“One of the
great current myths that is being propounded by those in charge is that they
are going to magically withdraw, at the appropriate time, the stimulus which
is currently preventing the world economy from imploding.
What a bad joke,
that is! Tim Geithner, the U.S. Treasury Secretary, may have given the whole
ruse away when he said recently that it was important that the authorities
publically discuss the subject of withdrawing the stimulus because it was
important in sustaining the confidence of financial markets. Very simply,
that’s what this is all about. It is a large con job to keep financial
markets elevated so the average citizen will ignore the rot which is eating
away at the foundation of the economy and the financial system.
Jim Sinclair, the
brilliant gold trader and a man who early on recognized the true destructive
nature of OTC derivatives, has coined an expression for the whole sordid
procedure. He calls it Management of Perception Economics or MOPE as an
acronym. It is patently designed to mislead the public by producing phony
economic statistics to promote the idea that a sustainable economic recovery
is underway.” (emphasis added)
Con Job in the
Financial Markets Continues John Embry, Investor’s Digest of Canada,
Vol. 41, No. 19, October 23, 2009
market rally was helped by a wave of liquidity from near-zero interest rates
and quantitative easing, says economist Nouriel Roubini — but
what’s really fueling this asset bubble is the weakness of the U.S.
dollar, driven by “the mother of all carry trades.”
borrowing at negative 20 per cent rates to invest on a highly leveraged basis
on a mass of risky global assets that are rising in price due to excess
liquidity and a massive carry trade," Roubini writes in the Financial
Asset Bust Ahead Julie Crawshaw, Newsmax.com, November 5, 2009
Signals are Warning us that the Equities Markets are Headed for a Big Fall.
Indeed, it is mainly The Cartel* (see below) which has been boosting Equities
Markets in recent weeks.
But those signals
also constitute an Invitation to Profit which can be realized provided one
chooses the Right Strategy, Vehicles, Timing and Sectors. We offer guidelines
for making these choices, below. However, as background, it is essential
first to consider key Fundamentals and Technicals.
support the “Impending Fall” View as well. It bears repeating
that 70% of U.S. GDP is the U.S. Taxpayer/Consumer, and, often, Mortgage
Holder. A glance at the Real (see below) Payroll and Unemployment numbers
(coincident, NOT lagging, indicators, by the way) show that the economic
condition of that Main Street “Sector” is worsening.
These numbers and
others mean that consumer spending will be increasingly impaired and that the
companies which rely on it (not just American, but Chinese and others) will
take a big Earnings hit.
It also means
that Mortgage Foreclosures will continue to rise, especially in light of the
dramatic increase in Variable Rate Mortgage Interest Resets slated for 2010
and 2011. And it means that government tax revenues will continue to fall.
News that the
Economy has recently become “less bad”, is largely a result of
Bailouts and the Stimulus package (and Data Gimmicking – see below),
whose positive effects are temporary and will dissipate soon.
-- The Fed has
been spiking the Monetary base at a rate so extreme that one can conclude
they are panicking – since the August 12, 2009 near-term trough they
have increased the monetary base at an annualized rate of 96.6%, up to nearly
$2 trillion in the 2 weeks ended October 2, 2009.
As well, consider
just of few key Technicals:
Markets interim highs in recent months have come on increasingly lower
-- An increasing
number of Sectors show losses over the last three months, and a decreasing
number show gains.
Bearish Wedge and Bearish Megaphone Patterns are near Completion
-- The Realities
of our Economic and Financial Crises are being hidden from us by the Official
Distortion of Key Statistics.
Consider the Real
versus Official Numbers as reported to us by Shadowstats.com, which
calculates Statistics the old-fashioned way they were being calculated before
the political gimmicking began in earnest in the 1980’s and
Numbers vs. Real
Price Inflation reported October 15, 2009
6.1% (annualized October Rate)
reported November 6, 2009
U.S. GDP Annual
Growth/Decline reported October 29, 2009
One other factor
must be added to this constellation of factors impelling the Equities Markets
toward a Fall -- Market Intervention by a Fed-led Cartel*.
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.”
For those who
wish to investigate the subject of Interventions of greater length we
recommend 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, and
“There are no Markets Anymore, Just Interventions” Chris Powell
www.gata.com, and “An Overview of the Fed’s Intervention in the
Equities Markets, via the Primary Dealer Credit Facility”
zerohedge.com, Tyler Durden, October 25, 2009.
And the title of
John Embry’s (Sprott Asset Management) recent Article “Con Job in
the Financial Markets” confirms The Cartel’s objective –
“to keep markets elevated so the average citizen will ignore the rot
eating away at the foundation.” Investors Digest of Canada, October 23,
2009. (But they can not keep them elevated forever – for
Deepcaster’s latest Forecasts regarding Timing and Sector Moves see his
latest Alert in the ‘Alerts Cache’ at www.deepcaster.com.)
So, we offer the
following Guidelines to help the typical investor cope.
Investors need to consider Crossover Trends. Changes in Dividend Increases
versus Dividend Decreases in relation to other Market Factors: generally for
example, dividends tend to get cut when Mainstreet – the average
Consumer/Mortgage Holder -- is most severely economically hamstrung (See
“What the False Recovery Means to Income Investors”, Lifetime
Income Report, 11/5/09). Thus, Investors need to rotate in and out of
‘Crossover Trends’ Guideline is a subspecies of the following
-- Buy and Hold
rarely works anymore. If one seriously considers the foregoing, as well as
the fact that the Dow was at 10,000 just over a decade ago, and that the
purchasing power of the U.S. Dollar has declined over 35%, basis the USDX, in
just last seven years, one should not need any more convincing.
