Protecting Profits and Deflecting Threats, Climacteric Crash is Coming!
Stock-Markets / Financial Crash Aug 28, 2009 - 12:20 PM GMTBy: DeepCaster_LLC
Truth would destroy U.S. economic system, Fed warns…
The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy…
"Immediate release of these documents will cause irreparable harm to these institutions and to the board's ability to effectively manage the current, and any future, financial crisis," the central bank argued.”
Fed Urges Secrecy for Banks in Bailout Programs Jonathan Stempel, Reuters, August 27, 2009 Via The GATA DISPATCH 8/27/09 www.gata.org
“The Social Security and Medicare Trustees Report for 2009…(shows) Social Security and Medicare have a combined unfunded liability of almost $107 trillion…
The nation can’t pay for Social Security and the health entitlement programs it has now…
Are Members of Congress Out of Touch with Reality?”
www.dailymail.com, opinion/editorial, 8/21/09
“What is a crying shame is, if they were going to print 10 trillion dollars, they would have done a lot more good rebating it to households, rather than sending it down the black hole of too big to fail institutions. In the hands of consumers, that cash would have trickled up to the larger institutions. As taxpayers, wouldn’t you rather have the money and decide how it is spent, rather than let the Central Planners have it and decide how it is spent? If you decide, we have capitalism. If they decide, we have socialism. What a blown opportunity. If the Central Planners change policy and decide to defend the Dollar rather than let it devalue, interest rates will rise sharply and destroy what is left of this fragile economy.”
Robert McHugh, August 21, 2009
A key implication, not explicitly stated above, of McHugh’s characterization of the $10 trillion in bailouts and stimulus money going down the “black hole” of “too big to fail” financial institutions is that those bailouts and stimulis did not provide a sustainable “fix” to the economic and financial systemic problems.
Deepcaster mainly agrees with McHugh on this point. Consider for example, the likely state of the Economy when the bailout programs are ending and the stimulus funds have all been depleted and sent down the “black hole”. (By the way this “ending” and fund depletion are all coming in the next few months.) What then?
“Then” there is no sign that the U.S. Consumer/Taxpayer/and, often, Mortgage holder – 70% of the U.S. Economy – will be any better off. The bailouts and stimulus have not helped them (i.e. most of us) significantly. Indeed, the unemployment rate is still rising and no pundit or analyst has provided a credible scenario regarding when Unemployment may begin to significantly fall. This means increasing defaults on all sorts of credit obligations from mortgages to credit card debt.
And lest one think the worst is over for the housing market, consider that another huge wave of option resets begins in May, 2010 and will not end until October, 2011. This time the loans held by the already-financially-stressed middle class – the Alt-A’s, and Option-Arms – will be the ones resetting. The consequences for that “Sector” – the middle class Consumer/Taxpayer/and, often, Mortgage holder -- will be disastrous, and will virtually ensure another Major Equities Market Takedown.
Moreover, contrary to Official Statistics, Monetary expansion still continues at a brisk pace with M3 at 5% (shadowstats.com – see below). Downstream, hyperinflation is baked into the cake.
And U.S. and other government debt obligations continue to skyrocket, with the stimulus and bailouts totaling at least the $10 trillion, as McHugh noted, and with downstream unfunded. U.S. government liabilities from social security and Medicare alone totaling over $100 trillion and growing. The money to repay these liabilities will be provided mainly by U.S. Taxpayer borrowing at interest from the private for-profit U.S. Federal Reserve.
Realistically, given their magnitude and rate of increase, these debts can never be repaid without dramatically reducing the purchasing power of the U.S. Dollar over the next few years, a development which will significantly further reduce the wealth of those who hold U.S. dollar-denominated Assets.
As the markets come to acknowledge these Hard Realities, the ongoing Spring and Summer Bear Market Rally will end, and the catastrophic Takedown in the markets and Economy which we earlier forecast will begin. But the Takedown will not be linear, and Timing will be the key to profits and protection. See Deepcaster’s latest Letter and Forecast at www.deepcaster.com and click on ‘Latest Letter’.
It is encouraging, in an ironic sort of way, to know that other thoughtful and experienced writers agree with you, even if the shared vision of the future is a dark one.
