Big Kahuna Investor Profit Opportunities Coming Soon!
Stock-Markets / Financial Markets 2013 Jul 20, 2013 - 10:14 AM GMTBy: DeepCaster_LLC
“Highly accommodative monetary policy for the foreseeable future…”
Ben Bernanke, Fed Chairman, 7/10/2013 and 7/17/13
“… in June, 2013, inflation was about 9.4%, up from 9.0% in May and Real Unemployment up to 23.4% from 23% in May.
Real Retail Sales and Real Earnings contracted in June… (The Official Reported) June Retail Sales Gain Reflected little more Than Rising Inflation”
Shadowstats.com, 7/15/13
With the aforementioned statements Bernanke’s Fed took yet another Giant Step toward unleashing The Big Kahuna. It is a step forecast by us and several other independent analysts. But it is the significant consequences of these steps toward the Big Kahuna for the Markets and Economy and the Opportunities and Risks they create for Investors that count.
Translating the phrase “highly accommodative monetary policy” yields a Clearer Fed Policy statement – the Fed will continue to print money primarily for the benefit of its Mega Bank owners/allies for the foreseeable future.
Indeed, Goldman Sachs, Citigroup, and Wells Fargo have just reported Record Profits, but wages are stagnant and Real Unemployment and Real Inflation are both rising. And by Bernanke first uttering those words the predictable result occurred – the U.S. Dollar tanked dramatically basis USDX, i.e. vis a vis other Major Fiat Currencies.
From one perspective, the Fed was impelled to make that $US-debasing Policy Statement because Major Central Banks in Europe, Japan, and elsewhere are intensifying their debasing of their Fiat currencies also. The Currency War is now in full swing.
But there is a problem with this path, especially for the USA and other debt saturated countries. Money Printing eventually entails a crashing Dollar, and a crashing Dollar means crashing Purchasing Power, i.e. Price Inflation leading to Hyperinflation and an eventual bursting of the U.S. Treasuries Bubble. Thus investors will, and already are, demanding higher yields on U.S. Treasuries to compensate for their debased dollars. And the same dynamic is becoming Manifest in other debt-saturated Fiat Currency based nations. And higher rates mean that at some point Sovereign (and other) debt repayments become unpayable.
So consider specific Consequences already becoming Manifest and the Opportunities, and Risks, this provides.
For most developed nations such currency debasement serves, temporarily, to make their exports sell more easily and to provide the illusion that their citizens’ financial assets are appreciating, when in fact they are losing Purchasing Power, just as the Fed’s ongoing QE is generating Intensifying Inflation and Unemployment which is hidden by Bogus Statistics, as the Shadowstats quote indicates.
But there are two asset classes in which the already-intensifying inflation is hard to hide. The first is U.S. T-Bonds and T-Notes, and MBS, The Fed has been buying these at an $85 billion per month clip to attempt to suppress/hide rising inflation (by keeping Treasury yields artificially low) and bolster the balance sheets of their Mega-Bank owners/allies. But, as the recent spike up in Treasury yields demonstrated, this is not a policy which can succeed indefinitely.
The mere talk of Tapering a few weeks ago catalyzed a 10-year Note weakening in which the yield shot up 100 BPS from 1.7ish to 2.7ish on the U.S. 10-year. Frankly, the Magnitude of the Spike Up in yields is yet another indication that argues that Real inflation is already intensifying.
And, when the timing is right, we expect to recommend seizing the Opportunity to Short the long-dated U.S. Treasuries once again.
Note well that Intensifying Real Inflation is also already showing up in Crude Oil.
The Crude Price is much harder for the Cartel (Note 1) to manipulate than Prices of other “Hard” Assets, (and harder even than their manipulating long bond prices as The Fed has done with some success thus far) because Crude is essential and gets used up soon after production. And, relative to other essential Commodities, Crude Demand is somewhat Inelastic. If, for example, the price of wheat spikes, consumer can switch to rice, corn, or soy. But so far as portable energy sources go, there is no good substitute for Crude Oil.
It is not merely that Crude Prices have been elevated by Fears of Intensified Mideast Conflict in Syria and Egypt. So long as War and Revolution are percolating in the Mideast, WTI Crude should remain high. Specifically so long as Egypt is unstable and thus the Suez Canal Oil Transport Corridor is at risk, expect Crude to remain elevated. If that Risk diminishes, (unlikely soon) one might expect a drop.
But note that it is not merely the Suez and general Mideast War Risk (to Supply) that has impelled WTI Crude to $105ish as we write, it is the very Real Ongoing QE-generated intensifying Price Inflation already being baked into the economy. Bogus Official Statistics serve to hide it but the Crude Price “tells the truth” and reveals it. And Fracking, much-hyped by the Big Media has thus far only increased U.S. production to about 50% (from 40%) of U.S. consumption. Thus, it is no surprise to us that U.S. Crude inventories fell 5.1% in just two recent weeks, the biggest plunge since 1982, according to the EIA.
