Financial Fairy Tale Antidotes Springboard For Garnering Gains
Stock-Markets / Financial Markets 2009 Oct 30, 2009 - 02:28 PMBy: DeepCaster_LLC
“…the Federal Reserve established and refined a program that permitted banks to pledge virtually any security as collateral…a guaranteed way for taxpayer capital to evaporate in the context of a disintegrating financial system, all with the purpose of bailing out Wall Street's major institutions…
…We uncovered numerous bankrupt companies' equities that were being pledged as collateral for what ultimately was taxpayer exposure. To our surprise, this discovery is not an exception, and in fact in the days immediately preceding the collapse of Bear Stearns…
…Beginning in March 2009, the Fed was now running the capital markets directly, by pushing prices of "riskless" assets ever higher through its $1.7 trillion Quantitative Easing program, thereby making it all too clear…that moral hazard was once again tolerated and encouraged…
Furthermore, by being a self-professed "lender of last resort" as well, providing a perpetual backstop for an indirect way to bid up equities at a 50 bps funding cost, the Federal Reserve has now managed to singlehandedly take over the entire capital market…
…On September 14th, 2008 the gloves came off, when the Fed, stated in a press release no less, that it would provide virtually free taxpayer capital to banks so that they could go to the market and purchase equities!
…Yet in the meantime, Primary Dealers and banks should take full advantage of the Fed's market manipulating generosity courtesy of such middle-class devaluing constructs as Quantitative Easing…
…As long as commercial banks and dealers are allowed to commingle their balance sheets, and as long as firms like Goldman which have yet to open even one deposit branch exist and have a riskless balance sheet courtesy of the American taxpayer, nothing will ever change…And the administration's response to date has been to make the firms at the top, even more systematically critical…
The CPDF provides a glimpse into the Fed's, up to now speculative, and hereby confirmed, willingness to (in)directly manipulate equity markets via its Primary Dealer network…”
An Overview of the Fed's Intervention in Equity Markets Via the Primary Dealer Credit Facility
Tyler Durden, Zerohedge.com, 10/25/09
But notwithstanding all the foregoing, as well as the fact that the private for-profit Fed’s excessively loose monetary and credit policies are the Primary Cause of the recent Financial crises, Congress is headed toward giving the Fed even more Power!
“The latest financial-regulation legislation moving through Congress would give the Fed new oversight powers, including the authority to force large firms to shrink if their size threatens the broader economy.
The draft bill, released this week by House Financial Services Committee Chairman Barney Frank (D., Mass.) gives the central bank more direct authority than outlined in a proposal earlier this year.” (emphasis added)
Congress Weighs Scope of Fed's Authority
Sudeep Reddy, The Wall Street Journal, 10/28/09
Perhaps nothing threatens potentially Profitable Investment and Trading Strategies more than the Myths upon which they may be founded.
Deepcaster critically examines certain of these currently widely accepted Fairy Tales and suggests ways of surmounting, and profiting from, those which pose such a threat.
Fairy Tale #1: The Equities, Precious Metals and other Markets trade freely, and are not manipulated by a Fed-led Cartel.
The aforementioned excerpts from Tyler Durden’s excellent article are yet another substantial addition to the veritable Mountain of Evidence that the Major Markets are manipulated by a Cartel* of key Central Bankers and Favored Financial Institutions led by the private for-profit Federal Reserve.
*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, 2008 Letter containing a summary overview of Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2009 Letter entitled "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the “Latest Letter” Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org 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.”
Indeed, the evidence for pervasive overt and covert Intervention is now so overwhelming, thanks to GATA and increasing numbers of other, that we merely refer readers who may have doubts to the articles referenced above.
Indeed, but for Cartel Intervention, the sustained Equities rally since March 9, 2009 would never have occurred.
Fairy Tale #2: The U.S. Housing Industry is in a Recovery Mode
Dream on.
The Average New Home has been on the Market for over a year.
At current rates of home sales it will take over two years just to absorb the vacancies. Six percent of all homes built this decade are Vacant.
And the U.S. faces a substantial increase in Alt-A and Option ARM interest Rate Resets in 2010, and even more in 2011.
Indeed the dollar value of loans resetting in 2011 will nearly equal that of the Peak 2007-2008 period when subprime defaults brought down the mortgage Market. [All the foregoing data courtesy of a T2 Partners Special Report.]
