Major Financial Market Forces’ Trajectories
Commodities / Gold and Silver 2013 Mar 30, 2013 - 11:34 AM GMTBy: DeepCaster_LLC
“We are in a period where the "haves" are determined to hold on to their positions in the world. The "haves" include the world's leaders and politicians, and the world's "masters of the earth," which includes those who control the world's money.
“Those who control the money make the rules, and their main aim is to remain in power. Currently, the various central banks control the creation and the issuance of money. To ensure that they remain in power, the central banks are spewing forth a veritable avalanche of fiat currency, money created out of a computer -- money that has been created out of "thin air." In turn, we are supposed to bow down and thank the money creators, those who are saving us from a new world depression. Thank you, thank you, marvelous Alan Greenspan and great Ben Bernanke.
“At this time, although no banker will admit it, we are experiencing an international currency war. Every nation wants a cheap, competitive currency….
“The dangers in the background for the haves are the possibilities that (1) interest rates will begin to advance, and (2) inflation will rise and be so visible that even the common man will recognize it, and begin to protest, or even revolt and (3) the whole debt structure will rise so high that it will topple over of its own weight and take down the entire world economy with it….
“The key to control by the "haves" is the production of fiat, unbacked money. Gold is the enemy of money created out of a computer. When gold was removed as a discipline behind money, those who could create "money" out of thin air discovered the path to riches and control. And they developed a hatred towards gold that was understandable. Gold was the monetary discipline that stood in their way. This set off a long period of Fed-sponsored propaganda against gold. Gradually, through the years, and as generation after generation passed on, even the common man in America began to agree that gold was a worthless relic, a useless ornament to be despised.
“So this is what I believe is the theme of our times. It's the control of our money by the modern "masters of the earth."
Richard Russell, DowTheoryLetters.com, 03/26/2013
Among the Number of Forces which move Markets, only a few will be critical Market Movers for the next year. It will be the interplay among the following which will move the Markets. It is essential to identify these and to monitor them in order to make profitable and protective investing decisions.
The Duration and Extent of Central Bank QE et al
We and others have made the case that the Central Banks have locked themselves into the position of having to do QE to Infinity.
But increasing or tapering down QE (as Dallas Fed President Fisher suggested this week) will be a Major Market, and Inflation, Determiner.
QE is not without its Systemic Risks as the Asia Confidential report on Japan indicates.
“…The overwhelming consensus among the world’s economists is that quantitative easing (QE) has saved the day in the U.S. and that Japan needs to follow suit, on a larger scale. I beg to differ and suggest this policy will almost certainly lead to a hyperinflationary disaster in Japan. If that’s right, it will have serious ramifications for other countries, dragged down by an acceleration of the so-called currency wars. More broadly though, it is likely to destroy the myth pushed by today’s economists that QE is a cure-all for downtrodden economies. It isn’t and Japan will become the template to prove it.”
“Forget Cyprus, Japan is The Real Crisis,” Asia Confidential,
03/23/2013
Not only will Japanese QE likely lead to “a hyperinflationary disaster” in Japan, but Fed and ECB QE to a similar Result in the U.S. and Eurozone. The Trajectory, in other words, is for the Central Banks to keep printing until inflation becomes so pervasive that the printing must stop. We are closer to that point than we might like to think.
The Price of Crude Oil
WTI Crude has recently moved back up into the mid $90s/bbl, close to the level at which it becomes a Major Economic Drag.
The Crude Price is probably the least manipulable of all the Major Commodities Prices, because it gets used up. See Deepcaster’s Article, “Market Price Consequences of Competing Mega-Forces in 2013” re Crude Price Forecasting. One Major Factor determining the Crude Price is Central Bank Money Printing. The Crude Price is a Major Canary signaling accelerating Inflation.
Essential Food Price Trends
Essential Grains (Corn, Wheat, Rice, Soybeans), though off recent highs, are still trading at historically High levels. And given the 80 Million per Year increase in World Population, the long-term trend is Up. Another Inflation Indicator whose Trajectory is Up.
Fiscal Policies in Major Economies
Regardless of what the Politicians say, many Major Governments continue to spend well beyond their incomes and to go ever deeper into debt.
Central Banks print and lend ever more Fiat Money to accommodate the free-spending Politicians and to profit. But time is running out for this “Business Model”, because the Debt Saturation is so Great in several Major Economies that even the Interest on the Debt can not be paid, much less the Principal. This phenomenon will likely continue until it is clear that ever-increasing debt can not be paid. This must lead to consideration of a related factor: Repetition of The Cyprus Precedent.
The Cyprus Precedent – Asset Confiscation & Capital Controls
“Cyprus isn’t over. It’s a disaster for all of us. The idea’s out there now that in a crisis politicians won’t hesitate to seize any asset they can lay their hands on. It just guarantees more fear in the future.”
Steve Forbes, Editor-in-Chief, Forbes, The Daily Ticker, 03/26/2013
Sovereign Debt Saturation is already so extreme that there will surely be more Writedowns and Asset Confiscations, and Capital Controls à la Cyprus. Desperate Mega-Bankers have now set the precedent that Asset Confiscation is O.K. And Desperate Politicians will not cut spending.
So more Borrowing, Hyper Debt Saturation and Asset Confiscation and Capital Controls are in the offing. Be very careful about where and how, Assets are deployed.
But in order to determine Wise Asset Deployment Quality Price Forecasts, and the Consequences and Feasibility of Fiscal and Monetary Policies, it is essential to have
Real Numbers, Not Bogus Official Ones
It is widely known that Official Numbers are Often Bogus. One thinks immediately of China and the U.S.A. In the U.S.A., for example, Real CPI is already Threshold Hyperinflationary at 9.62% per year and Real Unemployment 23% (Note 1).
One must monitor Real Numbers, not Bogus Official Ones.
Regarding Inflation at 9.62% in the U.S., Note that an investor must make an annual Total Return of more that 9.62% in order to make a Real Profit on the investment. All of the stocks in Deepcaster’s High Yield Portfolio aim at a Total Return in excess of Real Inflation (See Note 3).
Currency Wars
As we earlier pointed out we are in Phase 2 of the Central Bank Money Printing Orgy.
This has profound Economic Effects. For example, Japan’s Ongoing Dramatic Devaluation of the Yen greatly helps Honda and Toyota and hurts other carmakers around the World. There will be increasing Tension among the Money Printers.
Dr. Copper & Corporate Earnings
Both are Indicators of Economic Health, or lack thereof.
And neither is painting a particularly Rosy Picture of Economies going forward.
Bond Yields
As we and others have documented, Key Nations’ Sovereign Bonds are the Biggest Asset Bubble in History. The Fed and ECB have been able to temporarily suppress Sovereign Yields, by buying Sovereign Issues and, generally, to keep bond prices artificially elevated, and, therefore, yields artificially low.
But their Cash Injections into the System are already causing accelerating Energy and Food Price Inflation. Takeaway: Watch Sovereign Bond Yields and Real Inflation Numbers closely.
The long term trend for both is up.
Gold and Silver Prices
The Cartel (Note 2) has been trying mightily to suppress these Precious Metals Prices but has not been able to keep them below $1580 and $27 for Gold and Silver respectively. Gold and Silver are Private Real Money, to which the wise are already gravitating. Stay tuned for their Breakout.
N.B. to the wise: Central Banks have bought over $3 Trillion in Gold in 2013 alone according to UBS!
The foregoing are by no means all the Market Influencers, but they are all Critical. To consider how the foregoing play out in our Forecasts, see our April Letter.
Best regards,
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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