Protect and Profit Before the Coming Financial and Economic Storm
Stock-Markets / Financial Crash Nov 13, 2009 - 01:24 PM GMTBy: DeepCaster_LLC
The “full force of the economic crisis will hit us next year… The problem will get bigger before things can get better…”
Angela Merkel, German Chancellor, November 11, 2009
Well-informed Realists know that we face at least one and perhaps two Great Waves of the Coming Perfect Storm in the Economy and the Financial Markets. Thus Deepcaster provides Guidelines for Protection and Profit in anticipation.
The evidence that there will be such a Storm is quite convincing for those who bother to consider the Realities beneath the MainStream Media Hype.
Since Deepcaster and others have made that case already, we will not make it again here, except to state a few points and reference key articles** providing that evidence below under “Fairy Tale Antidotes”.
As regular readers know, Deepcaster and other notable pundits view the post-March 6, 2009 Rally as mainly a Cartel-generated Liquidity Fueled Goldilocks Rally, one that we expect to begin to come to an end soon.
We need only a passing glance at a few key Fundamentals and Technicals to reconfirm our view.
-- The Consumer/Taxpayer and, often Mortgage Holder, Sector – 70% of U.S. GDP -- is increasingly stressed and unemployed. (But, ominously, mortgage rate resets will balloon again in 2010 and 2011.)
-- This has already resulted in greatly diminished Tax Revenue, and will likely be reflected in diminished 4th Quarter Earnings.
-- Real U.S. Unemployment, per Shadowstats.com, is 22.1%, and still rising. (see below)
-- Recent Equity highs have been on decreasing volume.
-- A Rising Bearish Wedge in Equities is confirmed and breaking down.
-- A Key Momentum Indicator for the Major Equities Indices, the MACD (Moving Average Convergence Divergence) is curling over, typical of Highs.
-- The S&P Relative Strength Index is trending lower, creating a Bearish Divergence with equities prices.
-- And the foregoing are just a few of many.
We conclude, Based on Fundamentals and Technicals, that an Equities top is very near.
BUT, will The Cartel* catalyze, or allow, such a Takedown VERY SOON?
*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.”
Throughout this past summer, when Equities were about to Tank, The Cartel* bought the Market heavily, generating liquidity rally after liquidity rally. But Sugar Highs do not last.
Indeed, The Interventionals now indicate a major “Interventional Turn” is coming in key Sectors.
Thus we provide the following Guidelines for protecting and profiting from the Coming Storm:
1. Protect Against the U.S. Dollar’s Demise, but be Alert to Timing
The United States National Debt (now about $12 Trillion) and downstream unfunded liabilities now (some $70 Trillion) are still increasing. Realistically, they can only be “repaid” by further degrading the purchasing power of the U.S. Dollar. Eventually this Degradation will likely mean the end of the U.S. Dollar as the World’s Reserve Currency.
But this Degradation will be at least a multi-month and likely even a multi-year process.
After all, it has taken 7 years for the U.S. Dollar to lose over 35% of its Purchasing Power basis the USDX. (This is the “Stealth Tax” imposed on Americans by the private for-profit Fed.)
And the Degradation will not be a smooth linear process. Indeed we think a U.S. Dollar Bounce is coming (See our latest Alert “"Forecasts; Major Moves Imminent With This Trigger" (11/10/09), regarding timing).
But an Investor’s long-term goal should be to systematically exit U.S. Dollar Denominated Assets.
Into What?
2. Buy Physical Gold and Silver on Dips
The History of Fiat (i.e. not backed by Gold or Silver) Currencies (they fail) is the harbinger of The Future.
Only Gold and Silver have withstood the test of time as the Ultimate Store and Measure of Value, the Safe Haven in spite of Wars and Economic and Financial Disasters.
And with the U.S. Dollar’s position as the world’s Reserve Currency weakening, Gold and Silver’s price appreciation prospects (in Fiat Currency terms) are better than ever.
But as regular readers know, the Price of Gold and Silver in the Markets is vulnerable to Takedowns by The Cartel*.
The Cartel’s motivation for periodically Taking Down Gold and Silver prices is easy to understand. Increasingly widespread acknowledgement of Gold and Silver as the Ultimate Stores and Measures of Value would delegitimize The Cartel’s Treasury Securities and Fiat Currencies.
That would threaten The Cartel’s Wealth and Power. [But Deepcaster has developed a Strategy designed to protect and Profit from these Takedowns. See “Defeating the Cartel...With Profit” (03/28/2008 (part 1) and 06/19/2009 (part 2)) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.]
Unfortunately, we expect at least one more Cartel Takedown, near the bottom of which we would recommend buying physical Gold and Silver, plus selected top quality “juniors” and producers (see our Latest Alert -- "Forecasts; Major Moves Imminent With This Trigger" for forecast Takedown Timing in the ‘Alerts Cache’ at www.deepcaster.com).
A key point to recognize is that the price of Paper Gold and Silver (e.g. Futures, Securities, including ETF Shares) is much easier for The Cartel to manipulate than the price of the physical metal.
Indeed, during the last significant Precious Metals Takedown, the Price of Physical Silver fetched a 20 to 25% (or more) premium over paper Silver (e.g. Futures prices).
We expect such a premium will be available in the future as well.