Among the very best whom we have long appreciated is Harry Schultz. We take the liberty of quoting from his recent (23 August 09) letter as he articulated several of the conclusions to which we have also come.
Note especially his comments below – “It was a trap…a Ponzi Scheme” referring to The Fed and allied Mega-Bankers (The Cartel* -- see below) easy-credit and monetary policies which “set up” the Market Freeze-up and crash. Yes, Harry, it was indeed “a trap” and a “Ponzi Scheme” one which Deepcaster has long ago identified as one phase of what we started describing a few years back as The Cartel’s* ‘End Game’ (see “Massive Financial-Geopolitical Scheme Not Reported By Big Media” (08/11/06), “Protecting Profits from "Dark Liquidity" & Other Systemic Risks” (4/06/2007) and “Increasing Systemic Risk Portends Cartel 'End Game' Attempt” (03/07/2008) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com). In any event consider the delightful Harry Schultz’s characterization of our current pickle.
“Housing is still the Achilles’ heel of the US…& has yet to have its last word. It will. In the run-up to the Oct 2007 stk mkts peak, the privately-owned US Federal Reserve (under spinner Greenspan) openly encouraged bankers to lend & the public to buy (without creditworth), & provided cheap interest rates. It was a trap, about which more later. Banks resorted to gimmicks, like adjustable rate mortgages (ARMs)-whose i/rates would later reset (like guillotines). Enter subprime. But don’t worry, Greeny snarled, “betting on higher house prices is the safest wager. If U get cash flow probs, when ARMs reset, your casa will be worth a lot more, so U can sell it & walk away with a nice profit.” Uh-huh…
Then bankers got concerned, so they took out insurance via credit default swaps (CDSs), a new invention, letting mortgages be sold and resold til they leveraged 20x over! They became the shakiest part of a huge global derivatives mkt with a nominal value in tens of trillions of $’s. This was a Ponzi scheme, which stalled out as ARMs began resetting, & defaults followed. Then the US economy slid & people were trapped; owed more on homes than could sell for, sent keys to the bank & left town. Wall St mortgage buyers were stuck, stopped buying, & couldn’t sell. Trust & liquidity dried up…
…”deadly water”, held back by the US Treasury dam, with leaks now visible, & the middle class about to be destroyed…
…Who wins US elections doesn’t matter; same people pull the strings…No banker should be allowed to go into govt jobs…Bills in US Congress to regulate Wall St are quietly neutered, off camera…is the US middle class being targeted? Via buying mega & multiple houses on tricky mortgages & now bearing new healthcare costs, paying both private & govt…Govt bail outs and debt plus sharply deflating the US$, will cause massive inflation. That will push middle class income brackets higher, meaning higher taxes as the $ buying power shrinks…
I predict the world will moderately trend toward deflation for the next 5-6 months, fed by more job cuts, half timers, wage reductions, foreclosures, bankruptcies, & consumers in hiding…
Following that, govt pumping will reverse the tide—or if they can’t, there will be a monetary failure-where fiat money is suddenly shirked in favour of “things” & we’ll begin (in either case) the start of stage one of a major inflation period (food soars, taxes rocket, crime leaps, interest rates leap, strikes dominate) for about 8 months, after which it escalates into a Weimar or Argentinean hyper-inflation lasting for about 10-14 months—that will wipe out the poor, savage the middle class & badly dent the rich. The US$ may be “revised” & gold will rise to multiple of 3-5x. After that a new depression, bigger than others of record. The start of that period will be the most dangerous, in getting out of the over-inflated things before they turn sharply down to the mean…” (emphasis added)
Harry Schultz Life Strategies, 23 Aug 09
The first phase of this Climacteric which both Deepcaster and Schultz forecast will likely begin after the ongoing Bear Market Rally Top approaches. Deepcaster expects to be able to give you a more well defined timeline in our Alerts, as we enter into Fall.
So that is the Threat, and that leads to the question of how one best protects one’s wealth and profits.
The answer to this question must be considered and substantially modified in light of the ongoing and very active Market Interventional Regime conducted by the Fed-led Cartel*, as long time readers of Deepcaster understand. Regular “Targets of Interventions are Equities Markets, Precious Metals, and Strategic Commodities, inter alia.”
