CRISES-OPPORTUNITIES AS WE MOVE INTO THE ABYSS
--Gold, Equities, Crude Oil, Commodities & U.S. Treasuries--Denial of Unpleasant Realities can cause extraordinary Portfolio and Personal Pain.
Unfortunately, there are some Seriously Unpleasant Realities developing in the Markets and Economy--considerably more Unpleasant than those we have seen to date.
Indeed, the next sixty days or so should provide a Blunt Introduction to those
Unpleasant Realities. But it is Deepcaster's aim to find Opportunities for profit and protection in those Realities.
In order to identify these Crises-Opportunities it is important to understand a bit more about the Financial Abyss into which we are about to be taken.
The European, Swedish and Indonesian Central Banks just hiked key interest rates, despite the fact that the international economy is slowing. Equities markets around the world are in Bearish downtrends, in the United States for the first time in 34 years.
We are not likely to find salvation in 'Emerging Economies'--Tokyo's market recently experienced eleven down days in a row, the Toronto market recently had a 3% down day, and China's markets have been dropping for several months. And India is suffering 11%+ inflation, rising interest rates, slowing growth, and a stock market down over 40% from this year’s high.
Indeed, lest anyone think the Euro-zone can be the International Economy's salvation, just consider that the European Central Bank’s monetary creation rate (M3) is over 10%.
Record High Oil prices we are experiencing NOW will surely cause a hyperinflationary ripple effect for many months downstream, even if they begin to significantly decline soon.
Real U.S. Consumer Price Inflation is still nearly 12%, Real U.S. Unemployment nearly 14%, and Real Money Supply Inflation (M3) is still around 16% annualized according to the quite credible calculations of shadowstats.com
Thus we are taken into the Abyss of worsening HYPERSTAGFLATION.George Soros, who has made a buck or two calling them right, opines:
"To expect [to come] out of the recession by the end of the year,
I find that inconceivable..."
And there are many other "Shoes to Drop". Consider Commercial
Real Estate: Richard Berner points out "real outlays for office construction rose at an 18.6% annual rate over the past two years". Yet the U.S. national office vacancy rate rose to 12.6% in the fourth Quarter, 2007, the first such increase in 4 years.
Supplies are increasing at the very time demand is decreasing. And that vacancy rate does not yet reflect the space increasingly becoming available as mortgage lenders and other financial institutions declare bankruptcy.
Even the so-called “Government Sponsored Enterprises” are moving into The Abyss: Fannie Mae and Freddie Mac shares are down over 90% from their 52-week highs as we write!
Speaking of the health of Financial Institutions, a study by the hedge fund Bridgewater Associates found that losses by financial institutions could total $1.6 trillion dollars, and not the $400 billion earlier estimated.
Fortunately, Investors and Traders have never had so many opportunities to profit on the downside, as they do today. There continues to be a relentless proliferation of Exchange Traded Funds and Exchange Traded Notes, which track various Sectors on both the long and short side.
Moreover, these instruments not only allow tracking on a one-to-one basis. There are also ETF's and ETN's in most Sectors which allow one to go 'double short' or 'double long' thus magnifying the moves in that Sector by a factor of two. Indeed, Deepcaster recommends taking a position in one of these instruments in his latest Alert posted at
www.deepcaster.com. Though the outlook is bleak, there is one other Important Factor to consider when Forecasting – the Interventionals. Deepcaster, and increasing number of others, continue to develop evidence that a U.S. Fed-led Cartel* of Central Bankers and their allies, including key Primary Dealers, regularly intervene in most, if not all, major market sectors, including the Precious Metals, Equities, Crude Oil and other key Sectors.
*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Central Bankers and Allies to read Deepcaster’s July, 2008 Letter containing a summary overview of Intervention entitled “Market Intervention, Data Manipulation Still Accelerating -- Increasing Risks, The Cartel End Game, and Latest Forecast” at
www.deepcaster.com >LatestLetter. 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.”