3. Avoid The Fatal Flaw
In the Fall, 2008, Portfolios whose Managers were wedded to the ‘Buy and Hold’ Theology suffered the Most. Deepcaster, on the other hand, had recommended his subscribers have positions in 5 Short Funds as of early September, 2008, before The Crash. Those positions were all subsequently liquidated showing quite a nice profit.
If one considers that the Dow was trading around 10,000 just over a decade ago, just where it is trading now, (and that the dollar-value represented by that Dow level is a dollar-value with much less purchasing power than a decade ago) one realizes the Bankruptcy of the ‘Buy and Hold’ Theology.
4. It is essential to consider the Interventionals as well as the Fundamentals and Technicals
Consider the articles cited below as well as Deepcaster’s “Defeating the Cartel...With Profit” (03/28/2008 (part 1) and 06/19/2009 (part 2)) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com, for observations regarding coping with Cartel Interventions.
5. Get the Real Data
As many Investors suspect, Crucial Official Government and Agency Economic and Financial Data are of questionable validity. The Data set forth above from shadowstats.com is a good starting point. Consider
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported October 15, 2009 -1.3% 6.1% (annualized October Rate)
U.S. Unemployment reported November 6, 2009 10.2% 22.1%
U.S. GDP Annual Growth/Decline reported October 29, 2009 -2.33% -5.71%
Educate yourself about the realities of the marketplace using Alternative Data Sources such as Deepcaster, Gold Anti-Trust Committee (www.gata.org), and shadowstats.com as indicated above. Gathering and staying attuned to authentic information regarding the marketplace can save one much financial grief as well as positioning one for profit.
6. Derivatives Risk, and “Market Magnetism” Militate in favor of Sector Investing
The demise of Lehman Brothers, Bear Stearns, AIG and CIT are only a few of the indicators that OTC (i.e. not publically traded and thus “dark”) Derivatives can bring down any individual company.
The Fall, 2008 Crash reduced the Notional amount of OTC Derivatives outstanding by “only” some $91 Trillion. There still exist, as of the latest BIS report (www.bis.org, path: Statistics>Derivatives>Table 19), some $592 Trillion in Toxic or Potentially Toxic Derivatives World Wide.
But short of a total systemic collapse, OTC derivatives risks threaten some companies more than others. Unfortunately, these risks are often not visible, even in the most detailed SEC Filings and Financial Reports.
Moreover, even the strongest securities often get pulled down with a general Market Downdraft. This “Market Magnetism” also militates in favor of Sector investing on both the short and long side.
7. It is very important to be quite willing to go both long and short Major Market Sectors -- long near the bottoms of Interim Takedowns and short near Sector Tops. The Interventionals are essential to helping identify these tops and bottoms. In Deepcaster’s view, it will be increasingly difficult to achieve a net profit for one’s portfolio if one is unwilling and/or unable to “go short” as well as “long”.
The Blossoming of the 200% 300% (and other) leveraged ‘short’ and ‘long’ ETF’s provide a superb opportunity to go short and long with ease, but not without risk.
8. Be aware of the overall Geopolitical Landscape in order to gain an adequate understanding of how that Landscape might affect the present and future direction of the Markets. It is essential that one understand the motivations of the major players in the market and the resources at their disposal.
9. Take Account of both Overt and Covert Cartel Intervention.
Many of these same investors who suspect Official Statistics also rightly suspect that the private-for-profit U.S. Federal Reserve and/or Central Banks and their Favored Financial institutions overtly and covertly manipulate Major Markets. But they might not be aware that covert Market Interventions and Data Manipulation are likely far more pervasive than generally believed, as detailed in Deepcaster’s articles mentioned above. Fortunately, some Covert Interventions “leave tracks” which can be read by astute Investors.
Attention to the foregoing Guidelines can help investors prepare to Protect and Profit from the coming Storm. Deepcaster has recommended specific short positions designed to Protect and Profit in his latest Alerts which can be found in the ‘Alerts Cache’ at www.deepcaster.com.
Psychologically, it might be easier to engage in wishful thinking about the future of the economy and the markets. Indeed the post-March 6, 2009 performance of the Equities market (with a stunning 62% run-up in the S&P) provides an apparent basis for optimism.
But anyone who honestly consider the Realities beneath Appearances, will likely realize there is a Coming Perfect Storm in the Economy and Financial Markets, and will take steps to protect and profit.
** “Fairy Tale Antidotes - Springboard for Garnering Gains” (10/30/09) “Exorcising Deflation Delusions is Essential to Wealth Enhancement” (10/23/2009) “No Armageddon... Yet! Gaining From Time” (10/16/09) “Warning Signals Flashing! Prepare to Protect and Profit” (10/2/09) “Surmounting the Cartels' 'End Game' Juggernaut - An Overview & Update of Cartel Strategy” (9/25/09) “Climacteric Coming! Protecting Profits; Deflecting Threats” (8/28/09)
The articles above can be found in the ‘Articles by Deepcaster’ cache at www.deepcaster.com
“September Annual Inflation -1.3% (CPI-U), 6.1% (SGS) CPI-U Inflation Spike Due by Year-End No Recovery: September Real Retail Sales Continued Bottom-Bouncing At Low-Level Plateau 10 Years of Retail Sales Growth Gone” John Williams’ Shadow Government Statistics, October 15, 2009
“Con Job in the Financial Markets Continues” John Embry, Investor’s Digest of Canada, Vol. 41, No. 19, October 23, 2009
“Roubini: Huge Asset Bust Ahead” Julie Crawshaw, Newsmax.com, November 5, 2009
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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