Stock and Commodity Market Forecasts Nuggets
Stock-Markets / Financial Markets 2013 May 11, 2013 - 10:25 AM GMTBy: DeepCaster_LLC
“After watching the effects of the mediocre payrolls number yesterday (Friday, 5/3/13) which culminated in a push over 1600 in the S&P 500 and a print in the Dow over 15,000, I thought it might be useful to note a few things about this most recent example of a hysteria.
“I am on record here as stating that the entire stock market rally is nothing but a Federal Reserve induced bubble brought about by artificially low interest rates starving investors for yield elsewhere. The Fed, along with the Bank of Japan and the ECB I might add, are determined to corral investors and herd them, unthinking like cattle, into equities; the goal being to create an atmosphere of general euphoria towards the economy boosting consumer confidence in the hopes of inducing them to take on more debt and spend.
“This is akin to building a towering skyscraper on a foundation of PLAY-DO. It may look wonderful and draw gasps of admiration but it has no stability and will not be able to withstand any external shocks.
“I know what the perennial perma bulls are saying - stocks are cheap and corporate profits are good so the path of least resistance is higher. They have been right so far judging by the tape. However, to point to a jobs number that is less than 200K per month, now some FIVE YEARS after the onset of a horrible recession as if it is evidence of a recovery strikes me more as ROSE-COLORED GLASSES analysis rather than solid reasoning.”
“Fed Induced Stock Market Mania”
Dan Norcini, TraderDanNorcini.com, 5/4/2013
Perceptive, Independent Market commentators like Trader Dan Norcini generally agree that The Fed’s (and Bank of Japan and European and other Central Banks) Easy Paper Money Policies are Creating An Asset Bubble in the Equities Market that is not justified by Economic Fundamentals.
And they generally agree that it can not last.
We agree.
That raises the Key Question of which Assets to Invest in Now, and “When the Bubble Will Burst,” questions which we address here.
As to timing of the Asset Bubbles Bursting, John Hussman has it generally pegged.
“The year-over-year growth rates of real GDP and real final sales have declined to just 1.8% and 1.87% respectively, which is the first time in this economic cycle that both have simultaneously declined from above 2% to below 1.9% – an occurrence that has been a hallmark of every post-war recession, with remarkably few false signals for such a simple measure. The Fed's ability to kick-the-can in increments of a few months at a time may allow this time to be different, but investors should recognize that they are relying on that proposition.”
“When Rich Valuations Meet Poor Economic Data”
John Hussman, HussmanFunds.com, 4/29/2013
Yes, given the following, Fed (and other Central Bank) Actions only support the Markets “in increments of a few months.”
Indeed, it is likely only a matter of Months before Two Key Asset Bubbles Burst with Calamitous results. (See Deepcaster’s latest Letter and Alerts.)
But Burst they Must because all that Fiat Central Bank Money is already creating Threshold Hyperinflation, if one disregards the Bogus Official Numbers and looks instead at the Real Ones. (e.g., U.S. CPI at 9.12% per shadhowstats.com – See Note 1).
But there is another reason too. Most of the “Wealth” Creation since the Crash of 2008-2009 has in fact been a Wealth Transfer from taxpaying, mostly Middle Class, Savers and Retirees (who now get virtually nothing for their Savings Accounts) to the Mega-Bankers and Speculators. (of David Stockman Bill Bonner, Matt Taibbi, et al.)
And with Middle Class Consumers over 60% of developed Nations’ economies, their continuing Impoverishment (in terms of diminishing Fiat Currency Purchasing Power) is not good for Corporate Earnings, or Capitalism in general.
Consider the following re Hyperinflation in today’s Argentina, a Harbinger for the USA, Eurozone and Elsewhere.
“The typical American is not buying a Porsche. Relatively, he's getting poorer. But his brain has gone soft, shrunken by TV news, elections and deadhead commentaries.