Key Interventionals support our Forecast that the beginning of a Series of Mammoth Moves in several important Sectors is coming quite soon. Consider a very brief overview of the following Sectors, for example, which we address in greater detail in our latest Alert posted at
www.deepcaster.com. EQUITIES:
Fundamentally, Equities should be aiming in only one direction: down, not yet having fully reflected the terrible economic and financial prospects which we and others have described in recent months.
Yet technically the signals are mixed with a recent Dow 14 day Stochastic signaling “buy” but a recent 30 day Stochastic signaling “sell,” for example. Of course, given such mixed signals, the Interventionals are key. Evidence from the Repo Pool trend and elsewhere indicates that The Cartel is prepared to allow the Equities Markets to fall soon, but only just so far.
CRUDE OIL
Crude Oil remains technically quite overbought. For example, the Full Stochastics indicate a short-term correction is likely. Fundamentally, the world is awash is above-ground Crude with Tankers sitting full off the coasts of the USA and Iran.
But the issue of possible war with IRAN compels us to once again issue our Serious Caveat on any Crude Oil Play. In the event of a Geopolitical Development, whether Adverse or Positive, Crude can make Huge Moves in an instant. In the long-term Deepcaster is still quite bullish on Crude, but in the next very few months the picture is much more complicated.
GOLD and SILVER
Given The Generally Gloomy Outlook for the Economy and the Markets, Gold and Silver should shoot to the moon as Equities and Crude are taken down. But notwithstanding that Gold and Silver are Real Money and the Ultimate Measure and Store of Value, they suffer, nonetheless, one Major Disability:
Gold and Silver are the Mortal Enemies Number One of The Cartel's* Fiat Currencies and Treasury Securities, because they are competitors for being Ultimate Measures and Stores of Value. As such, they are at Great Risk of repeated Takedowns, such as those which Deepcaster correctly Forecast and chronicled regarding the March, 2008 crisis, and the June, 2008 Takedowns. See Deepcaster's July, 2008 Letter “MARKET INTERVENTION, DATA MANIPULATION STILL ACCELERATING: Increasing Systemic Risks, Cartel ‘End Game’ Threatening, Thus a Solution” in the Letters Cache at www.deepcaster.com
The Only Question is whether The Cartel still has the Firepower to effect another Major Takedown. Consider that the Cartel has over One TRILLION Dollars U.S. in Gold Derivatives Contracts available to move the Gold Market alone. (see Deepcaster's
July, 2008 Letter and the Bank for International Settlements Triennial Survey at www.bis.org, Path: Statistics>Derivatives> Table 19 and following).
If the Equities Markets and Crude are to be taken down, from the Cartel's perspective it must attempt to prevent investors from “escaping” to Precious Metals.
But the Gold-Bullish fundamentals are stronger than they have been in years, as the July 11, 2008 launch up demonstrates. Whether The Cartel can still succeed in their next Takedown attempt is the Question of the Year for the market. Deepcaster’s latest forecast addresses just that question.
U.S. TREASURIES – 10-year Note and 30-year Bond
Given that we are moving into HyperStagflation, and IF the Equities Markets and Crude Oil and Gold are all successfully Taken down, the obvious beneficiaries should be the long-dated U.S. Treasury Securities. In that event, long-term rates would decline. On the other hand if Equities, or Crude, or, especially, Gold are not taken down, long rates would rise, probably dramatically.
COMMODITIES
Similarly, IF Equities, Crude and Gold are successfully Taken Down, most commodities (i.e. with the exception of select agricultural commodities) would likely begin to be Taken Down as well, as Market Intervention by The Cartel coupled with slowing economies worldwide take their toll. (Such a takedown would likely last only a few months, since the long-term price outlook for commodities remains very bullish.) A variety of “short funds” now provide vehicles to profit in such a scenario. Similarly, if Gold or Crude is not taken down, commodities price inflation generally would likely continue.
Crisis often equals opportunity
Deepcaster
July 11, 2008
DEEPCASTER LLC
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