Financial Markets Profit Opportunities and Wealth Destroyers in 2010
Stock-Markets / Financial Markets 2010 Dec 18, 2009 - 12:38 PM GMTBy: DeepCaster_LLC
“A Great Collapse. The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar. The results of those efforts are being seen in tentative selling pressures against the U.S. currency and in the rallying price of gold.” (emphasis added)
Shadow Government Statistics – Hyperinflation Special Report (2010 Update)
December 2, 2009
Reality Check: 2010 is shaping up to be more like 2008, and much less like 2009, so far as the economy and markets are concerned. To identify Profit Opportunities it is essential first to identify the Main Prospective Wealth Destroyers for 2010.
Wealth Destroyer Candidate #1: Key Sectors in the Equities Markets
More than one financial writer whom we respect has recently opined something like the following: “the Equities Market will likely fall in 2010; thus we have to look elsewhere for profits…”
As to the premise: “the Equities Markets will likely fall 2010…” we wholeheartedly agree (see below). Fundamentals and Technically we (and several others) have made this case in recent articles.
But as to the conclusion “…thus we must look elsewhere for profits…” we emphatically disagree.
Yes, profits will likely be found “elsewhere” in select Sectors other than the Equities Markets, and even on the “Long” side in a very few Sectors in the Equities Markets. But we expect profits will more often be generated on the “short side”.
Profit Opportunity
Thus it will be most important to generate Profits on the “short side”. Indeed, failure to “find Profits” on the “short side” in the Equities Markets and other Sectors will result in a considerable limiting of Profit Opportunities. That is because (we forecast) many Profit Opportunities in many Sectors other than Equities will be on the “short side” as well.
In this connection Exchange Traded Funds offer a convenient vehicle for shorting, or shorting with leverage, entire Sectors. For details see Deepcaster’s article “A Profit Tool & Strategy for Coping with The Cartel” (8/14/2009) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
Wealth Destroyer Candidate #2: “Buy & Hold”
Indeed, those who cling to a ‘Buy and Hold’ investment philosophy in 2010 are likely to find it extremely damaging to their portfolios, just as they did in the Fall, 2008.
That “Buy and Hold” philosophy has not worked for the last decade. The Dow is about where it was ten years ago, and, adjusted for Official Inflation, that means that the typical “Buy and Hold” portfolio has suffered over a 30% loss in the past Decade (and even more if one uses Real rather than Official Inflation numbers – see below).
But perhaps the Primary Cause of “Buy and Hold” not working in 2010 will likely be that The Fed-led Cartel* has no way out of the box they have knowingly painted themselves in, except to continue their attack on both Financial and Real Assets, to, inter alia, create an Apparent Deflation.
That “Box”, to reiterate, is: if low to zero lending rates are to be maintained, foreign buying of U.S. Treasury and Agency Debt will continue to decline (who wants U.S. debt that pays low to no interest). Chinese Central Banker Zhu Min recently said it will become more difficult for nations to buy U.S. Treasuries. And the “Bond King” Bill Gross of PIMCO has just announced he will cut his holdings of U.S. Treasuries.
Thus the Fed will have to increase its overt and covert buying of Treasury and Agency debts (i.e. to monetize) and that will be inflationary, which will choke off recovery.
On the other hand, if The Fed allows rates to rise that will choke off any possibility of recovery, as well.
We believe The Fed will (and already has) opted for increased money printing (the Weimar Republic “Solution”) and increased provision of credit to Major Financial Institutions (but not to small businesses and the middle class). Apparently The Fed intend to try to stave off hyperinflation by causing the Deflation of Real and Financial Assets via its Interventional Machinery (e.g. to take down the Equities Markets and Precious Metals prices). The Precious Metals Takedown has already begun as we earlier forecast (but see below). The aforementioned will likely be catastrophic for those implementing a long “Buy and Hold” Strategy.
Wealth Destroyer Candidate #3: Cartel Intervention
It is becoming increasingly widely known that a Fed-led Cartel* of key Central Bankers and their Allies intervene overtly and covertly in Major Markets. Predictably, these Interventions work to the benefit of the Mega-Bankers and to the detriment of Investors worldwide.