*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.”
Investor Wealth Protection and Profit Goals must accommodate this Interventional Reality. (In this regard Deepcaster has developed a Strategy for Coping with and Profiting from these Interventions most recently laid out in his Latest Alert “FORECASTS (MegaMoves Impending! & Buy Reco.) Gold, Silver, Equities, Crude Oil & U.S. Dollar” available in the ‘Alerts Cache’ at www.deepcaster.com.)
Investor decisions must also be considered in light of the ongoing gimmicking of Official Statistics, which are often far removed from the Realities of the economy and market place. For example, consider the latest Real Numbers versus the Official Versions, thanks to Shadow Government Statistics.
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported August 14, 2009 -3% 5.5% (annualized August Rate)
U.S. Unemployment reported August 7, 2009 9.5% 20.5%
U.S. GDP Annual Growth/Decline reported August 27, 2009 -3.9% -5.9%
All the above Real Numbers are calculated by Shadow Government Statistics the old-fashioned way i.e. with the methods used before the official gimmicking of these numbers began in the 1980’s and 1990’s. See www.shadowstats.com and click on ‘Alternate Data’.
It thus becomes increasingly apparent that certain Mainstream Media including key Financial MSM have 3 functions: Infotainment, Infomanufacturing, and Viewer Conditioning!
Deepcaster’s General Strategy, as informed by the aforementioned Considerations, is clear: Continue to Ride mainly long positions (as in our portfolio) up to near the top of the ongoing Bear Market Rally. Then liquidate most mainly long positions and switch to mainly short positions including e.g. leveraged short ETFs for The Takedown to follow.
Of course the Equities and Commodities Choices and Sector Selection and timing will depend on developments (including especially Interventional developments) which unfold as we proceed into Fall. So, here is how we see the Sectors we follow:
Gold & Silver
The Showdown at the Precious Metals Corral which we earlier forecast appears to be ever closer. Indeed, the evidence of its approach is increasingly strong. In our view it is not a question of “if” but rather only of “when”. The “when” we still expect to be in the next very few weeks. Same forecast for the Shares. Will the very bullish Fundamentals and Technicals prevail to launch the precious metals higher? Has The Cartel “lost control”? We address these questions in our latest Letter and Forecasts at www.deepcaster.com and click on ‘Latest Letter’.
Equities
We have a fascinating situation in Equities. The past (since March 6, 2009) Bear Market Rally provides considerable evidence of Raw Cartel Interventional Power.
Key technicals are Bearish and of course the Fundamentals are rotten. Both the NYSE and Nasdaq summation indexes generated sell signals last week. And the Bullish Percent Index for the NYSE is currently at its highest level (i.e. overbought) in over 20 years!
Indeed, the only force keeping this Bear Market Rally going in the past few weeks has been The Cartel.
It is clear to us that by boosting Equities over the past few months, they are lessening some of the “heat” they have justifiably been taking for their perfidy and mismanagement. The Cartel does not want the Audit The Fed/Abolish The Fed Movement to gain any more traction than it already has. Fortunately a large majority of U.S. House members has endorsed the ‘Audit The Fed’ bill. The nonprofit organization Carrying Capacity Network (www.carryingcapacity.org) is also pushing hard for this bill.
Therefore in our view the main question for the Equities markets is when the Climacteric will arrive, not whether. Visit www.deepcaster.com and stay tuned for our future forecasts regarding that critical key: timing.
U.S. Dollar
It now appears that the U.S. Dollar Bounce we earlier Forecast is now just beginning – We expect the U.S. Dollar to rise to the Target announced in our Alert. Then The Great Fall begins. Stay tuned regarding timing.
Crude Oil
The reversal in Crude Oil we earlier forecast now appears to have begun. The substantial above-ground surplus (and Cartel Clout) should begin to weigh Crude prices down soon, but for how long?
In several articles in the summer 2008 Deepcaster forecast a Market Crash and had recommended five ‘short’ positions to subscribers by early September, 2008. As the Market Crashed in The Fall, 2008, all five were profitably liquidated.
Now we expect our forecast Climacteric to have an even greater impact on all markets in 2009 and 2010. Be prepared.
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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