Superb Investor Opportunities Created by 3 False Premises
Stock-Markets / Financial Markets 2012 Feb 10, 2012 - 09:23 AM GMTBy: DeepCaster_LLC
“In one of the most shamefully disingenuous reports we’ve seen in years, the US Labor Department released the latest employment figures on Friday showing that the headline US unemployment rate had fallen to 8.3%.
“Champagne and sound bites were pre-positioned in Washington as the self-congratulatory praise flowed like the bubbly. President Obama, beaming like he’d just caught the winning touchdown pass, told the American people on Sunday that he ‘deserved’ a second term.
They call it the headline unemployment rate for a reason… it’s the only number that the papers tend to run. All weekend long, mainstream press ran headlines like:
“Unemployment rate falls to 8.3%; fifth straight monthly decline” (LA Times)
“Jobless rate drops to lowest level in almost three years” (MSNBC.com)
“Unemployment rate drops to 8.3 percent” (Christian Science Monitor)
“Hiring surges in January; jobless rate at 8.3 pct.” (Atlanta Journal Constitution)
“Jobless Rate Falls to 8.3%, Altering Face of Campaign” (New York Times)
“Unemployment report: January job gains have economists rethinking outlooks” (Washington Post)
Needless to say, few outlets with any meaningful reach covered the real story behind the employment figures—the Labor Department simply took 1.2 million Americans out of the labor force. In other words, the unemployment rate fell because the Labor Department deliberately did not count 1.2 million unemployed people….
It’s the same Orwellian style logic (WAR IS PEACE. DEBT IS WEALTH.) that prevailed during the Soviet Union—outright lies and deceitful reports painting a rosy picture of the economy and its glorious leaders, masking a dismal reality. It’s nothing but propaganda in the worst form.
This has been going on for years in the United States, as evidenced by the chart below:
sovereignman.com, Simon Black, 02/06/12
Indeed, the U.S. Department of Labor’s Employment Data is Bogus, as Deepcaster and John Williams of shadowstats.com (see below) and others have been pointing out for years. Real U.S. Unemployment is 22.5%.
And not just Employment Data, but also Inflation Data are Bogus. Real U.S. Inflation is 10.57% per shadowstats.com. Even the Chinese just acknowledged (via their tightly controlled and politicized Official Data Source, the National Bureau of Statistics) that inflation had risen significantly.
But the Key Take-Away for Investors and Traders is that the recent Ostensibly improved Job and Inflation figures are False Premises on which the Markets rallied. And this provides Superb Opportunities to bet against the False Premises as we later indicate.
Indeed, Shrewd Trader and Political Interventionist, George Soros, recommends
"Find the premise which is false and bet against it." George Soros
First, however, it is important to understand why and how the Unemployment Numbers are Bogus.
“January Jobs Reading Still at Levels of 11 Years Ago
January Unemployment: 22.5% (SGS)
Money Supply M3 Growth Is Picking Up
“Given pending benchmark revisions, monthly reporting results are unusually vulnerable to any reporting needs of the political establishment.”
“The hard data (not-seasonally-adjusted) on payrolls always tank in January (January 2012 was down by 2.68 million jobs month-to-month), while the unemployment rate always rises (January’s unadjusted unemployment rate rose to 8.8% from 8.3% in December). The only difference between those numbers and the headline 243,000 January jobs gain and 8.3% unemployment rate, is how the seasonal adjustments were applied. There are serious issues with the current quality of those adjustments, and extremely small distortions in those seasonals can make big differences in the resulting headline data.
“Whenever there is a major systemic change to an economic series, and the data overtly are massaged so as to prevent distortions, unusually large changes in the resulting near-term reporting automatically are suspect as to accuracy. Today’s reporting included the annual benchmark and seasonal-factor revisions to the payroll survey, as well as to the annual population controls and revised population assumptions for the household survey. Where both of those revision processes involve making assumptions (i.e., Is the economy going to be growing, or not?), it is not surprising that assumptions yielding stronger results might be selected over those that did otherwise.
“In any event, beyond the revisions, the headline numbers for January 2012 generated by the revamped systems simply were not believable. [In fact] New online help-wanted advertising fell sharply in January, indications from the January purchasing managers survey were mixed, and anecdotal evidence still is running to the contrary of happier numbers. Accordingly, I would expect reporting in the months ahead to revise and weaken with the payrolls, and would expect deterioration in the headline unemployment rate ahead, assuming some catch up in seasonal factors, if that is an issue.
“As an aside, there is precedent for direct political manipulation (the first kind) of headline economic data, from a number of administrations—both Democrat and Republican—from the early 1960s and from the onset of modern economic reporting, into the 2000s.
“January 2012’s headline 8.3% unemployment rate was in the context of the annual population revisions. As such, it is not directly comparable with Decembers 8.5% unemployment rate, but it will be used as a comparable number going forward. The new population data suggested a lower labor force participation rate, with implications for a growing discouraged-worker population. The U.6 unemployment rate was at 15.1%, the SGS-Alternate was at 22.5%.”