Fairy Tale #3: The Economy is Recovering; there are “Green Shoots”
70% of U.S. GDP is the U.S. Consumer/Taxpayer (and, often, Mortgage Holder). This huge Sector is certainly no better off, and is arguably worse off, than before the 2008 Crises. U.S. household liabilities as a percent of disposable income have inched down from a peak of 138% in mid-decade to 129% now. No significant change there.
[Indeed, the Primary Beneficiaries of the Bailouts and Stimuli are the “too-big-to-fail” Financial Institutions, NOT the U.S. Consumer/Taxpayer.]
But the consumer credit to fund these Household liabilities is contracting.
Overall, consumer credit is declining at a 5% rate, while revolving credit (credit cards) is declining by 7.8% annually.
And in an ominous omen for the job market and for the economy at large, commercial and industrial loans are off 12%. Economic growth (from whence come earnings to justify increased equities prices) is declining.
Fairy Tale #4: The economy is structurally sound – we just have to get through this rough spot.
Au contraire, the U.S. and International economies have increasingly been built, in recent years, on borrowing, and not on savings and investment -- the traditional and healthy source of economic growth.
The primary Culprit effecting this Unhealthy Structural Transformation is the private for-profit U.S. Federal Reserve and its allies – other Key Central Banks and Favored Financial institution. That is The Cartel* referred to above.
The more borrowing which is undertaken by government and consumers, the more money The Cartel makes and the more power they accrue. Add their profits from lending to their Profits from Market Intervention ($13.4 Trillion in the last six months of 2008, when Investors were losing Trillions in the Equities Markets -- see “Opportunities & Threats in Derivatives Shocker” (05/29/2009) and “Surmounting the Cartels' 'End Game' Juggernaut” (09/25/2009) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com) and The Cartel* is a Real Juggernaut.
But borrowing from The Cartel and their allied Favored Financial Institutions carries the obligation to repay principal and interest. Thus, The Cartel must continually create more Fiat Money to pay the interest. But more Fiat Money Creation erodes the Purchasing Power of the World’s Reserve Currency, the U.S. Dollar, thus imposing a Stealth Tax on U.S. Dollar Holders. (See “Opportunities to Escape Paper ‘Wealth’ ” 11/07/2008 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com)
Thus genuinely profitable U.S. dollar denominated investments must profit sufficiently to beat U.S. Dollar depreciation.
This Fed-implemented Ponzi-Monetary/Credit Creation Scheme is truly fundamentally unsustainable in the Long Run. Unfortunately, “The Long Run” is nearly over.
Fairy Tale #5: Official Figures provide a Realistic View of Economic and Financial Realities.
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported October 15, 2009
-1.3% 6.1% (annualized October Rate)
U.S. Unemployment reported October 2, 2009
9.8% 21.4%
U.S. GDP Annual Growth/Decline reported October 29, 2009
-2.33% -5.71%
Fortunately John Williams’ of Shadowstats.com calculates Key Statistics the Traditional Way they were calculated before serious Political gimmicking began in the 1980’s and 1990’s.
In light of the foregoing Myths, we offer Antidotes designed for Protection and Profit in the form of Guidelines.
Our regular readers may notice that certain of the following Guidelines have been published before. We trust that those readers will understand that we receive requests to republish these Guidelines, when we fail to do so.
In any event, we believe that it is important to carefully consider these Guidelines, and especially #7, because legislation now pending in Congress (e.g. Rep. Ron Paul’s ‘Audit the Fed and Abolish the Fed’ bills and Rep. Barney Frank’s countervailing “More Power to The Fed” Bill) will be important determinants of whether citizen/investors around the world will be, to use Ellen Brown’s words, “subservient to a global empire of Central Bankers”.
Guidelines for Identifying Opportunities for Profit and Protection
- Get the Real Data. As many Investors suspect, Crucial Official Government and Agency Economic and Financial Data are of highly questionable validity. The Data set forth above from shadowstats.com is a good starting point.
Educate yourself about the realities of the marketplace using Alternative Data Sources such as Deepcaster, Gold Anti-Trust Committee (www.gata.org), and shadowstats.com. Gathering and staying attuned to authentic information regarding the marketplace can save one much financial grief as well as positioning one for profit.