-- It is
essential to consider the Interventionals as well as the Fundamentals and
Technicals. Consider the articles cited above as well as Deepcaster’s
“Defeating the Cartel...With Profit” (03/28/2008 (part 1) and
06/19/2009 (part 2)) in the ‘Articles by Deepcaster’ cache at
-- Get the Real
Data. As many Investors suspect, Crucial Official Government and Agency
Economic and Financial Data are of questionable validity. The Data set
forth above from shadowstats.com is a good starting point.
about the realities of the marketplace using Alternative Data Sources such as
Deepcaster, Gold Anti-Trust Committee (www.gata.org), and shadowstats.com as
indicated above. Gathering and staying attuned to authentic information
regarding the marketplace can save one much financial grief as well as
positioning one for profit.
-- 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% 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 below, without risk.
-- Be aware of
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 periodic takedowns of Gold and Silver and, since July, 2008, of
Crude Oil, become understandable. And the fact that The Fed is a private
for-profit entity (which prints money for free and then charges Taxpayers
interest on it!) makes it even more understandable. Moreover, such an insight
applied daily to the market can result in a tremendous edge in understanding
market performance, present and future.
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.
Interventional Realities, and especially the Cartel’s capacity to move
the Markets at will, (or to ensure they do not move substantially over long
periods of time, as they wish) two considerations are especially important:
Sector Selection and Time and Risk Premium Erosion. Sector Selection is so
important we treat it separately below.
But, given Cartel
Interventional Capacity, it is essential for those using options to insulate
oneself against time and risk premium erosion. Fortunately ETFs and
especially leveraged ETFs allow one to do this, though they themselves are
not without risk.
The 200% and 300%
leverage ETF’s are Exciting Newcomers to the Exchange Traded Funds
Territory in recent months.
these 300% Funds seek leveraged investment results which are triple that of
the underlying benchmark, in the case of the ‘Long’ Funds, and triple
the Inverse of the underlying benchmark in the case of the
Clearly, a Major
Positive of such Exchange Traded Funds is the substantial avoidance of the
Time and Risk Premium decay inherent in Options. By substantially eliminating
that Premium decay, one barrier to Profit is removed.
Clearly, also, a
Major Negative is that the losses which result from an incorrect judgment
about the direction of a particular Market Sector are magnified threefold or
more with potentially catastrophic results.
Yet in our view
these Triple Funds have their place, and not just for hedging, but for profit
plays as well, but for sophisticated investors only.
A benefit in
using these funds is that precise timing becomes somewhat less important,
provided one gets the Direction of the next major move right.
advantage -- particularly in today’s Markets in which ‘Buy and
Hold’ rarely works anymore -- is that one can profit whether markets
rise or decline. When we last checked there were about as many 300% leverages
inverse (i.e. short) funds, as there are 300% “long” funds.
For More details
about the opportunities and Risks associated with these funds see our
“A Profit Strategy and Vehicle for Brutal Markets” (5/22/09)
article in the ‘Articles by Deepcaster’ at www.deepcaster.com.
-- 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 and their
Favored Financial institutions 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. Fortunately, some
Covert Interventions “leave tracks” which can be read by astute
As well, such
investors may not have thought systematically about how one copes with and
profits from such Intervention and Data Manipulation.
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 beginning early in 2008,
been taken down in price from its highs of over $1000/oz down to around the
mid-$700 level (e.g. 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
still manipulated, Deepcaster’s view is that its price would be over
$3,000.00 per ounce today.
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,
certain characteristics of which we outline in this article:
-- Track the
Covert Interventionals as well as the Technicals and Fundamentals and Overt
Interventionals. Essential to Timing Decision is tracking the Footprints, as
it were, of the Covert Interventions (e.g. the Repo and TSLF Pools) daily can
often, but not always, give one excellent clues about 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.
As should be
evident by now Prices in entire Sectors have a sad history of being moved by
Cartel Intervention. Gold and Silver prices have, for years, been the
Primary, but certainly not the only victims.
Militates in favor of Sector Investing The demise of Lehman Brothers, Bear
Stearns, AIG and CIT are only a few of the indicators that OTC (i.e. not
publically traded and thus “dark”) Derivatives can bring down any
The Fall, 2008
Crash reduced the Notional amount of OTC Derivatives outstanding by
“only” some $91 Trillion. There still exist, as of the latest BIS
report (www.bis.org, path: Statistics>Derivatives>Table 19), some $592
Trillion in Toxic or Potentially Toxic Derivatives World Wide.
But short of a
total systemic collapse, OTC derivatives risks threaten some companies more
than others. Unfortunately, these risks are often not visible, even in the
most detailed SEC Filings and Financial Reports.
That is because
these risks are often realized through counterparties to contracts or other
relationships with the company in question.
suppose a major aircraft manufacturer has a framing metal supply contract
with a privately held Specialty Metals Manufacturer. And suppose that
Specialty Metals Manufacturer is destroyed by Toxic Derivatives problems.
Thus, no specialized metal, no planes.
manufacturer’s Financials and Filings might well not have revealed this
upstream counterparty’s OTC derivatives risks. Therefore,
Ceteris Paribus, Sector Investing through ETF’s is often (but not
always) the preferred way to go.
Requires Special Attention to the Interventionals.
Interventionals favor, or disfavor as the case may be, certain Sectors over
others. Which Sectors are favored, and by how much, varies through time.
Sectors fall into, and out of, Cartel favor periodically. Thus for Sector
Investing it is especially important to track the Interventionals.
to Strategy, Timing, Sectors and Vehicles is thus essential to profiting in
Bull or Bear Markets.
provide the Profit Opportunity Thresholds, whether in Bull or Bear Markets.
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Preservation - Wealth Enhancement
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