Indeed, Cartel affiliated Mega-Banks gained $11.9 Trillion between June and December 2008 when the Equities Markets were crashing and Investors around the world were losing Trillions. (See The Central Banker’s Bank, the Bank for International Settlements’ website, www.bis.org, Path: Statistics>Derivatives>Table 19ff.) While the Cartel Mega-Bankers wallow in U.S. Taxpayer-enabled wealth, over 100 mid-sized and small banks have gone out of business in 2009 alone in the U.S.A.
*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.”
Increasing Gold and Silver prices tend to delegitimize the Cartel Treasury Securities and Fiat Currencies. This means the Cartel attack on Gold, Silver and Crude Oil (and other Strategic Commodities) prices which we earlier forecast, and which has already begun, will likely intensify in 2010.
BUT none of these attacks will proceed linearly, not merely because Markets do not move in Straight lines, but more importantly because it is in The Cartel’s interest that they not move linearly.
For example, The Cartel typically acts to attempt to inflict maximum damage on Precious Metals Bulls such as Deepcaster. Indeed in the past few months they have allowed Gold to move up two thirds of the way from its $1000/oz. technical base toward the next technical plateau of $1300/oz. to $1350/oz.
But when Gold was just over $1200/oz, and when all the key Fundamentals and Technicals signaled that Gold would likely surmount $1300/oz. before pausing, Gold was viciously taken down $100 to just above $1100/oz.
Such a Scenario is Typical of The Cartel’s Modus Operandi.
What the recent Takedown shows is that The Cartel still has the capacity to take down Precious Metals (and other) Markets.
However, the Cartel Interventions in the Precious Metals Markets are encountering increasingly stiff resistance, not the least of which is increasing buying of physical Metals by Governments and Investors alike. To consider Deepcaster’s view about the likely success of ongoing and future Cartel Takedown attempts read his January 2010 Letter in the ‘Latest Letter’ cache at www.deepcaster.com.
Those Forecasts for 2010 are developed in light of Cartel Interventions. The following are available in the January 2010 Letter:
- 2010 Forecasts for Gold, Silver, Equities, the U.S. Dollar and Crude Oil
- select Profit Opportunities for 2010
- International Equities Markets Forecasts including:
- Australia/New Zealand
- Brazil
- China
- Eurozone
- Great Britain
- United States, and
- Junk Bonds Forecast
Wealth Destroyer Candidate #4: U.S. Dollar Weakness
Still-increasing U.S. National Debt (now $12 Trillion) plus downstream unfunded liabilities ($60 to $70 Trillion depending on whose figures ultimately prove to be most accurate) will eventually result in the U.S. Dollar’s demise as the world’s reserve currency, unless the U.S. Dollar is linked to Gold and Silver. (The only other scenario which could prevent the Dollar’s demise, is if most of that $70 Trillion plus U.S. Taxpayer’s liability could be repaid – not a realistic prospect.) In the event of a Precious Metals linkage the U.S. Dollar’s eventual demise could be avoided, although at such time its value would likely be even more debased (than now) in Purchasing Power terms.
Indeed, the private for-profit U.S. Federal Reserve policies have resulted in a 35% reduction in the purchasing Power of the U.S. Dollar in just the last seven years (and 95% since the Fed’s founding in 1913). In effect, this has been, and continues to be, a ‘Stealth Tax’ on savers, investors, and businesses, with the beneficiaries being the Mega-International Banksters.
And fundamentally, while long-term the U.S. Dollar is in Mortal Danger, short term in 2010 the situation is more complicated as we explain in our January, 2010 letter.
But the foregoing Forecast long-term Fate of the U.S. Dollar will have a profound effect on the other Sectors on which we focus. See below and stay tuned for Timing updates.
Wealth Destroyer Candidate #5: Key Emerging Markets Debts
The Dubai Debt Crisis is merely a harbinger of Trouble in the “Emerging Markets” World. Portugal, Ireland, Italy, Greece and Spain (PIIGS) all have debt problems which could explode at any time creating another International Financial Crisis. European countries cannot print their way out of these crises due to Eurozone restrictions. Such is the Fate of Countries which relinquish their Sovereignty to Regional or Global Institutions. But not all are in for trouble. In fact two countries should do relatively well in 2010 as we point out in our January, 2010 letter.
Wealth Destroyer Candidate #6: Juiced Numbers
The following Real Numbers are from Shadowstats.com, which calculates the Real Numbers the way they were calculated in the 1980’s and 1990’s before Official Data Manipulation began in earnest.
