Investor Opportunities via the Intensifying Challenges
Stock-Markets / Financial Markets 2010 Jul 10, 2010 - 05:32 AM GMTBy: DeepCaster_LLC
“At the moment Germany is pushing its neighbors into deflation; this threatens a long phase of stagnation, leading to nationalism, social unrest, and zenophobia. It endangers democracy.” - George Soros, Die Zeit, 6/23/10
“How about the bill does nothing to break-up the concentration of banking power in this country. The too-big-to-fail banks and other systemically dangerous institutions, that just got bigger with the help of government, are nuclear bombs. And not only that, they are crowding out more productive community banks that won't be able to compete with the giants who want to destroy them…
How about the bloating of bank balance sheets courtesy of the Fed's free money and the big bonuses paid to bankers for their new found profits on the heels of being bailed out by taxpayers. It's a myth, they're still holding hundreds of billions of toxic assets (which are getting worse, not better, as the economy heads into a double-dip) and they aren't in good health. The sick game that bankers are playing is to pay themselves from the rich profits the public thinks they are making because it proves they are healthy again and all is right with our banks. Nonsense; accounting tricks (agreed to by FASB because our congressmen and women threatened them with extinction if they didn't loosen their mark-to-market and other prudent rules) are hiding the truth, and the government can't admit it so they let the banks make huge interest rate spreads off the free money they borrow to leverage themselves with risk-free government treasuries that the Treasury desperately needs them to buy. Folks, if you only knew!
How about the truth that banks aren't lending to desperate consumers, they are actually pulling credit wherever they can. So where and how will the needed resurgence in American consumerism (75% of our GDP) come from if there's no free flow of financing for consumer purchasing?”
“Capital Wave: Sunday Undercurrents”
Shah Gilani, Captial Wave Forecast, 7/4/10
To Recognize and Profit from Opportunities these days, One must first survey the Intensifying Challenges.
- Is it not shocking that George Soros (see quote above) equates “Nationalism” with “Social Unrest”, and “Zenophobia” which “Endangers Democracy”?
Shocking perhaps, but not surprising because the Soros quote openly reflects the often-veiled Globalism (as opposed to Internationalism) of the Transnational Elite certain of whom also dominate The Cartel* (see below).
As that quote indicates, these Globalists are serious opponents of Sovereign Nations and Sovereign Economies. Instead they prefer Regional (and, ultimately Global) Entities such as the Eurozone (which they have already created) and the North American Union (which keeps reappearing in various Guises, as developed and promoted by The Globalists).
While Internationalism (which respects the Integrity of Sovereign Nations and their diverse Cultures) in Trade, Commerce and Politics is often a good thing, Globalism, and its precursor, Regionalism, often delivers very Negative Consequences for Investor-Citizens in Countries around the world, as those in the Eurozone are increasingly discovering.
Consider that it was excessive “Global” Interdependence that led to very negative consequences in the Fall, 2008 Market Crash for Investors around the World. These included the losses of Trillions in Investor Portfolios, and the concomitant enrichment of The Cartel and its Allies and Agents to the tune of some $11.9 Trillion (between June and December 2008) as revealed by the Disclosures of the Central Bankers own Bank, the BIS. See “Opportunities & Threats in Derivatives Shocker” (5/29/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
And it is excessive Regional Interdependence which makes all of the Eurozone countries vulnerable to the indebtness of the PIIGS.
As well, consider the implications of ongoing loss of National Sovereignty on the Civil Liberties of the Citizens of Western Democracies.
Do Investor-Citizens of Sovereign Nations around the world really want to put their economic and personal liberties in the Hands of Big Brother Globalists?
Opportunity: For a Strategy for Investor-Citizens designed to surmount with this Cartel Threat, see “Surmounting The Armageddon Scenario & Cartel ‘End Game’” (2/26/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
- The Vaunted Economic Recovery is a Delusion as recent development and data increasingly confirm. The U.S. Unemployed (21.6% of the Workforce per Shadowstats.com – see below) will likely not be getting an improved economy with enhanced job prospects any time soon. But it is looking like the Global Mega-Bankers will get pretty much everything they want from a Supine and Sold-Out U.S. Congress in the Financial Regulation Bill which is about to pass.
This Financial Regulation Bill apparently will include the private for-profit Fed being granted the power to Regulate/Manage/Shut down “Non-Financial” Institutions, which are, in The Fed’s Sole Opinion, Systematically Significant Risks. Rather than getting an Audit of The Fed that a Majority of U.S. Citizens want, U.S. Citizens got a Fed with Enhanced Power.
Opportunity: Unless there are very good reasons not to, shouldn’t the presumption of U.S. Voters be to throw incumbent National Officials out of Office in this Fall’s elections?
Even if a replacement candidate is equally Bad, defeating most Incumbents will send a strong Message that Congress should attend to the interests of its constituents rather than the Mega-Bank Globalist Cartel*.
- Most of The Trillions that the U.S. and Eurozone Governments spent for ostensibly Saving the Financial System (or in the case of Europe on the pretext of Saving Greece and the other PIIGS) actually went mainly into the coffers of the Mega-Banksters. (See “Golden Antidotes to our being Fleeced” 5/14/10 in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.)
Now it is beginning to be clear, as we have been saying for months, that all this spending for bailouts and stimuli, and increased indebtedness has not resulted in a Sustainable Economic Recovery.