“He believes Hillary Clinton when she says, "The government is all of us." He thinks the Fed really is bringing a "recovery." And he imagines that an economy can get richer when it prints more money and gives it to other people.
“The Argentines know they can't trust their money... or their government. In comparison, Americans are saps. They don't know whom to trust.
“But we'll make a prediction: Americans will be a lot less sappy... and a lot less wealthy... when they finally realize what the feds are doing to them.”
“The Greatest Wealth transfer in History”
Bill Bonner, BonnerPrivateWealth.com, 5/3/2013
Writing from Argentina
Today, Argentinians are suffering from up to 50% annual inflation due mainly to Fiat Money Printing. A Harbinger indeed.
The logical and anticipated response should be, and we recommend, go for the Gold (and Silver) because these Precious Metals are Real Money and thus protection against Paper Fiat Money Printing/Devaluation.
But the Very Best of the Very Few excellent CNBC reporters identified the problem of Going for the Gold.
Paper Gold in the form of Gold Fund Securities increasingly no longer reflects the Value or Price of Real Physical.
“Rick Santelli said, "I do not even look at Gold as gold anymore since they securitized it. If things went badly in the world that I used to observe (as a gold bug), the gold would end up in the hands of the gold bugs. If things go badly now, they are going to end up with checks from Exchange Traded Funds! Sorry, it is not the same. The reign of paper gold as the Ayn Rand endgame, to me, that is over. Game, Set, Match!" A big wow!! By securitizing gold, Santelli means the conversion to a paper contract, either a gold futures contract or a gold certificate (bank promise) or a GLD stock fund share from the infamous ETFund.”
Rick Santelli, CNBC, courtesy of
“Hat Trick Letter Issue #109”
Jim Willie, GoldenJackass.com, 4/21/2013
In fact, after the mid-April Cartel (Note 2) Gold Takedown the Premiums for real Physical (when you could find it) shot up over those for Paper Gold Securities. We agree that we can now expect to see a Permanent and Widening Divergence between Prices for Physical and Prices for Paper.
Jim Willie summarizes well the Real (as opposed to the Mainstream Media version) Realities of the Gold Market.
“$$$ THE PRICE DIVERGENCE IS WIDENING IN A BIG WAY BETWEEN PAPER GOLD AND METAL GOLD, AS THE JACKASS FORECASTED. THE DIVERGENCE IS A DEFINITIVE END GAME SIGNAL. THE POINT HAS BEEN APPROACHED WHERE THE GOLD PRICE IS MUCH HIGHER, AND COULD HAVE NO PRICE ATTACHED. ON FRIDAY APRIL 12TH, AROUND $20 BILLION IN PAPER GOLD WAS SOLD SHORT SUDDENLY IN TWO VERY POWERFUL WAVES WHERE NO METAL CHANGED HANDS. A MAJOR LONDON GOLD DEFAULT ALMOST OCCURRED, WHICH MOTIVATED THE ATTACK. $$$
“The gold paper architects and craftsmen have control of the publicized Gold market. They do not have control of the physical Gold market, and are actually cutting their throats in accelerated fashion. The Eastern players are grabbing at the opportunity to secure gold bars at any price, wherever it is available. The global cupboards are turning bare. Tiberius reports that Russia & China have been very heavy buyers after the price dip through their central banks. See the Red Lion Trader article (CLICK HERE). The victims are those naive and reckless investors who insist on remaining in the leveraged paper gold arena (ignored MF-Global warning), and the unfortunate few who depend upon small gold sales to fund household expenses and specific projects. The scale of the selloff was incredible, only to accelerate on Monday April 15th for a climax event timed exactly with the income tax deadline in the United States. No coincidences occur in this great game of global fascist chess.”
“Hat Trick Letter Issue #109”
Jim Willie, GoldenJackass.com, 4/21/2013
Yes, The Great Divergence between the price of Physical Gold and Silver and Paper (i.e., the Price Manipulated Market) Gold and Silver will only increase. In light of these ongoing paper price “Games” and in light of the fact they must eventually end, we make Recommendations designed to Profit and Protect (see Notes 3, 4 and 5).
