Investors Great Opportunities (from Great Mistakes) Season
Stock-Markets / Financial Markets 2011 Oct 14, 2011 - 01:28 PM GMTBy: DeepCaster_LLC
“… I think this next phase of the crisis — a crisis that started with the credit crunch — has been exacerbated by governments and central banks creating even more debt in the global economy.
… The credit crunch was the result of too much leverage (debt) in the global economy. So the private sector starts to deleverage and instead of letting the market take its natural course, authorities add more debt to the global economy. Now the imbalances are worse than before the credit crunch.
I couldn’t make this stuff up if I tried.
Thus, I believe this story ends badly again; deleveraging globally is the only way to solve the problem if countries wish to see real growth ever again.
It won’t be pretty for most asset classes…”
“The Bank of England falls off the wagon. The pound could be sore in the morning!”
Jack Crooks, Money and Markets, 10/8/11
Make no mistake about it, however much the Eurozone is able to temporarily paper over its crises (and however much the USA is able to deflect attention away from its arguably worse crises), the Crises remain and worsen, as Jack Crooks points out. But Great Crises provide Great Opportunities (as we outline here) especially with Insiders aggressively buying going into seasonally strong Q4.
Perhaps more important, Great Mistakes in overall Investment Perspective (e.g. the Recession is over; Peak Oil is not a problem, ‘Buy and Hold’ is generally a Good Strategy to employ in the Equities Markets, Inflation is quite subdued) are an invitation to serious Investment losses for those holding these views, and a Great Opportunity for Others.
Crooks’ basic point is irrefutable. Piling Debt upon more unpayable debt only worsens the crises in the middle and long term. In fact, even if the bankers take a larger “haircut”, prospects for the PIIGS and certain other Major Nations ultimately avoiding default are dim.
The foregoing reveals our first Great Opportunity. Short-term, there are several forces, which are propelling the Equities Markets into Rally-mode into year-end as Deepcaster earlier forecast.
Short-term, there is likely still a profit Opportunity on the Upside, if any such Rally does not get derailed by any of the large Black Swans lurking out there (more than a distinct possibility!).
Mid and long term, the fact that fundamental Financial and Economic problems have largely not been sustainably solved, presents a far different prospect.
But short-term, such a Bullish Equities forecast does present another Great Challenge and Opportunity.
Assuming a year-end Equities Rally continues, that will reflect “Risk-On” behavior. And that will provide The Cartel* with another pretext to redouble its efforts to Take down Precious Metal prices again, because the demand for P.M.’s as Safe Havens will ostensibly have diminished.
And that would provide a Great Buying Opportunity for Gold and Silver.
*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.
But the Cartel faces unprecedented challenges in sustainably Taking Down P.M. prices again, given increasing demand for delivery and possession of Physical Metal.
“Gold physical demand remains strong… The buying interest remains broad based throughout Asia.
…In fact… the current extended period of net buying, combined with the strength in the physical market, indicates that the current net buying is some of the strongest seen since at least 2009…”
Standard Bank, 10/14/11
Ed. Note: Standard Bank is a Major Gold Dealer, especially to emerging Market Countries.
Indeed the macro-perspective is bright for the P.M.’s, but it dictates that any Equities Rally will likely be short-lived.
The fact is that the festering and fundamental Systemic problems have not disappeared, and are worsening.
And that will have “earth-moving” consequences down the road.
Bob Chapman suggests some of them, and that reveals yet another Great Opportunity.
“… The German government is already in the process of protecting its banks and we are told contingency plans are in the works to return to the Deutschmark. The possibility of six sovereign defaults accompanies by bank failures looms in the distance. Considering the condition of other European banks, and the possibility that three major French banks may be purchased by China, we could see disruption in the global banking system. The advocates of world government wanted all world banks interconnected and now that control connectively will act as a lynchpin to possibly destroy the entire system. As these preparations are made the euro continues to sink in value versus other currencies, particularly what should under normal circumstances be a weak dollar. The dollar again has become the best of the worst. The very fact that Germany is building a reserve of Deutschemarks has to spell the possible end of the euro. … Without German euro zone participation the euro will cease to exist…
The importance of Greek failure and default and a 60% haircut of Greek debt are important, as Greece finally succumbs, but not priced into the markets is that Germany will return to the D-mark. … In addition US banks are still 25% or 35% exposed to European sovereign and bank debt, plus the $150 billion in CDS sold to European banks. Overall US banks have major exposure in Europe.
The foregoing events will be very disruptive to financial markets worldwide. … Germany is preparing for the worst by the Bundsbank giving orders for Deutschemarks to be printed immediately. Make no mistake about it that this is the greatest crisis to the EU since WWII and the bailing wire that holds the agreements that binds the euro and the EU are coming unraveled. The die-hard one-worlders just do not give up. As the center falls apart these idiots are calling for new agreements to replace the old ones to keep this unnatural association together…
The banks caused all these problems and have been assigned 21% of the losses. We believe that figure should be at least 50%. If that were put in place, nationalization would be the only solution and that would neutralize the power of the banks, which are responsible for 85% of the problems. Put the burden where it should be, on the banks.