Opportunity: It is very late, but perhaps not too late to act to save the situation.
Given that 70% of the U.S. Economy is the U.S. Consumer and given that the Financial Health of Consumers is actually worsening and that Housing Market Conditions are actually worsening.
- Pass a Massive Income Tax Rebate.
- Reduce Property Taxes
- Stop the Impending Phase 2 of the Mortgage Market Meltdown by passing a Cram-through (the lenders) Bailout of Mortgage Holders. In One possible Scenario the Mega-Banks and Feds would participate 50-50 in forced Write Downs of Mortgage Principal with 98%, say, of the Federal Contributions applied to the actual Mortgage Reduction. The Mega-Banks would have to “eat the other 50% of their losses”. They did, after all, make, or facilitate the making of the Toxic Loans to begin with.
- Improving the Economic Health of the U.S. Consumer and the Housing Market is a Necessary Condition for a Sustainable Economic Recovery. The vaunted Recovery is a Delusion as we have been saying for months. We are headed into the second dip of a double dip, and it will be worse than the first.
The Fundamentals have been telling us this for months.
And now the Technicals with, inter alia, the recent Death Cross of the 50 day moving average under the 200 day moving average of Major Equities Indices, are also signaling the way.
And the Real Numbers, as opposed to Bogus Official Statistics reveal the Real State of the Economy. Consider the Real Numbers below as provided by Shadowstats.com. Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s, before systematic Data Distortion and Interventions began in earnest.
Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported June 17, 2010
2.02% 9.22% (annualized June 2010 Rate)
U.S. Unemployment reported July 2, 2010
9.5% 21.6%
U.S. GDP Annual Growth/Decline reported June 25, 2010
2.42% -1.48%
U.S. M3 reported June 15, 2010 (Month of May, Y.O.Y.)
No Official Report - 5.91%
Opportunities: The likelihood that the Equities Markets will go lower, much lower, presents Opportunities in the Short Side of the Equities and other Markets.
Of the several Ways to play the Short Side, there are two we address. One is selling individual stocks short. This is certainty legitimate, but not typically preferred, because there are often too many unknowns such as Off-balance sheet transactions, Mark-to-Myth, rather than Mark to Market Accounting, and lax regulation. All these make sound analysis of individual securities dicey at best.
Thus, we prefer ETFs, and particularly leveraged short ETFs. Yes, we are aware they do not perform fully as their names (e.g. “double” or “triple”) leveraged might lead one to expect.
The Main Cause has to do with compounding, which causes them to underperform their double or triple leverage expectations.
But we think the horrific Underperforming Scenario described by certain anti-leveraged ETF proponents are closer to being improbable ‘Black Swan’ Events than probabilities. Of course, they have, do, and will occasionally occur. But So What?
More probable scenarios reflect some underperformance (or over performance!) but nonetheless a performance which results in a substantially greater potential or actual profit than similarly focused nonleveraged funds’ performance. [We intend to publish in greater detail regarding leveraged funds in the near future.]
Thus they are Speculation Vehicles, a conclusion with which nearly everyone has agreed since they first arrived on the scene a few years ago. Of course, to maximize profits, from such ETF’s one has to correctly forecast the potentially profitable Sectors and likely Direction of the impending moves. Accordingly, Deepcaster has identified several in his DHPS Speculative portfolio which can be found at www.deepcaster.com.
- With Equities Markets trending Down, most Commodities deflating, and zero or niggardly returns from Treasuries and CD’s (indeed, negative returns if one factors in Real Inflation now running at 9.22% -- see above). Where can/should one put one’s money?
This question becomes especially Salient given that The FinReg Bill does little to address or solve the Systemic Derivatives Threat.
The Notional Value of Derivatives held by U.S. Commercial Banks is $216.5 Trillion and most of these are “Dark” i.e. Not Exchange Traded. And 95% of these are held by just 4 banks: JP Morgan Chase, Bank of America, Citibank, and Goldman Sachs.
But the Total Amount of Derivatives traded Globally on public exchanges is a mere $73 Trillion – Small when compared in the overall total worldwide of $688 Trillion.
And while the U.S. Treasury is running all-time high deficits, the Fed has in recent years massively increased the Monetary Base thus increasing Systemic Risk. Recent decreases in the Monetary Base have not significantly diminished this Risk.
Opportunity: More and More Investors are Realizing not only that the Monetary Metals, Gold and Silver, are both Deflation and Inflation hedges, but also that they are superb Vehicles for both Profit and Protection.
Gold Bullion has often strengthened as U.S. Treasury Securities have strengthened in recent weeks, a sign that Gold is a Deflationary as well as an Inflationary hedge.
But there is a Hooker, as our regular readers know – a Fed-led Cartel of Mega-Bankers manipulates Precious Metals prices and prices in other Markets.
*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.”
Notwithstanding this manipulation The Cartel has been considerably weakened in recent weeks, for reasons we explain in recent articles (available in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com).
Nonetheless, The Cartel still has some capacity to suppress Precious Metal prices. Thus Deepcaster has developed a Strategy designed to profit in spite of that Intervention. That Strategy is laid out in our July, 2010 Letter.
Thus, The Good News is that Serious Challenges spawn Significant Opportunities.
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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