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Trading Lessons

Gold and Silver Are A Profitable Approach to the Coming Crises

Commodities / Gold and Silver 2012 Nov 30, 2012 - 03:47 AM GMT

By: DeepCaster_LLC

Commodities

Profit Opportunities, as well as pain, surely exist in all coming Crises-Inducing developments such as:

 

  • Inflation generating QE-to-Infinity and Eurozone Outright Monetary Transactions
  • Fiscal Cliff/Grand Bargain Negotiations
  • Debt Super-Saturation of most of the countries in the Developed World including the USA, Great Britain, and France, as well as the PIIGS

Refusal to confront, or worse, Denial of, the consequences of inevitable coming Crises in an understandable response, but neither constructive nor profit-generating.

 

Indeed, Denial virtually guarantees the Pain without the Profit.

 

A much more constructive response is to Profit from those Crises which one cannot ameliorate. Given the Crises which are surely coming, profit Opportunities abound. And thus we shall identify a few.

 

For example, Japan experienced a record trade deficit of JPY 1 Trillion in September! Japan, a country with a long history of Trade Surpluses, this third largest Economy in the world, is teetering, with its export sector collapsing. In part this collapse results from decades of massive and increasing and unsustainable government debt, wholesale Central Bank Bond Monetization, and a two decades old Zero Interest Rate Policy (sound familiar?!). And other Asian Tigers’ economies are contracting also, with Thailand’s manufacturing output down 13.7% Y.O.Y. and Philippines exports down 9%, for example.

 

All of the above will hurt the earnings results of Japan’s companies which rely on exports – selected short plays should be very profitable.

 

And the Eurozone presents similar opportunities.

 

“You don’t have to be an economic genius to understand that the perpetual uncertainty over the Eurozone’s future has led to a widespread freeze on industrial investment and development. Industrial production is collapsing at an accelerating rate, falling 7% year-on-year in Spain and Greece, 4.8% in Italy, and 2.1% in France.

 

“…the old cliché about kicking the can down the road is close to becoming no longer possible. Deferring the inevitable is only a political option so long as there is no immediate damage from doing so. But this is no longer true in the Eurozone… Doctors and teachers in Greece do not get paid anymore, and it is going that way in Spain, with regional governments surviving by simply not paying their bills. Government is destroying society, proving the falsity of the heretofore accepted belief (in Europe, anyway) that government makes society better. But then, anyone who has bothered to read Hayek’s The Road to Serfdom will not be surprised.

 

“What was not anticipated in Hayek’s masterpiece is the divided state that is emerging. Greece is part of a larger EU and Eurozone bureaucracy and cannot achieve statist ends by turning her citizens into serfs. The government itself is subservient to higher authorities and is now having that medicine applied to it by its peers. Every visit by the Troika (collectively the European Central Bank (ECB), International Monetary Fund (IMF), and the European Commission) screws the Greek government further towards its own serfdom.

 

“Keep in mind just one thing: Greece is utterly broke and cannot escape that fact. All of the posturing by the three Troika members is designed to avoid facing this reality. The political elite drive this party line and rigidly conform to it.

 

“…the ECB and other national central banks in the Eurozone are now Greece’s largest creditors and cannot take a haircut on Greek debt.

 

“This is cash for an economy that is tanking with its industrial production collapsing. Deposits have flown from the banks, which, without the ECB’s recycling of funds both through the TARGET2 settlement system and… debt as collateral, would themselves default. Tax revenues, insofar as they can be collected, are simply vaporizing.

 

“The concern, obviously, is that Greece is a dry run for Spain and Italy. It is also, as I argue below, a dry run for France, which is in terrible shape and deteriorating rapidly.”

 

“Europe Is Now Sinking Fast”

Alasdair Macleod, peakprosperity.com, 11/20/2012

 

 

That Eurozone “Leaders” continue to have more meetings and to repeat claims that the Latest Band-Aid Fix is The Solution, is not News, but is Reality, albeit unpleasant.

 

The Real News, not widely reported in the MSM at any rate, is that the Eurozone as we know it will not survive. This will adversely affect the Earnings of many, but not all of the companies which do business in or with the Eurozone.

 

Well-chosen, well-timed shorts should be most profitable.

 

And it is not just a matter of shorting companies which are vulnerable to the PIIGS economies. France’s Industrial Production, Employment Growth, and Business Confidence are plummeting. Why? Same reasons – a shrinking economy, higher taxes, and more and more residents eligible for government “benefits,” i.e. socialism come home to roost. The French Welfare State is running out of other people’s money.

 

And a long-standing relatively Open Borders Policy does not help France either. Low-skill migrants who come to France (or the USA for that matter) to share in that Welfare States “benefits” inevitably create a smaller piece of the pie for everyone, because the benefits received exceed the taxes paid by them.

 

Indeed, an Open Borders policy is a de facto form of socialism so far as low-skilled immigrants are concerned. In the U.S.A., for example, 37% of all immigrants, legal and illegal, are on some sort of welfare program (www.cis.org). And in addition, in many states such as California, low-skill immigrants get free medical care and free K-12 schooling for their children. And all these taxpayer-provided benefits greatly exceed the taxes low-skilled immigrants pay.

 

Moreover, virtually all of the countries mentioned above have allowed their Central Banks to implement Inflation-Inducing, Fiat-Currency degrading, Policies via, for example, The Fed’s QE-to-Infinity, the ECB’s outright Monetary Transactions, and Japan’s Debt Monetization. Thus consequent Superb Profit Opportunities arise in certain Inflation Assets (see Note 1, 2, and 3 below). Real U.S. Inflation is already threshold Hyperinflationary at 9.82% per shadowstats.com.

 

All the foregoing dramatically affect Earnings, Taxation, and Economic Recovery Prospects going forward. Given this context, notable for their Superb Profit Potential are Gold and Silver which have rallied lately and have shown remarkable resistance to being taken down off current levels.

 

Indeed, even with the recent mid-week Takedown, Gold has held stubbornly above $1700 and Silver above $33. The Cartel may take them even lower, short-term. But Gold and Silver are still in Rally Mode and still poised to launch up strongly.

 

And Key Technicals (e.g., Point & Figure Chart and Golden Cross) remain Bullish. And Gold is increasingly being used as money to circumvent use of Fiat Currencies such as the $US. Turkey, for example, is buying Iranian Natural Gas with Gold.

 

And Central Banks’ Gold purchases are still increasing overall.

 

And the Chinese New Year (February 10) Gold Buying Season approaches. Indeed, China’s Gold demand will exceed 1,000 tons by 2015, but China’s production will then be only 450 tons, according to the Chinese Ministry of Industry and Information Technology.

 

And Silver looks especially bullish with Strong Buyers appearing under $34 per ounce.

 

Thus a Significant Profit Opportunity exists in these Precious Metals and Mining Shares, but timing is important, especially for the mining shares, and we forecast timing in our Alerts.

 

In sum, if one has Courage for the Truth, the Truth about Economic and financial Realities, Real Statistics (as opposed to Bogus Official ones), and genuinely serious Impending Crises, then one is in a greatly enhanced position to Profit and Protect.

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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