But the Realities underneath the Official and Quasi-official “Games” of Price Distortion and Data Distortion are two of those Realities: “No Economic Recovery” and “No Improvement in Unemployment” in the foreseeable future.
“Labor Market Conditions Still Reflect a Troubled Economy and No Economic Recovery. The outlook for current economic conditions has not changed at all. While happy headline news from the April jobs and unemployment report may have some on Wall Street hyperventilating, stories based on the Bureau of Labor Statistics (BLS) press release—that the economy is strong or not faltering—are little more than hype. Both employment and unemployment are coincident indicators of broad economic activity and the signals are not good for near-term business conditions. There has been no recovery, and there can be no sustainable economic recovery, without a recovery first in consumer income and liquidity.
“Unemployment. The pattern of declining headline unemployment rates since the end of 2011 has not been due to new jobs from a surging economy. Instead, these declining numbers tell the unhappy tale of discouraged workers—unable to find work—being moved out of the BLS headline counting. The ShadowStats alternate unemployment rate regained its series-high 23.0%, based on detail from the same April unemployment report that excited the markets today (May 3rd).”
“April Employment and Unemployment, M3 and Monetary Base, No. 521”
John Williams, ShadowStats.com, 5/3/2013
A specific Area in which Reality will eventually overcome Manipulation is in the Gold Market, as the legendary Investor, Jim Sinclair, notes.
“The not-anticipated result of the take down on paper gold was to wake a sleeping elephant of physical demand from other every corner of the globe. The opinion of the operators is that if the gold banks can keep pressure up on paper gold the huge demand for physical will fizzle. The world outside of North America has recent memories of monetary situations exactly the same as now. They know that paper is in its final stage and gold is in a major ascendancy. Physical demand will remain strong thereby overcoming paper gold and forcing paper gold exchanges to change their methods of delivery, clearly restricting paper to a secondary role and making its use to manipulate gold redundant.”
“Where We Are, Why Gold Was Bombed, And Why TA Is A Waste Of Time”
Jim Sinclair, JSMineSet.com, 5/6/2013
And also, in addition to the Precious Metals Market,there is the Great Risk in the Greatest Manipulated Market Sector of all (see our recent Letter and Alerts) as recently identified by Goldman Sachs CEO, Lloyd Blankfein. See our recent Alert regarding the Nature and timing of the “bursting of This Greatest Asset Bubble.
“I worry now – I look out of the corner of my eye to the '94 period... you'd think in hindsight (it) should have been expected... (it) really was stunning.”
Lloyd Blankfein, CEO Goldman Sachs, 5/1/2013
And, regarding The Ultimate Outcome, Paul Singer identifies one of the Major (and, unfortunately, likely) consequences of the Central Banks’ Money Printing.
“Printing money by the trillions of dollars has had the predictable effect of raising the prices of stocks and bonds and thus reducing the cost of servicing government debt. [...] But it is like an addictive drug, and we have a hard time imagining the slowing or stopping of QE without large adverse impacts on the prices of stocks and bonds and the performance of the economy. If the economy does not shift into sustainable high-growth mode as a result of QE, then the exit from QE is somewhere on the continuum between problematic and impossible.
“At some stage, central banks inevitably realize, regardless of whether they admit the catastrophic nature of their own failings, that the cessation of money-printing will cause an instant depression. Even though at that point the cessation of money-printing may be the only action capable of saving society, that becomes a secondary consideration compared to the desire to avoid immediate pain and blame.”
“The Fed, Lost in the Wilderness”
Paul Singer, CEO Elliott Management Corporation, 5/3/2013
The foregoing demonstrates why it is extremely important to, and why we do, stay attuned to the Macro Environment, and to Timing. The Macro Policies and Developments we have identified here will continue to Trump other Investment Considerations.
Best regards,
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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