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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Investor Opportunity Window

Commodities / Gold and Silver 2012 Apr 06, 2012 - 12:17 PM GMT

By: DeepCaster_LLC

Commodities

Best Financial Markets Analysis Article“Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets.”

 

Warren Buffet, Fortune Magazine, 2/9/2012


 

An early 2012 Report indicates anti-Gold Sentiment (“Led” by Warren Buffet who is Wrong about Gold, but right about the Dangers of Currency-Based “Investments”) has reached recent record highs except among those in the “know”:

(In the short term) “I expect the (Gold) price to decline and when that happens I will buy more.” Jim Rogers 4/4/12.

While the anti-Gold Sentiment is perhaps baffling at first glance, thoughtful educated Investors should see it as facilitating an Opportunity Window. Consider the following:

  • While most of the Eurozone Bailout Money from The Fed and ECB has gone to Banks via Sovereign Debt restructuring – Eurozone lending to non-financial Companies shrank by 3 billion Euros in February 2012. As in the USA, Eurozone businesses and citizens are not much helped (and are arguably hurt) by the Bailouts.

And even the ECB’s $Trillion recent LTRO Injections have not helped the hopelessly indebted Sovereigns either, as recent spiking yields on Spanish and Italian debt testify.

  • Last weekend, Eurozone Officials agreed to transfer the remaining Assets of the EFSF to the ESM. That would bring the total Eurozone Bank Bailout Funds available to €700 billion until the middle of next year when the new rescue fund kicks in with a €500 billion ceiling. Already, Officials in the know (e.g., the Secretary-General of the OECD) say it is “not enough” in the long run. And they are right. Indeed the Sovereign Debt Situation is hopeless without more large Creditors “Haircuts”.
  • And consider that U.S. Banks hold $641 billion in loan exposure to Europe.
  • And the four biggest U.S. Banks hold 95% of the $250 Trillion! in U.S. Derivative Exposure, according to the Bank for International Settlements, the Central Bankers’ Bank.

 

PIMCO’s “Bond King”, Chairman Bill Gross, sums it up. “Greece is a Zit, Portugal is a Boil, Spain is a Tumor.” Bloomberg 4/5/12

Surely, one gets this Picture now. To keep the entire Paper/Digital Edifice from falling, the Central Banks will indulge in even more Massive Money Printing/Digitizing.

And that is why Opportunity Knocks in the Precious Metals (notwithstanding Cartel (See Note 1) Interventions) and why we are already seeing serious Price Inflation in Energy and Food –

“One the more interesting investments I’ve made over the last few years was buying a sizeable chunk of a successful baby products company…

 

“The managing partner forwarded me a letter yesterday… [which] explained that, over the last two years, prices have risen substantially in the developing world…

 

“China, for example, has seen wage increases of 44.6% since 2010. Vietnam- 39.1%. The polyethylene resin that we use has gone up in price 40.3%.  Naturally, the rise in oil prices has also increased transportation costs substantially as well.

 

“The letter… followed up with a polite assertion that they would be increasing their prices as a result.

 

“And they say there’s no inflation.

 

“This is a direct consequence of the rapid expansion of the money supply. When you print trillions of dollars, euros, renminbi, etc., there are consequences… namely, rising prices.

 

“At first, it’s the developing world that suffers the most. Central bankers in countries where the entire economy is based on cheap manufacturing feverishly expand their own money supplies in an effort to keep pace with the [devaluation of the –ed.] dollar and euro. If they don’t, the fear is that their currencies will rise, killing the manufacturing industry.

 

“Since these countries have tiny bond markets and lack reserve currency status, all the new money they print goes straight into the local economy. This pushes prices up.

 

“At first, it’s usually raw materials, intermediate goods, and staple commodities. I remember being in Sri Lanka last year where the price of turnips had recently gone up nearly 40%, and people were demanding higher wages.

 

“As wages in the developing world rise, it eats into the manufacturer’s profit margins. Eventually, the manufacturers capitulate and pass the inflation back to their customers in the developed world.

 

“You can probably guess that, since we’re now paying more to have our products manufactured, we have to raise prices for our retailers and end users.

 

“It takes a while for all of this money to make its way through the system… but rest assured, it does come home to roost. No doubt, inflation is very much with us.”

