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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Investors Gaining from Economic Exposés and Realities

Commodities / Gold and Silver 2012 Jun 23, 2012 - 06:23 AM GMT

By: DeepCaster_LLC

Commodities

Best Financial Markets Analysis Article“The U.S. economy looks weaker than it did when the Fed last met in April. Growth was more sluggish in the first three months of the year than first estimated.

“Job growth averaged only 73,000 in April and May, after average gains of 226,000 per month in the first three months of the year.

“The number of people seeking unemployment benefits has risen about 5 percent in the past six weeks, and employers posted sharply fewer jobs openings in April compared to the previous month.


“And economists worry the debt crisis in Europe is worsening, even after Greek election results increased the likelihood that Greece will stay in the euro currency alliance.

“Yet it’s unclear whether any further Fed action would help the economy much. Long-term U.S. interest rates have already touched record lows. Businesses and consumers who aren’t borrowing now might not be moved to do so if rates slipped a bit more.

“Critics have complained about the Fed’s efforts to boost growth over the past three years by purchasing more than $2 trillion in bonds. They say the extra money added to the banking system could ignite inflation once the economy rebounds.”

“Fed extends ‘Twist’ program to drive rates lower”

Martin Crutsinger, AP Economics Writer, Associated Press, 6/20/12

With all the Chaos in Markets and Economies these days, Investors seeking Gain and Protection are well advised to focus on Realities rather than Main Stream Media and Official Fictions.

Here in summary are Key Realities:

--Neither the U.S. nor Eurozone Economies is recovering. They continue to be in recession (when one considers the Real Numbers – see below) and continue to contract as we and a few others have been saying for months. Thus the 6/20/12 AP Report above is not a surprise to us.

--Leading Sovereigns, and not just the PIIGS, are suffering from Debt Hypersaturation. This includes France, the U.K., and the USA, whose debt is growing at $1.5 Trillion per Year.

--Likewise, Major Banks are suffering from Debt Saturation (i.e. holding non-performing “Assets”). In other words, Solvency is the Fundamental Challenge for Major Sovereign Nations and Banks, not Liquidity. Merely piling more Debt upon Unpayable Debt and/or increasing money Printing (i.e. Q.E.) is no solution, but is actually harmful in the long run.

--Under any reasonable optimistic Economic Growth Scenario, none of the Debts of the aforementioned can ever be repaid; indeed it is becoming difficult or impossible for certain Sovereign Nations even to pay interest on the debt. This makes Partial Defaults and more Q.E. are the most likely “Solutions.”

--And even China is suffering from a Debt Saturation Problem though they have the resources to prevent it from being Economically Catastrophic.

--What China finds it increasingly difficult to successfully address is the demands of its increasingly affluent 1.3 billion people (growing by at least 20 million per year) for food and fuel. India, with one billion people, faces the same problem.

--Thus China is the Major Purchaser of Iranian Oil. Could they, would they, stand by if Iran is attacked or any of their other present or prospective energy (or food) sources were threatened?

--Given all the Problems elsewhere, the $US is currently the Most Attractive Major, but Ultimately Doomed, Fiat Currency, at least over the Short Term. Thus the U.S. Dollar has been rising as a share of Global Bank reserves to nearly 2/3. But the prospect of “Q.E. to Infinity” will weaken the $US Purchasing Power and generate Hyperinflation.

--The US Fed and ECB’s repeatedly expressing willingness to “do what it takes” to bolster the economy, as well as their action (e.g., most recently the Fed’s extension of Operation Twist) both have periodically served to boost Equities Markets but with increasingly less effect. Witness the Equities Markets Swoon, one day after the Operation Twist Extension Announcement. The private-for-profit Fed very much need to be audited, so the American people can determine whether it is acting in their best interest, or the interest of the Mega-Banks which own it.

--The foregoing indicates an increasingly serious economic and financial situation. For example, in the U.S.A. unfunded State pension liabilities are $3.9 Trillion according to a recent J. P. Morgan Chase study.

--Official Data of Key Major Economies is Bogus; the U.S. and China are two leading Purveyors of Bogus Economic Data. Therefore, critically important for Investors is use of Real Data. In the U.S., for example, Real Inflation is 9.3%, Real Unemployment is 22.7% and Real GDP a Negative -2.17% per shadowstats.com*

*Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider

Bogus Official Numbers    vs.      Real Numbers (per Shadowstats.com)

Annual U.S. Consumer Price Inflation reported June 14, 2012
1.70%     /     9.30%

U.S. Unemployment reported June 1, 2012
8.2%     /     22.7%

U.S. GDP Annual Growth/Decline reported May 31, 2012
1.99%        /     -2.17%

U.S. M3 reported  June 18, 2012 (Month of May, Y.O.Y.)
No Official Report     /     2.52%

--Note that the Real U.S. Inflation Rate of 9.3% is already threshold Hyperinflationary. This is why Deepcaster’s High Yield Portfolio is specifically aimed at generating a Total Return (Gain plus Yield) in excess of Real Inflation (see Note 2).

--One Especially Essential Reality: Gold and Silver have been much better investments than Equities over the past decade, with Gold up over 500%. This will continue to be the case notwithstanding ongoing Cartel (Note 1) Price Suppression Actions. Equities-in-general have been losers over the past decade when Real Inflation is factored in.

--As to Strategy, Bill Murphy, the Midas Proprietor of LeMetropoleCafe.com, provides us the Key: Buy Physical on Dips just like certain Mega-Bankers and other Major Investors are doing, ever so quietly.

“The Gold Cartel has been going all out to get the prices of gold and silver down. The nature of their selling appears to be showing a bit of desperation by doing what they are doing. Desperation because we are in a No Solution situation in Europe, and even in the US. The only course of action available which won’t get the politicians in both countries kicked out of office is massive amounts of money printing. This is why The Gold Cartel is so desperate to take the prices of gold and silver off the radar screen as much as possible; hence, their constant bombings.

“Yet, for all their huffing and puffing, the Gold Cartel is not blowing down the precious metals. And this is because the ‘big money’ is buying up suddenly cheap gold (and silver) after their attacks. They have become SO blatant, with their moves expected, the buyers continue to scoop up gold and silver when the cabal forces make their move … which is why the prices keep rebounding after the raids. I know that is a bit repetitive, but it is important to emphasize the price action dynamics because this buying is building formidable bases in both precious metals … bases which can support moves to much higher price levels.”

Bill Murphy, lemetropolecafe.com, 06/18/2012

A concluding Object Lesson for the Wise: The ‘Big Boys’ keep Buying, quietly Buying on the Dips. Carpe Diem! Just recently we hear:

“(The GoldCore site has two pleasant reports) – that Russia bought 500,000 oz of gold for FX reserve purposes, and an unsourced interview:

‘Eugene Kim, chief investment officer at the central bank’s foreign-exchange reserve management group, said its gold holdings are “too small” given the size of its forex reserves…Mr. Kim said the central bank needs to boost its gold holdings even after two purchases last year that took the amount to 54.4 metric tons, or about 1% of the total reserves… “the BOK needs to buy more. We may do so this year,” he said.’

“See www.goldcore.com/goldcore_blog/russia-buys-05-million-ounces-and-bank-korea-“needs-buy-more”-gold.”

Courtesy of JBGJ, 06/21/12

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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