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported December 16, 2009
1.84% 8.77% (annualized December Rate)
U.S. Unemployment reported December 4, 2009
10% 21.8%
U.S. GDP Annual Growth/Decline reported November 24, 2009
-2.51% -5.71%
Indeed, when one looks at the Real Inflation numbers (CPI at 8.77%) one sees that in fact we have extreme Stagflation; that is, we are on the Threshold of a hyperinflationary Great Depression. Net/Net, even considering the deflationary forces at work, we still have high inflation. It is convenient for The Cartel that the Official Numbers hide the wealth confiscating effect of Fed Policies on Small Business and the Middle Class.
Wealth Destroyer Candidate #7: Mega-Bank Bailouts & Mistargeted Stimuli
The Bailouts and Stimuli have thus far only helped the Mega-Banks get richer. Small businesses (the main Job Creators) and the “Main Street” Consumer/Taxpayer/and (often) Mortgage Holders who are 70% of the U.S. Economy are worse off than ever. Robert McHugh has it right:
“The Central Planners made a big deal Monday about taking bankers to task for failing to lend to ‘credit worthy’ borrowers. Key here is the term ‘credit worthy.’ A ton of formerly credit worthy borrowers are no longer credit worthy due to no fault of their own. They are victims of credit card company fine print fraud, guilty of having their credit ratings destroyed due to usurious interest rate and unilaterally imposed high minimum payments from credit card companies that suckered borrowers in with zero and low percent interest rate teaser deals, that quickly rose to 30 percent because of tricks like invoice mailings sent to wrong addresses, invoice mailings sent a few days before a unilaterally imposed due date that most people would not have sufficient time to pay to meet that due date, which triggered delinquency fees, usurious interest rates and ended up defiling credit ratings with the credit bureaus.
‘Credit worthy’ borrowers who are victims of the 17 percent underemployment and 10 percent unemployment rates have been forced to make decisions to feed families or be late on loan payments. They may have had a temporary problem, but the delinquent blemish remains on credit reports for years.
The point here is that more debt is not the answer to this economic mess. Get rid of debt is the answer and that means a massive income tax rebate is needed where the past 3 years of income taxes, a minimum of $50,000 per household, gets rebated to each household, with the caveat that half of that money must be used to payoff debt. This will increase dramatically the number of ‘credit worthy’ potential borrowers. It will dramatically improve household balance sheets, reduce bank non-performing loans, increase bank risk based capital ratios, and provide the cash stimulus across the entire spectrum of the economy, boosting every sector and business, not just the few targeted corporations and programs that Central Planners choose to realize their political agenda.”
McHugh’s Daily Market Briefing, December 14, 2009
“The Fed has now purchased $825 billion of bad mortgages from Fannie Mae (FNMA), and Freddie Mac (FHLMC). It intends to continue these purchases to a level of $1.25 trillion by March 2010. Our comment here is, wouldn't a better plan had been a massive income tax rebate to every American Household so folks could have brought delinquent mortgages current, held onto their homes, and rendered unnecessary the Fed's purchase of $1.25 trillion of bad loans?
Time Magazine has announced that Fed Chair Ben Bernanke is its Person of the Year for 2009. What a joke. Technical Indicators suggest it is highly unlikely he will be praised in 2010. Why he was praised in 2009 is a mystery, with unemployment skyrocketing under his tenure, with consumer foreclosures increasing, and consumer credit ratings plummeting. Time is out of touch with reality…”
McHugh's Wednesday Market Update, December 16, 2009
Bob Chapman describes well the Consequences of the Bailouts and Stimuli.
“We see $12.7 trillion donated (without their consent) by the lender-taxpayers to the top world economies, or about 20% of world GDP. These funds, a good part of which will never be retrieved, have been stuffed into the pockets of bankers, Wall Street, insurance companies and GM and AIG. 80% of the problems we have had to face were caused by these very same entities, which along with the Fed, propose to solve the problem they created. It is as if they are the only ones in the world who know best what is good for our system and for us. They as well continue to play in the giant casino as if nothing ever happened. While this transpires there are still trillions of dollars in bad debt and impaired assets on the books that have to be written off…
At first the G-20 nations wanted to remove monetary stimulus and now they say it is too early to do so. What they do not tell you is if they remove trillions from their economies they would collapse. Europe, the UK and US have losses of $1.7 trillion they haven’t written off of yet. In addition, they have hundreds of billions in losses for foreclosed loans that are still flowing in, to further befoul their balance sheets. We have to laugh when central bankers talk about draining trillions from the system. If they pull liquidity the system collapses. Other than feeding money and credit into the system the bankers have no solution. Keeping them in charge is like giving a pyromaniac matches.” (emphasis added)
Bob Chapman, International Forecaster, December 16, 2009
Profit Opportunities
Gold and Silver
As we earlier Forecast, The Cartel Takedown of Gold and Silver prices has now begun.