John Williams, “Payrolls, Unemployment and Revisions, M3, PCE Deflator”, 2/3/12
Moreover, Trader Dan Norcini’s Astute Commentary on the Bogus Payroll numbers Reveals another Official Premise (recently expressed by Chairman Bernanke himself) that should be “Bet Against”
Consider Norcini’s comment:
“Today's payrolls number, something which I might add is more akin to an Alice in Wonderland creation, was the factor responsible for the selling in both gold and in silver. The thinking was that if the economy is gathering steam at such a fast clip as the numbers suggest, then any notion of additional QE3 is a pipe dream. That means no Dollar debasement and little to fear on the inflation front so out came the sellers in the gold market. It also did not help the bullish cause that the market failed at a critical technical resistance level.
”Between the two developments, longs who have had a nice run lately, decided to go ahead and take the profits while they were still there and wait for a better buy back in point. Short sellers looking for a top were also emboldened and made their presence felt as they have been on their heels lately due to the strong buying present in that pit.”
Dan Norcini, “Gold Bulls Unable to Break Through Resistance”, 2/3/12
Savvy Trader Dan Norcini makes a critically important point.
Because last Friday’s Payroll Numbers were perceived to be improving, coupled with Official Assurances that Inflation was contained, Safe Haven Gold sold off (with help from The Cartel [Note 1 below]) the U.S.$ stopped sliding and even strengthened a bit, and Equities shot up.
Only problem was that the Payroll Numbers were “Alice in Wonderland” as Norcini says. But the fact that Gold sold off and the U.S. Dollar stopped sliding showed the markets believed the (False) Premise that Inflation was controlled.
And John Williams of Shadowstats.com has told us why and how, and what the Real Numbers are (Real U.S. C.P.I. at 10.57% is threshold Hyperinflationary).
In sum, there are clearly two False Premises distributed by several Main Stream Media:
- That the Economy is Recovering, as the Payroll numbers ostensibly show, and
- That inflation is contained (See our Article last week – “Essential Preparations for THE BIG ONE” in ‘Articles by Deepcaster’ Cache at www.deepcaster.com)
But, The Realities are that we are moving into an ever more stagnant economy with increasing Monetary, and thus already existing (U.S.CPI 10.57%) and increasing, Price Inflation, as we have already seen in Food and Energy costs and even Officially controlled Chinese Inflation figures. Deepcaster has recently made several recommendations which have generated profit (Note 2 below) and which are designed to Profit from (see our March Letter) the Impending Hyperstagflation.
But it is important to consider the opportunity latent in a Third False Premise as exposed by Professor Simon Johnson comments on Bloomberg Financial.
“Greece is (already – Ed.) in default. We are in a downward spiral. They are papering over the cracks. When the ultimate Collapse comes, it will be all the more painful.”
MIT Professor & Former IMF Economist, Simon Johnson, 02/09/12
Over the mid and long term that Euro strength is unsustainable for the whole host of reasons including not only the ultimate de facto default of Greece, Portugal, and Ireland, but also probably eventually the default of Italy and Spain, and perhaps even France.
Third False Premise: that the Eurozone as it presently exists, can and should be saved. Indeed, the impending disintegration of the Eurozone, though most painful for the citizenry in the short and medium term is, on balance, in their best interest in the long run. Being beholden to Mega-Banks and Unelected Globalist Bureaucrats results in a loss of political and economic freedom, as well as National Sovereignty.
Moreover, with all the juicing and goosing and bailing out, The Fed and ECB has provided the Markets, and promised to continue, the current Equities Rally could last for a while more.
But such a Rally goosed nearly solely by Excess money and credit provided by The Fed and Eurozone (as opposed to Savings and Investment which creates Real lasting wealth), will only exacerbate The Great Equities Crash when it surely arrives. And the Developing Jaws of Death Technical Pattern emphasizes this Prospect.
Meanwhile, Food and Energy Costs will soar more, further financially disabling consumers, which are 70% of the U.S. Economy and a similar % of other Major Economies.
According to the U.S. DOE U.S. gasoline Demand is at a 10yr low, but Gas Prices are near record High (and Food prices still skyrocketing with Corn up 10% and Wheat 12% in just the last three weeks). Thanks Ben Bernanke!
This fact of continuing high (and increasing) energy and food prices underscores the Extraordinary Reckless Policy Error of both The Fed and ECB which create too much money and credit (in their attempt to save their owners, The Mega-Bankers), and the Obama Administration which continues to Increase the U.S. National Debt to over $15 Trillion (from $10 Trillion when he was elected) plus downstream unfunded liabilities of over $100 Trillion for Social Security, Medicare, etc..
All of these feckless policies will, of course, generate Hyperstagflation down the road for which we will all pay (and are already paying) a very high price in Destroyed Savings and Wealth in General.
But Short-term, the just-announced Cosmetic Disguise of the existing Greek Default will likely keep the Euro pumped up for a while. And the focus on the Eurozone’s Debt Saturation Crisis temporarily deflects attention from the U.S.A.’s larger and unsolvable Debt Crisis. Thus, in the long run, those two Debt Crises will doom both Fiat Currencies, the Euro and the US$, vis a vis Real Assets.
Thus, given the foregoing and in light of the False Premises, now is an Excellent time to Acquire Real Assets – Gold, Silver and Agricultural Products, on the cheap.
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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