Investor Opportunities to Profitably Escape Fiat Currency Paper "Wealth" in 2010

By: DeepCaster_LLC

“Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs, and the case could easily be made that default could have serious implications for big US banking cartels.

Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.” (emphasis added)

“Another Reason to Audit the Fed” Rep. Ron Paul quoted in Casey Research Report, 2/18/10

“Harvard professor and former IMF chief economist Ken Rogoff says the United States has been in ‘default’ before, when it went off the gold standard, and there is no reason why it won't do so again…

As an example, he points out that the United States defaulted on its debts during The Great Depression.

‘We went off the gold standard,’ he observes, and the price of gold, which used to be $20 an ounce, suddenly jumped to $35 an ounce.

‘That was a default on domestic debt, Rogoff observes. ‘You would be amazed at how many countries have amnesia with respect to their default(s).’”

“Rogoff: U.S. Has Defaulted Before, May Do So Again” Julie Crawshaw, Moneynews, 3/5/10

Investors were understandably dismayed at the Savaging their Portfolios took in the Equities Market Crash lasting from the late Summer, 2008 and through March, 2009. Unfortunately, given present and prospective Economic and Market Realities, Investors are likely looking at another Massive Loss in Paper Portfolio “Wealth” soon, unless they act to prevent it.

Dismay at past Portfolio Losses and prospective future ones is understandable but perplexity should not be. Fortunately, there are Opportunities to insulate oneself from the risks of holding one’s “wealth” in Paper (and to profit as well), Paper which the aforementioned Takedowns (and those which we anticipate) have revealed to be less valuable than earlier thought.  Indeed much of the Paper (and electronic equivalents) which suffered dramatic Takedowns in 2008-2009 has thus been de-legitimized as a SECURE Repository of Wealth.

Fortunately also, employing Strategies which provide insulation from such Takedowns also provide opportunities to profit, as we indicate below. But to insulate oneself from the risks, and to position oneself to take advantage of these opportunities for profit, one must first understand the requirements which Paper must meet in order to genuinely represent Value which is likely to endure.

First, thinking one's wealth resides SECURELY in Paper Assets-in-general (or, even more intangibly, in electronic data stored on some remote server) is often unjustified, and, quite risky, as the aforementioned Market Savagings have shown. Consider first that 'Paper/Electronic Assets' typically have NO INTRINSIC VALUE. Indeed, Paper/Electronic Assets typically have no value at all unless they REPRESENT (or can, if liquidated, reliably generate) 'Purchasing Power' to obtain goods and services, or ownership rights in Tangible Assets. Here we do NOT focus on Paper representing Ownership rights in Tangible Assets. 

We focus instead on publicly traded securities which, for example, typically represent 'Equity' Ownership in various business enterprises. And we focus more narrowly on those Equities which, prior to the aforementioned Takedowns, were thought to be secure repositories of wealth but which, as those Takedowns have demonstrated, were not.  We characterize these “Assets” as “De-legitimized Paper.”

As the aforementioned Market Takedowns have demonstrated, the value of equity ownership of de-legitimized paper measured in market terms is often not SECURELY determined -- it fluctuates according to the vagaries of the marketplace.  Over the past two-and-a-half years, that market fluctuation has ranged from a high of just over 14,000 in 2007 to a low of about 6,400 and back up to over 10,400ish (basis the Dow) today. That still represents a considerable (nearly 30%) loss since the 2007 high, and an even greater one if inflation is factored in. Consider also that to have relatively secure REPRESENTATIONAL value a publicly traded security must:

1. Be able to be LIQUIDATED for SIGNIFICANT value (i.e. Profit, or, at least, not a significant loss) in the market regardless of general market fluctuations, and/ or
2. Pay dividends, and/or
3. Have genuine appreciation potential.

But as the recent Market Crashes show, many Paper (and arguably most) securities do NOT RELIABLY have ANY of the above.  They have thus been shown to be “De-legitimized Paper.” In addition, many publicly traded securities (i.e. Paper/electronic) which can be liquidated for a NOMINAL profit (i.e. considering appreciation and dividends together) do NOT have a REAL Profit but rather only an Illusory one, because of three additional factors:

4.  Inflation – Investments, which are subsequently liquidated, must, to show a genuine profit, show a profit in excess of Real Consumer Price Inflation.  But Real Consumer Price Inflation is now running at over 9% annualized, according to the very credible statistics of shadowstats.com. Shadowstats.com calculates key statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest.

Consider the following Official versus Real Numbers

Official Numbers      vs.      Real Numbers

Annual Consumer Price Inflation reported February 19, 2010
2.63%                                      9.76% (annualized February Rate)

U.S. Unemployment reported March 5, 2010
9.7%                               21.6%

U.S. GDP Annual Growth/Decline reported February 26, 2010
0.15%                                      -4.62%

5.  Fiat Currency Purchasing Power Degradation: The U.S. Dollar has over the past eight years lost over 30% of its purchasing power, notwithstanding its recent (and temporary) bounce, which Deepcaster earlier forecast. In the middle and long term, the U.S. Dollar will almost surely move lower.

6.  Market Intervention by the Fed-led Cartel* of Central Banks in the Precious Metals, Strategic Commodities, and Equities Markets.  Such Market Intervention has (and can still) convert otherwise “Safe Haven” Assets (such as paper shares in Precious Metals Producers) into quite vulnerable, and (for some) ultimately, de-valued “Assets.”