At this point in time sovereign countries should be worried about protecting their own citizens, not others. Germany seems to understand this. Can you imagine the inflation throughout Europe if $4 to $6 trillion was created and lent to the insolvent countries? …”
“Euro Reckoning Amongst Long Term Threats”
Bob Chapman, The International Forecaster, 10/8/11
But Chapman’s final point – “Can you imagine the inflation throughout Eurozone if $4 to $5 Trillion was created and lent to the insolvent countries,” is most revealing.
Chapman employs the subjunctive hypothetical “if”. He probably should have said “when” the European Central Banks create a large portion of the $4 to $5 Trillion wanted to bailout the insolvent sovereigns/banks.
The Eurozone (and The Fed via operation Twist, and, probably, via offshore accounts) are already expanding their creation of money and credit, and the consequent serious “Inflation” has already begun. In the U.S.A. for example, Real CPI is already at a Hyperinflationary Threshold level of 11.4% (see Note 1 below).
Thus it is highly likely Hyperinflation is in our future, as Money and Credit Creation far outstrip GDP growth (actually, negative GDP “growth” in the USA per Shadowstats.com).
This provides another Great Opportunity in addition to Gold and Silver Purchases. Essential Assets in high, increasing, and relatively inelastic demand (food and including food producers and related businesses) will see increasing demand (in part from the 80 million/yr increase in world population) and will not only be excellent inflation hedges, but likely Profit Centers since people will buy food regardless of price. We have recommended several of these in recent Letters and Alerts.
Finally, short-term, Equities prospects are positive, because analysts and consumers alike are generally bearish, but P/E and forward P/E ratios are below long-term averages and, we repeat, insiders are buying aggressively.
As a Contrarian, we read these as Bullish signals, short-term.
But given that we face structural systemic and fundamental (e.g. debt saturation, sovereign insolvency, and negative GDP) Headwinds greater than those faced in the Great Depression, the aforementioned Bullish forces will not prevail mid and long term.
Another Great Opportunity is provided via certain Great Mistakes in other Investment Perspectives. For example, I can recall about five years ago, a former colleague of mine, claiming that (California, or pick the State) Real Estate Prices will continue to climb indefinitely. Wonder what the several hundred thousand California homeowners “Underwater” think about that today?
As we have pointed out on several occasions (The Opportunity Antidote to Cartel Created Crises (8/26/11), Profitably Surmounting Plutocratic Perfidy (8/18/11), and Gold-Freedom versus The Cartel ‘End-Game’ & A Strategy for Surmounting It (09/23/10)) we are not in a normal Business Cycle Correction but rather in a Supercycle Great Correction magnified by Cartel Markets Intervention. He who fails to recognize that is in for Serious Investment Pain.
Another Great mistake is that China will Continue to be a Growth Engine. Maybe, but China has a Debt Saturation Crisis too – loan Growth has been 30% annually in recent years.
And China has already stepped in to shore up the banks while trying to deflate the lending bubble. And holders of Chinese Equities have already been feeling the pain.
Finally, an Analyst whose work that Deepcaster otherwise much admires just bought the argument that because of the recent advances in Oil and Natural Gas production from shale… “So much for peak oil.”
“Let’s turn to No. 3, which deals with Peak Oil. People have thought that the U.S.’ and Canada’s oil production “peaked” and never would increase again. But as P… pointed out, ‘Who would’ve said a few years ago that North Dakota would be an energy superpower?’ Yet it is on its way to becoming a significant producer of oil. Not only North Dakota, but there is also a revival, due to new technologies, happening in Texas and other places. In Canada, it’s the same story. For the first time in three decades, oil production is on the rise. So much for Peak Oil…
Be clear about what he’s saying. He’s not saying oil consumption won’t grow. All is he saying is that it’s not going to grow as fast as today’s market assumptions imply. ‘Prices can’t be assumed to keep rising…’”
“Hunting for S-Curves”
Chris Mayer, agorafinancial.com, 10/13/11
A Few Facts: The source of Hydrocarbons (Oil and Natural Gas) is decayed biological material from eons past, which is in principal limited in amount.
And while new technologies (e.g. shale fracking) can unlock previously unavailable sources, they too are absolutely limited in amount.
And has P… (quoted above) looked at the depletion/production curves for shale gas?
They are the very definition of “rapidly depleting”.
Now the Energy Situation is more complicated than the above snippet suggests. A Major Factor is that Recessions diminish demand and thus prices.
Furthermore there are reasonable arguments to be made both that we already have, or that we have yet to arrive at, (and if so, when?) peak production.
But to say that the Peak Oil issue should not be considered or that “Prices cannot be assumed to keep rising” is to omit a vital consideration, a consideration essential to timely profiting from Energy Investments.
In sum, longer term, the Vastly Increasing Amounts of Fiat Currencies (see Note 2 below) will be chasing depleting resources limited in supply.
The foregoing Great Perspectival Mistakes provide Great Opportunities for the well-informed.
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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