Indeed, Gold and Silver prices are facing serious challenges in early and mid-2010.
First, to the extent that the U.S. Dollar continues to bounce, both Real Assets (like these Precious Metals), and Financial Assets and Equities Markets, all tend to get Taken Down.
Thus it is not surprising that the Dollar Bounce coincided with the recent Gold Price Takedown (as we earlier Forecast) of nearly $100 in the past few days.
Moreover, the Precious Metals are still subject to Cartel-generated Takedowns.
Unfortunately, the Recent Takedown clearly confirmed (what we earlier indicated) that The Cartel is still able to successfully intervene in the Precious Metal Markets.
Indeed, a mere Dollar Bounce such as we have experienced in recent days should not have been sufficient to take the Precious Metals down as far as they were, given their extraordinary bullish Fundamentals and Technicals.
But Taken down they were. This demonstrates that The Cartel is still potent.
So long as The Cartel has a motive (see above) for attacking Precious Metals they will continue to do so. The Malign Cartel seizes every opportunity and Pretext to take down the Precious Metals.
The key question is whether they will be able to continue to succeed, a question to which we respond in our January 2010 letter.
And after the U.S. Dollar bounce tops out – what then for the Precious Metals?
Equities Markets in general are up nearly two-thirds from their March 6, 2009 lows (up about a nice 61.8% Fibonacci retracement from those lows) and have moved essentially sideways for the past several weeks.
If another Cartel Equities Takedown attempt is successful in 2010, there will likely be another Cartel attempt to take down Gold and Silver prices as well. Why? Because The Cartel cannot allow the Precious Metals to be the “go to” Assets when Equities are crashing.
Only Massive Cartel Intervention could prevent such an Equities Takedown, and even Cartel Intervention cannot forever dampen the negative effects of increasingly stressed small businesses and increasingly impoverished 70% of the U.S. Economy comprised by the U.S. Consumer/Taxpayer/and, often Mortgage Holder.
Crude Oil – Conflicting Pressures
More-then-ample above-ground supplies exist, and should for the next few months.
As well, as the Equities Markets begin to reflect the deepening Economic Depression in 2010, Crude could be pressured to Fall further.
And the “nail-in-the-coffin” for Crude in 2010 could be that it is in The Cartel’s interest that no Strategic Commodity such as Crude Oil (or Precious Metals, for that matter) be a competitor to The Cartel’s Treasury Securities or Fiat Currencies as a Store or Measure of value, during an Equities Takedown.
On the other hand, annual production has topped out, and economic powers such as China and India require ever increasing quantities. And the unsettled International situation could lead to a spike up. See our Forecasts in our January Letter.
Another Opportunity
It should be clear by now that many of the opportunities in 2010 will be on the short side, and Deepcaster has recommended several.
One such short position which those with ample speculative capital and an appetite for risk should consider is Junk Bonds. (The market for high risk, high yield corporate bonds is known as the “Junk Bond” Market.)
Why anyone would buy such bonds given the aforementioned dismal prospects going forward is beyond us. After all, “Junk Bonds” are the First to diminish in value, or even to default, in impending or existing financial crises.
But, amazingly, there has been a dramatic recovery in the post-March 6 Junk Bond Markets (i.e. over-all higher prices and lower yields). But for us, JUNK Bonds are a “BUBBLE Market” if there ever was one.
In our view this recovery in the Junk Bond Market is based on a Delusion that the Official Statistical Recovery is a Real Recovery. A glance at Shadowstats.com Real Numbers should dispel those Delusions.
Our view is that Reality will rear its ugly head in 2010 and that Junk Bonds will reveal themselves to be what they really are — JUNK, so we have recommended a short position in Junk recently.
We believe a careful consideration of the foregoing can provide Profit Opportunities as well as Wealth Protection in 2010.
Best Regards,
By DEEPCASTER LLC
www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
© 2009 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.
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