We emphasize that, notwithstanding “fracking” the USA still has to import half its oil consumption, which, coupled with increasing Import Demand coming from China, the Eurozone, and Japan as well, supports Prices. By the way, given even the most optimistic “Fracking” Production Projections, do not expect the USA to produce more than 60% to 65% of its own oil consumption, unless there is a Major Depression.
But there is a third Factor Contributing to Crude Price rises. Sophisticated Investors know that Equities are artificially levitated and, thus overbought and over bullish, that Treasuries are no longer a Safe Haven, and that Prices of the Real Safe Havens, Gold and Silver are subject to Cartel Price Suppression. Opportunity: thus Crude Oil is becoming a Safe Haven of Choice as a Relatively Reliable Store of Value with Great Appreciation Potential.
Conclusion: Both rising U.S. Treasury yields and rising Crude Prices tell us: Inflation is intensifying.
One other indication which, but for Cartel Prices Suppression, would have already told us that inflation is intensifying, is Gold and Silver Prices.
Four straight Up Days for Gold last week legitimately gave encouragement to us Gold and Silver partisans as did the intensifying Massive Physical demand.
“Physical Gold delivered by buyers by China’s largest bullion bourse [Shanghai] in the first half of this year matched the entire amount taken from its vaults in 2012, and was more than double the country’s annual production. Output in China, the world’s largest Gold producer, reached a record 403 tons last year…”
“Gold Deliveries From Shanghai Bourse Jump on Physical Demand”
Bloomberg News, 7/15/13
But all of us should acknowledge that technically, so far, that Up move is only a mini-Rally in Gold’s trading range in what is still technically in a Bear Market for Gold and Silver. Indeed, The Cartel is still quite active in the Price Suppression “Game”. We are not baffled by Gold Price Suppression, unlike Grant Williams
“..the bizarre price action of the last six months has run counter to most logical assumptions and has been a source of great frustration to many – including Grant Williams. Cyprus should have been a hugely positive tailwind for gold. But it wasn't. The ongoing money printing should have provided support for gold. But it hasn't. The talk of tapering should have had a minor but noticeable effect on gold, given its healthy recent correction. But it didn't. Sustained data suggesting a voracious appetite for the physical metal not only in Asia but in Western countries, too, should have led to a bounce on the COMEX. But it hasn't.
The whole thing is as baffling as Kim Kardashian's fame.”
ZeroHedge, 7/16/13
JBGJ’s comment about price suppression is surely true.
“Wednesday was as clear a demonstration as any reasonable observer could need that there is a supervising force active in gold.”
But, even given the aforementioned, these are an increasing number of catalysts impelling a dramatic Upside reversal at some point (Regarding our Specific Forecasts see Notes 2, 3, and 4 below). Physical Demand (as above) is still intensifying, especially from India and China (now importing more than it produces), and China is now the World’s number one Producer and that Physical Demand is the ultimate Catalyst for a launch.
In addition, the dramatic recent increase in U.S. Treasury Yields may provide yet another catalyst (as an inflation indicator) and in the next few weeks too. (Interest rate levels are not themselves a Precious Metals Price Suppressor, unless they approach Volcker-era highs.) And that would be helped along by the Bullion (Cartel) Banks Massive Reduction of their Short Positions, which they have already achieved. Indeed, the Central Banks continue to accumulate Physical and East to West Demand for Physical intensifies. And then there is the matter of the rapidly depleting Comex and LBMA Inventories of Physical which we have discussed before!
Nonetheless, The Cartel is still Quite Active in Precious Metals Price Suppression. But The Cartel is having increasing difficulty sustaining its Takedowns, and a Great Launch Up for Gold and Silver Prices will come. (Regarding Timing, see our Forecasts.) So there is now a Great Profit and Wealth Preservation Opportunity in purchasing Physical Gold and Silver at these prices.
Regarding Commodities-in-general, then we expect to see the whole Commodities Sector take off sooner rather than later, for many of the aforementioned reasons. After all, Major Central Banks are intensifying their Money Printing War and this is price inflationary for Commodities (including Precious Metals) as well as Equities. And Key Technicals support the forecast of a Commodities Launch sooner rather than Later.
Regarding Equities, mainly because of ongoing Inflation-generating QE (i.e. Quick and Easy profits for Wall Street and the Mega-Banks) Equities Markets have again made all-time highs. Indeed, Equities-in-general are still technically in Rally mode, despite worsening Fundamentals.
Indeed, the Technicals virtually all show the Fundamental Equities Trend is still Bullish, for Now.
In sum, we continue to forecast that that Last Gasp Rally will take Equities to new all-time highs, as a result of Central Bank Money Printing to be followed by an Equities Crash about which we have been warning (as do seven recent Hindenburg Omen signals).
By that time, the Chinese bubbles will be seriously deflating, so expect no Salvation from China. Indeed, thanks to The Fed, the Chinese Yuan will then have become the World’s Reserve Currency, because The Big Kahuna, Fed-generated Inflation- will have destroyed the Purchasing Power of the U.S. Dollar.
Best regards,
www.deepcaster.com
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