- Take Account of both Overt and Covert Cartel Intervention. Many of these same investors who suspect Official Statistics also rightly suspect that the private-for-profit U.S. Federal Reserve and/or Central Banks overtly and covertly manipulate Major Markets. But they might not be aware that covert Market Interventions and Data Manipulation are likely far more pervasive than generally believed, as detailed in Deepcaster’s articles mentioned above.
As well, such investors may not have thought systematically about how one copes with and profits from such Intervention and Data Manipulation.
Consider one example of Cartel Intervention: the Traditional and Legitimate Safe Haven from inflation, deflation, and risk, is Gold. Yet, Gold has, during the recent periods of extreme financial market turmoil, been taken down in price from its highs of over $1000/oz down to around the mid-$700 level (e.g. in 2008) when it should have skyrocketed.
In early March, 2008 Gold was over $1000/oz. when the Bear Stearns Crisis revealed the fragility of the Financial System. Gold should surely have skyrocketed then. Instead, it was brutally taken down. Were its price not manipulated, Deepcaster’s view is that its price would be over $3,000.00 per ounce today.
As indicated above Deepcaster and others, including the Gold AntiTrust Action Committee, have offered considerable evidence that the Cartel* of Central Bankers and Favored Financial Institutions are the culprits behind these dramatic and devastating Takedowns. See Deepcaster’s Alert of 12/25/07 “A Strategy for Profiting from Cartel Intervention in Gold, Silver, Crude Oil and Other Tangible Assets Markets” in the Alerts Cache at www.deepcaster.com.
But there is a Profitable Refuge from Market Intervention and Data Manipulation. That Profitable Refuge lies in the Strategy described in the aforementioned Alert, key components of which we outline here:
- Recognize that the “Buy and Hold” strategy rarely succeeds anymore. The Eminence Grise of Newsletter writers, Harry Schultz perhaps put it the best when he stated that “buy and hold no longer works anymore, even with Gold.” Recent Market Developments should suffice to demonstrate this principle!
- Track the Covert Interventionals as well as the Technicals and Fundamentals and Overt Interventionals. Tracking the Footprints, as it were, of the Covert Interventionals (e.g. the Repo and TSLF Pools) daily can often, but not always, give one excellent clues about the nature and timing of The Cartel’s next likely Interventional Move - - such clues are essential to preserving wealth and making profits. Deepcaster’s tracking of The Interventionals, for example, allowed him to recommend five short positions going into September, 2008, (i.e. before the Market Crash) all of which he has subsequently recommended be profitably liquidated. Deepcaster’s recent article “Cartel Angst Equals Investor Advantage” (9/18/2009 can be found in the ‘Articles by Deepcaster’ at www.deepcaster.com) lays out a specific strategy for use in investing and trading in the heavily manipulated Gold and Silver Market.
- Perhaps most important, be prepared to go both long and short Major Market Sectors - - long near the bottoms of Interim Takedowns and short near Sector Tops. The Interventionals are essential to helping identify these tops and bottoms. In Deepcaster’s view, it will be increasingly difficult to achieve a net profit for one’s portfolio if one is unwilling and/or unable to “go short” as well as “long”.
The Blossoming of the 200% and 300% (and other) leveraged ‘short’ and ‘long’ ETF’s described above provide a superb opportunity to go short and long with ease, but not, as we explain in recent articles, without risk.
- Be aware of and Active in the overall Geopolitical Landscape in order to gain an adequate understanding of how that Landscape might affect the present and future direction of the Markets. It is essential that one understand the motivations of the major players in the market and the resources at their disposal.
For example, a Major Motivation of the U.S. Federal Reserve and other key Central Banks is the protection and enhancement of the legitimacy of their Treasury Securities and Fiat Currencies as Measures and Stores of Value. Therefore, one can understand that one of their Major Goals will be to attempt de-legitimize Gold, Silver and the Strategic Commodities, including especially Crude Oil, as Stores and Measures of Value. With this in mind, the repeated takedowns of Gold and Silver prices and, since July, 2008, of Crude Oil prices, become understandable. Moreover, such an insight applied daily to the market can result in a tremendous edge in understanding market performance, present and future.
