Gold Investors Surmounting the Coming Mega Financial and Economic Crises
Commodities / Gold and Silver 2010 Aug 20, 2010 - 12:57 PM GMTBy: DeepCaster_LLC
“Is gold gearing up for new highs? Rapturous radical bugs say yes.
Wednesday may prove to have been a very important day in gold. Gold broke early in the day, but then the metal reversed, closing higher than Tuesday's high. For technicians, this amounts to an outside reversal.
The Wednesday close put gold back to the level of June 30 and some $73 higher than the July 27 low.
Back then, almost the only cheerful group was what I have call the "radical gold bugs" mustered around Bill Murphy's banner at LeMetropole Cafe.
I quoted Murphy saying: "As long as the physical market holds up, it is only a matter of time before gold and silver go back up and make new highs."
Murphy's prediction seems to be happening.”
“Gold gearing up?” Peter Brimelow, MarketWatch.com, 8/19/10
“Manipulative selling of gold on the daily London PM fix has failed to suppress the gold price since April 2009, when China announced that it surreptitiously had accumulated a large gold reserve over the previous five years, GATA board member Adrian Douglas disclosed today in a statistical study. Since then, Douglas finds, ever-increasing dumping of gold in London by central banks and their bullion bank agents has been having less and less effect on the gold price. He concludes that the second "London Gold Pool" -- a clandestine one, unlike the first -- is imminently facing a collapse identical to the collapse of the first as physical gold demand overwhelms the ability or the desire of the market riggers to provide the necessary metal. Douglas' study is titled "The Failure of the Second London Gold Pool" and you can find it at GATA's Internet site here:
http://www.gata.org/files/DouglasFailureOfSecondLondonGoldPool-08-18-2010.doc”
“Adrian Douglas: The imminent failure of the second London Gold Pool” Submitted by cpowell, GATA, 8/18/10
“The Fed should, and probably will change its tune by the Fall and fire up the printing presses”
“Time to Print, Print, Print” Jonathan R. Laing, Barrons, 8/7/10
“Yes, it's going to get worse, a whole lot worse ... Bill Gross warns this is the "New Normal. Forget 10% returns. Think 5%". ... Economist Larry Kotlikoff, author of The Coming Generational Storm, warns: "Let's get real. The U.S. is bankrupt. Neither spending nor taxing will help the country pay its bills" ... Economist Peter Morici warns: "Unemployment is stuck near 10%. Deflation coming. Stock market threatens collapse. The Federal Reserve and Barack Obama are out of bullets. Near zero federal funds rates, central bank purchases, a $1.6 trillion deficit have failed to revive the economy." ... Simon Johnson, co-author of 13 Bankers, warns: "We came close to another Great Depression, next time we may not be so lucky." Why? Because Wall Street's already well into the next bubble/bust cycle -- the "doom cycle."”
“Warning, bear market 2010: 11 'sells.' Only 6 'buys' New Normal: Bankrupt nation. Deflation. Zeros. Junk. No jobs. Depression” Paul B. Farrell, MarketWatch, 8/17/10
“Developing third-quarter contractions in housing starts and real (inflation-adjusted) retail sales, likely third-quarter inventory liquidations, likely continued deterioration in the trade deficit, and slowing, albeit still-positive, growth suggested for industrial production in the third-quarter have started to suggest a renewed quarterly contraction in GDP for the current quarter. As the government plays the numbers, such would be touted as double-dip recession. As Shadow Government Statistics looks at its alternative economic indicators, the circumstance is a re-intensifying depression, as signaled by a December 2009 downturn in real annual growth for the SGS-Ongoing M3 Estimate.”
“Signals Continue to Build for Third-Quarter GDP Contraction Commentary Number 317, July Housing Starts, Production and PPI” John Williams’ Shadow Government Statistics, 8/17/10
A Momentous Event in the World of Economics and Finance occurred just a few days ago, but, unfortunately, while many investors noticed it, many did not fully appreciate its importance.
That event was the public announcement by The (private for-profit) Fed that it would monetize (via Quantitative Easing) Debt. (As well, there is considerable evidence that The Fed has engaged in covert Q.E. for many months. See our recent Article: “Profiting from the Q.E. Threat” (08/12/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.)
In its simplest terms, Monetization means The Fed’s creating more Fiat Dollars out of thin air to buy debt.
But printing more money inevitably (but not necessarily immediately) reduces the purchasing power of U.S. Dollars. This means Inflation and, likely, eventually hyperinflation, are inevitable.
Thus, The Intermediate and Long-term Negative Consequences of this present and prospective Q.E. are profound.
But there are actions one can take to profit and protect.
We therefore lay out the following Negative Consequences and Challenges and Constructive Guidelines:
1. Fed (and other Central Bank) Monetization is very injurious to Savers and Retirees and Prospective Savers and Retirees.
As the Monetization proceeds, the Purchasing Power of their Dollars (and other Fiat Currencies) drops. What would have been sufficient for retirement and for a decent standard of living, no longer suffices. The value (measured in terms of Purchasing Power) of savings declines.
2. Placing those “saved” funds in Equities is no Solution either.
Equities-in-general have had ZERO appreciation over the last decade and indeed, a 30% (see below) decline if Real CPI is considered, Equities are not now in a Bull Market, but, rather, in a Bear Market. It is highly likely that the Equities Bear Market will continue and worsen for many reasons including the ones the quotations above reflect.