 

And They Say There’s No Inflation…

Simon Black, SovereignMan.com, 3/30/2012

 

 

But why are Gold and Silver, the Superb Inflation Indicators, well off their 2011 highs? That is mainly because a Fed-led Cartel of Central Bankers and Allies engage in an Ongoing Campaign of Precious Metals Price Suppression in order to support the Ostensible value of their Treasury Securities and Fiat Currencies (see Note 1). Even the Financial Establishment Notables are beginning to acknowledge PM Price Manipulation. Consider Bill Buckler of “The Privateer”:

Buckler writes: “It is interesting that many of the some people who are now abandoning stock markets because of their volatility over the last few years are the same people who become affronted at the slightest mention of the possibility of precious metal price manipulation. A moment’s serious contemplation make things clear. The precious metals and gold in particular have always been the ‘alternative’ to government promise based on and created out of thin-air money. As such, the precious metals have always been Public Enemy No. 1 as far as the money manipulators are concerned. Anyone who aspires to intervention in an economy and the political power that it gives is and always has been an enemy of gold. As long as there is a central bank manipulating money and interest rates, all markets are manipulated by definition. To imagine that the precious metals would be overlooked is ridiculous.”

 

“ALL Markets are Manipulated”

Bill Buckler, www.the-privateer.com, 3/30/2012

And consider The Financial Establishment Icon, the Interest Rate Observer’s, Shrewd Jim Grant

“… The Federal Reserve, Grant said, is the anti-capitalism business… ‘The Fed ought to get out of the manipulation business…. They ought to forswear the intervention in markets.’”

 

Jim Grant, Interview with Maria Bartiomo, CNBC, 3/30/2012

http://video.cnbc.com/gallery/?video=3000080414

 

 

Clearly, and notwithstanding the most recent Gold Price Takedown earlier this week (and the one on February 29, 2012… and the many earlier ones) conditions are building for a continuation soon of the Gold and Silver Bull Markets with even Greater Force.

 

The Gold Market is indeed “like a coiled Spring” to use Jim Sinclair’s term. That is why Deepcaster has recently issued several Buy Recommendations and forecast Timing and Targets notwithstanding ongoing Cartel Takedown attacks. And the characteristics of these Takedowns explains why Deepcaster forecasts different “launch dates” for Bullion and Shares Rallies, as well as for the Massive Prospective Takedown of the Equities Market.

 

There is much at stake in forecasting timing of the Impending Massive Wealth Destruction and Hyperinflation wrought by ongoing Central Bank Quantitative Easing, as accurately as possible. Marc Faber explains why:

 

“I think somewhere down the line we will have a massive wealth destruction. That usually happens either through very high inflation or through social unrest or through war or credit-market collapse.

“I would say that well-to-do people may lose up to 50 percent of their total wealth…

“I think that people should own some gold, and I think that people should own some equities because before the collapse will happen with Mr. Bernanke at the Fed, they're going to print money and print and print and print. And so what you can get is a bad economy with rising equity price.”

Marc Faber, CNBC Interview, 4/2/2012

And Jeff Nielson presents a Candid Description of the Wealth Destruction which has already occurred.

 

“In writing about the relentless collapse of Western economies, I frequently point to ‘forty years of plummeting wages’ for Western workers, in real dollars. However, where I have been remiss is in quantifying the magnitude of this collapse in Western wages.

“On several occasions I have glibly referred to how it now takes two spouses working to equal the wages of a one-income family of forty years ago. Unfortunately that is now an understatement. In fact, Western wages have plummeted so low that a two-income family is now (on average) 15% poorer than a one-income family of 40 years ago.

“… real wages peaked in 1970 at around $20/hour. Today the average worker makes $8.50 hour – more than 57% less than in 1970. And since the average wage directly determines the standard of living of our society, we can see that the average standard of living in the U.S. has plummeted by over 57% over a span of 40 years.

 

“This brings us to the second point: the refusal of our governments to adopt a consistent methodology in reporting inflation statistics can only imply a deliberate attempt to deceive, since it is 100% logically/statistically invalid to simply string together disconnected series of data…

 

“Thus, our governments have been lying about inflation for the last 40 years as a deliberate means of hiding the 57% collapse in our standard of living. Meanwhile, the situation is more than reversed if you’re one of the fat-cats at the top. While average American workers have seen their wages plummet by 57% over the past 40 years, in just 15 years (1992-2007) the 400 wealthiest Americans saw their incomes rise by 700%.

 

“This is economic rape, plain and simple.

 

“The causes of that economic rape are equally obvious…

 

“3) Oligopolies/monopolies. It is elementary capitalist theory that monopolies and oligopolies are unmitigated evils. By definition they are 100% parasitic, and 100% non-competitive – and have absolutely no place in any capitalist economy. Yet today the global economy is totally overrun with these gigantic, non-competitive parasites. With these mega-parasites permanently blood-sucking us, the impoverishment of our societies was an inevitable result.”

 

“U.S. Standard of Living Has Fallen More Than 50%”

Jeff Nielson, Le Metropole Café, 4/02/2012

In sum, more Substantial Wealth Destruction is coming for those who are Not Aware and Not Prepared.

Best regards,

www.deepcaster.com
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© 2012 Copyright DeepCaster LLC - All Rights Reserved
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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