*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, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2009 Letter entitled  "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the ‘Alerts Cache’ and ‘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.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.

Thus, to realize a Genuine Profit, an investment must “overcome” all six of the aforementioned, not to mention overcoming typical adverse market action as well. Given the above hurdles and the magnitude of recent Takedowns, one inference is clear: Any 'Buy and Hold' Strategy will in most cases be doomed to failure. Thus The Solution to the aforementioned Challenges must be A Strategy.

Indeed, the “Opportunities to Escape Paper ‘Wealth’ in 2010” reside in adopting such a Strategy.

Successful Investors must be Position Traders with a long-term perspective. Deepcaster has developed such a Strategy (particularly relevant to the Gold and silver markets) additional specific details of which are available in Deepcaster’s 3/28/08 Alert "Defeating the Cartel...with Profit" in the 'Alerts' Cache at www.deepcaster.com.

Moreover, that Strategy must not only take account of Fundamentals and Technicals, but also Interventionals.  In addition, there is a strong preference in that strategy that one’s Paper Assets be linked to Tangible Assets as we describe below. Generally speaking, with the four Major Caveats listed below, the more closely one's assets are linked to Tangible Assets, and especially to those Tangible Assets which are in great and relatively inelastic demand, the more secure and potentially profitable one's investments will be, in the long term. This means, for example that the Opportunities to Profitably escape Paper Wealth in 2010 lie in Precious Metals, Agricultural products, Consumer staples, Energy and similar Tangible Assets Sectors, BUT taking into account the Caveats below.

1. Beware of Cartel Intervention in the Precious Metals Markets.  Tangible Assets, and especially the Precious Monetary Metals Gold and Silver, are the “Mortal Enemy” of the Fed-led Central Bankers and allies, as Deepcaster has pointed out on several occasions.  This is because if these become more widely recognized as the legitimate Ultimate Stores and Measures of Value (which, indeed, they are as compared) to the Bankers “Paper Assets” (i.e. Treasury Securities and Fiat Currencies) the Bankers lose power, influence and profit. Therefore it is understandable that the Cartel of Central Bankers* periodically makes major and often successful attempts to take down the prices of the Monetary Metals, Gold and Silver, and Tangible Assets such as the Strategic Commodity Crude Oil. Indeed, recall that in the week (ending 3/21/08) of the Bear Stearns collapse (when Gold and Silver should have skyrocketed), The Cartel did effect a major Precious Metals Takedown with massive Market Intervention, as Deepcaster earlier Forecast. Therefore, regarding TIMING one’s purchases of these assets, and especially Precious Monetary Metals, it is essential to consider not only the Fundamentals and Technicals but also the Interventionals.  Otherwise, one’s Tangible Assets Portfolio can be caught in a Cartel-generated Takedown, with severely negative results. For details regarding The Interventionals see the December, 2009 Special Alert “Profiting From The Cartel’s Dark Interventions - III" in the ‘Alerts Cache’ at www.deepcaster.com. The March 19 and 20, 2008 Takedown of Gold and Silver (and the early December, 2009, and early February, 2010 $50 Takedown days of Gold), and Commodities in general are an Object Lesson in the still-potent Interventional Power of The Cartel. Unfortunately, the exponentially increasing numbers of “Paper” Derivatives required to implement each successive Takedown is also a clear reflection of the increasing Threat of Systemic Collapse.  A Financial Regime built on Darkly Liquid Paper and Fiat Currencies and nearly $600 trillion of dark OTC Derivatives (see www.bis.org, follow the path:  statistics>derivatives>Table 19) is not indefinitely sustainable.  See Deepcaster’s 2/15/08 Article “Profiting and Protecting From Collapsing Paper” at www.deepcaster.com.
2. Beware of Cartel Intervention in Other Markets.  Cartel Takedowns are not limited to Precious Monetary Metals and Strategic Commodities.  (Though these are the Ultimate Stores and Measures of Value, given repeated Cartel Interventions, the timing of their acquisition is key.) Similarly, Cartel Intervention dramatically affects the Equities Markets, so these Caveats apply to them as well.  Indeed, we believe it is likely that The Cartel is just about to implement a Price Deflation for selected Commodities.  This process should continue for several months until the Commodities Bull Trend for those is allowed to resume. (See Deepcaster’s January and February 2010 Letters and recent Alerts for specific Forecasts and recommendations, all of which are available at www.deepcaster.com.)
3. “Buy and Hold” increasingly means to “Hold and Lose.”  There is a maxim that “smart money is always long-term money.” Indeed, that saying has until recent years often been true, provided that the smart money was also proficient in finding and investing in “value” investments. Alas, that maxim is increasingly NOT true. One primary reason is traditional measures of the value of a particular investment have mainly been contextual, rather than inherent.  But the economic, financial, and market system within which these contextual measures have been determined is increasingly vulnerable, as the Market Crash of 2008-2009 and the general Market Malaise Indicates. Tangible Assets have inherent value; Paper Assets have insignificant inherent value.
4. Adopt a Long Term Position Trading Strategy like the one described in last week’s article “Protecting Profits from The Apparent Recovery”. It specifically details a Strategy for Profit and Protection despite Cartel Intervention. In sum, employing the aforementioned Strategy and Guidelines above can help achieve Profits and avoid Real Losses, notwithstanding the ongoing Market and Economic Perils.

Best Regards,

By DEEPCASTER LLC

www.deepcaster.com
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