3. And Bonds are no Solution either, with record low yields and/or Sovereign Debt default Threats.
4. The six month U.S. Trade Deficit Widened 35% versus a year ago for what is, still the World’s largest Economy. Indeed, neither the U.S. nor the Eurozone are genuinely recovering. And though some emerging Markets are Marginally Recovering, their fortunes are linked to their largest customers, the U.S. and the Eurozone.
5. Corporations do have $1.8 Trillion in Cash, but that is offset by $7.2 Trillion in Corporate (nonfinancial) Bank debt.
6. Notwithstanding the fact that The private-for-profit (i.e. owned by its Mega-Bank Shareholders) Fed has reduced rates to Banks to nearly Zero, the Banks are doing very little lending to small and medium size businesses – the engines of hiring.
And U.S. State, Regional and Local Banks are being allowed to fail at alarming rates – over 200 have failed already in 2010. “Main Street”, including the U.S. Middle Class has been helped little by the Bailouts and Stimuli.
Given that the Mega-Banks were saved in 2008 to 2009 with U.S. Taxpayer funds and that they are being given a continuing boost to their balance sheets, and profits, by receiving virtually no-cost capital from The Fed, they should be lending.
Solutions: Ongoing, and any further, help from The Fed/U.S. Treasury should be conditioned on a “Cram-through” Requirement such as: “To the extent that you take our virtually “free” capital you must lend 95% of it out.” If Voters dump most incumbents in the November elections, Main Street and including the Middle Class may have a chance of Economic Salvation.
7. The Reality is that the Private Sector in the U.S. and Eurozone is deleveraging.
This debt liquidation reduces aggregate demand, which triggers business cost-cutting and present (for some) and prospective (for many) Business Earnings Reductions.
These Realities/Prospects discourage business from hiring, and encourage layoffs, thus increasing unemployment.
Increasing Unemployment results in reduced demand, resulting in further business Contractions. Thus the Negative Business Cycle worsens as it feeds back upon itself.
Opportunities:
In sum, Two Major Negative Realities create Consequent Opportunities.
Negative Reality #1: For all the foregoing Reasons (and others) the International Economy will at best remain stagnant for many months. More likely, it will contract further into a widely recognized Depression.
Negative Reality #2: Major Nations and Central Banks will continue to, and increasingly are, flooding their economies with Fiat Money. This Q.E. will continue to drive down the value (Purchasing Power) of the U.S. Dollar, Euro and other Major Currencies.
Thus, Real Inflation (Already! At 8.57% in the U.S. per Shadowstats.com) will Surge to much higher Levels.
Result: Hyperinflation
Opportunities:
Deepcaster has long been, and still is, an advocate of Gold and Silver, The Ultimate Monetary Metals, are our #1 and #2 Selections as the best Fortress Assets for Profit and Protection.
Indeed, Deepcaster has two open ‘Buy’ Recommendations on a particular form of these Metals. And, as Regular Readers know, Deepcaster has for weeks maintained these open ‘Buy’ Positions notwithstanding ongoing and prospective Gold and Silver Price Suppression Attempts by the Fed-led Cartel* of Central Bankers.
*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, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" 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, including testimony before the CFTC, 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.
The #3 Category is High-Yield Securities which meet certain criteria. If one Selects those with High Yields (i.e. above the inflation rate) and appreciation Potential (or, at least, those resistant to depreciation) one has a chance of making a Real Profit Notwithstanding ongoing Substantial Real Consumer Price Inflation, the ongoing Equities Bear Market, and the Declining Economy. Deepcaster has recently Recommended five High-Yielders which meet his Criteria, Four of which were recommended when their Recent Yields were 15.6%, 26%, 18.5% and 10.6%. To see these four including Deepcaster’s latest High-Yield Recommendations, go to www.deepcaster.com and click on the ‘High Yield Portfolio’ Cache.
To clarify the Context for our Top Recommendations, let’s address the challenge of Stagflation by looking at the Real Economic Statistics. 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 August 13, 2010
1.24% / 8.57% (annualized July 2010 Rate)
U.S. Unemployment reported August 6, 2010
9.5% / 21.7%
U.S. GDP Annual Growth/Decline reported July 30th, 2010
3.17% / -1.25%
U.S. M3 reported August 14, 2010 (Month of July, Y.O.Y.)
No Official Report / - 5.38 %
Regarding Gold and Silver, as we indicated several Months ago, The Cartel’s* Precious Metals Price Suppression Capacity has been weakened considerably by Recent Revelation catalyzed by GATA, Deepcaster, and others, that e.g. Major Gold Repositories have very little of the actual Physical Metal that they claim.
This has, thankfully, led to an increased demand for delivery of and possession of Physical Gold and Silver.
Deepcaster sees this August/September period as critical for The Cartel. To see Deepcaster’s forecast regarding whether The Cartel will be able to reverse the, thus far relentless, advance of Gold and Silver, see our latest Forecast in the ‘Alerts Cache’ at www.deepcaster.com.
Middle and Long Term, Gold and Silver are the World’s Best Bet to rise dramatically in terms of all Fiat Currencies.
Indeed, GATA Board member Adrian Douglas makes a convincing case that The London Gold (Price Suppression) Pool is likely to fail imminently, thus propelling Gold and Silver to New Highs, in the Near Term.
In any event, Gold and Silver are the Single Best Assets for Wealth Protection and Profit to surmount the Coming Mega-Crises.
Highly respected Financial Columnist, Peter Brimelow says it all:
“Wednesday may prove to have been a very important day in Gold.”
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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