Moreover, regarding the assets at The Cartel’s disposal, if one tracks the Repurchase Agreement and TSLF Pools regularly, as Deepcaster does, and is aware of the other Interventional tools that The Cartel has at its disposal, then one gains a considerable edge.
- Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of The Cartel. It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets and/or Retirement Accounts only to have those assets effectively de-valued by Cartel Takedowns, U.S. Dollar Devaluation and other Cartel actions. This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them. In order to help prevent this and similar outrages, we recommend taking three steps:
- Become involved in the movement to Audit and then abolish the private-for-profit U.S. Federal Reserve as Deepcaster, former Presidential candidate Rep. Ron Paul, and legendary investor Jim Rogers, all have advocated. The ‘Audit The Fed’ Bill is H.R. 1207 (and has over 250 co-sponsors) and S604 in the Senate; and The 'Abolish The Fed' Bill is H.R. 2755. www.carryingcapacity.org is a nonprofit organization which actively supports these bills.
- Join the Gold AntiTrust Action Committee, which works to eliminate the manipulation of the Gold and Silver markets (www.gata.org). GATA is a nonprofit organization, which makes a great contribution by gathering evidence regarding the suppression of prices of Gold, Silver and other commodities.
- Work to defeat The Cartel ‘End Game.’ Deepcaster has laid out the evidence regarding the Ominous Cartel “End Game” in “Coping with Power Moves in the Cartel's 'End Game' “ (04/24/2009) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com. Clearly The Cartel is sacrificing the U.S. Dollar to prop up Favored International Financial Institutions and to maintain its power. But this sacrifice cannot continue forever. See Deepcaster’s July 2008 Letter in the ‘Latest Letter’ Archives at www.deepcaster.co
Conclusion:
If this aforementioned strategy is employed effectively, it can result both in wealth protection, and in considerable profit along the way.
Additional insights and details regarding Deepcaster’s Strategy for investing in Gold and Silver are laid out in Deepcaster’s article “Defeating the Cartel...With Profit” (03/28/2008 (part 1) and 06/19/2009 (part 2)) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com. Deepcaster’s latest Forecasts for price moves in the Precious Metals, Equities, Crude Oil and other Markets can be found in his latest Alert posted in the ‘Alerts Cache’ at www.deepcaster.com.
Protection and profit require Proactivity and attention to the Interventionals, Fundamentals and Technicals, not “Buy and Hold.” We reiterate, “Buying and Holding” for the long term rarely succeeds anymore as current market conditions attest.
Indeed, the Key Point of the foregoing Strategy for Protection and Profit is careful attention not only to the Fundamentals and Technicals but also to the Interventionals. These Overt and Covert Cartel-generated Interventions have the power to move markets as those who study the matter can attest.
Thus, the Key to Profit and Protection is a Strategy: Successful Investors must become Long-Term Position Traders, with their trading choices informed by the Interventionals, as well as the Fundamentals and Technicals. Moreover engaging in the Actions suggested above can help prevent The Cartel’s obtaining Superpower status, and aid in achieving wealth protection and profits as well.
We conclude with John Williams’ and Stewart Thomson’s observations which are excellent Antidotes to the Fairy Tales circulating about these days.
“The general outlook for the U.S. economy continues to be for severe contraction, with the worst still ahead.”
Shadowstats.com, 10/29/09
“All hail the regulators. They've done it again. The banksters are masters at directing the public's anger at a red herring, while they operate a vastly larger robbery elsewhere. An example is bank manager salaries. The public is focused on those salaries, not on the trillions of dollars that have simply disappeared after being handed to the banksters, printed money now, to be paid in real money by your great grandchildren over the next 100 years. Should any taxpayer refuse to pay his share to the banksters, it's "hi ho hi ho off to the clink you go."
The bankster puppets, the CFTC, decided that ETF funds held "too much power" in the energy markets. So they are imposing "position limits." while the Chinese communist govt buys up every commodity it can touch without limit. US oil and gas funds, and the small investors invested in them, have been stopped from their evil mission to hold substantial amounts of oil and gas. I have to wonder how long it is before GOLD ETFs suffer the same fate.”
Gold Neckline Play. Easy on The Trampoline
Stewart Thomson, Graceland Updates, October 27, 2009
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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