations by the ECB.
Make no Mistake, “EQE” (European Quantitative Easing – More Money Printing) is here. And that generates the Great Opportunities and specific Buy Recommendations – described in our most recent Alert.
Of course, the ECB could (were it not self-interestedly “forbidden”) have bought Toxic Sovereign Debt (with the money it created nearly for free out of thin air) directly from Eurozone governments: That would save the Eurozone Taxpayers Billions in interest. But that would cut the Mega-Bankers out of the Profits.
And since the Overriding Interest of the ECB (like The Fed) is the welfare of Mega Bankers, Eurozone Taxpayers are left paying the Bill, as usual, just as in the USA.
Of course, this Massive Monetary Inflation is likely to lead to Price Inflation in certain Sectors, but only in certain sectors.
The ECB-generated “Hot Money Flood” should serve, for a while, to pump up certain, but by no means all, certain asset prices.
Regarding Commodities, as we earlier indicated, these rallies will likely be Sector-specific with the Precious Metals and Tangible Assets in relatively inelastic and rising Demand (e.g. Agricultural Products, and Energy under certain conditions) leading the way up, and Economic-Growth-Sensitive Commodities (e.g. Copper and other Basic Materials) weakening further over the mid and long term as deleveraging and the consequent economic slowdown continues.
The Key Point is that the aforementioned Tangible Assets in increasing and relatively inelastic demand, will be (and indeed already are) in the Vanguard of The Coming Hyperinflation. (See Deepcaster’s “Winning in the Hyperinflation/Deflation War (5/13/11)” in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.)
But as the EQE Hot Money (and The Fed’s 2012 Overt QE3 to follow) pumps up Food and Energy Prices, their increased prices will tend to dampen others including Equities-in-General. (This interaction will also tend to increase Volatility which means Inter Alia that one must Take profits when one has them – see note 3 below.)
And especially influential in Equities Price-dampening will be Crude Oil.
As the ECB Hot Money pump filters through the Economy in early 2012, it will temporarily juice the economy overall and that means the Eurozone demand for Energy will be somewhat stronger than anticipated (Very weak and Weakening was anticipated).
Thus Greater-than-anticipated Eurozone Demand plus War Threats against Iran and Chinese consumption, will all tend to keep Crude Prices High (An attack on Iran would likely be an Economic Catastrophe for Europe, China, and the USA, especially if the Straits of Hormuz are shut).
But there is a profitable Refuge in:
Precious Metals
But the Hyperinflationary Effect of EQE (and the Fed’s Overt QE 3, later in 2012) should boost Precious Metals’ Prices, but certain of these more than others. And this should be true notwithstanding ongoing Cartel* Price Suppression Attempts.
Indeed, we are at the Hyperinflation Threshold already if we look at the Real Numbers rather than the Bogus Official ones**. This is why we have developed a High-Yield Portfolio aimed at a Total Return (Gain plus Yield) in excess of Real Inflation.
Finally, the Weakness of Eurozone Sovereign Paper and ECB Money Printing in the Eurozone, and the desire of the Chinese not to destroy their two largest Markets, the Eurozone and the USA, will be the factors most affecting U.S. Treasury Paper. Short-term, it is the “Least Ugly” of Major Sovereign Paper.
Long term, U.S. Treasury Paper is the Greatest Asset Bubble in History.
And do not forget that some untoward Black Swan event could burst that Bubble Sooner rather than Later.
Meanwhile, the aforementioned Tangibles and Precious Metals are the Best Refuge and Profit Opportunity.
Have a Happy and Safe New Year!
Best regards,
By DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
© 2011 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.
DEEPCASTER LLC Archive |
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
