4 Essential Assets for Profit and Protection

“The Renmembi will become the World’s Reserve Currency.”

Pan Gongsheng, V.P. China Central Bank,

Caijing Financial Magazine, 05/20/2014

There are Four Fortress Assets Investors should hold in Today’s environment of increasing Geopolitical Economic, Financial and Market Risk.

Indeed, one of the 4 “Must Own” Fortress Assets is an interest in Food Production.

“Given the trends in world food production, energy prices, droughts, El Niños, depleting aquifers, and the like -- we actually have to work very hard to come up with any scenarios wherein food prices might fall instead of rise.”

“Rising Resource Costs Escalate Odds of Global Unrest: The critical 40% income-to-food threshold,” C. Martenson, 05/13/2014

But owning some of all four is very important. Indeed, all Four Taken Together are the “Fortress Assets Quartet.”

And all have Unparalleled Profit and Wealth Protection Potential in today’s increasingly risky environment.

Fortress Assets are those which offer considerable Profit Potential and some considerable degree of protection from Inflation, Hyperinflation or Deflation.

To identify this Quartet consider that the world’s population is about 7 billion and increasing by about 80 million per year.

A purblind economist may salivate over the fact that more people usually means more consumption and thus more GDP growth from increased economic activity.

But what really counts is GDP per capita. If population increases faster than wealth production, the population as a whole is poorer. That is, GDP per capita is less. And this is happening in much of the world today, (e.g., why India and China still have hundreds of Millions living in poverty) and is in large part why the middle class in the USA is diminishing. The population of the USA is increasing faster than any increase in Wealth.

In other words, one must consider the issue of carrying capacity (resources) limits. Available Topsoil for food production is one limiting factor, which is why China (with nearly 1.4 billion people) is having difficulty feeding itself. Topsoil is created only by natural processes and, once lost, takes decades to replace.

Twenty percent of China’s arable land has been irretrievably lost to toxic pollution or topsoil loss. China must, therefore, increasingly import food.

As well, “free” or low cost potable water for human consumption and agriculture is increasingly scarce when considered on a per capita basis.

“•The Ogallala aquifer that waters the Great Plains will be gone “in our lifetime,” according to the U.S. Agriculture Department

“•Half the rivers in China have disappeared since 1990

“•Worldwide demand for water will outstrip supply by 40% come 2030, according to a 2009 study prepared for a handful of giant companies including water guzzlers like Coca-Cola, Nestle and brewer SABMiller.”

“One Index Finally Makes Water a Great Investment,” Addison Wiggin,

Dailyreckoning.com, 05/13/2015

But still-rapidly-growing countries like China and India (with nearly 1.2 billion people) nonetheless have an increasingly (for a while) large economic middle class, i.e., with increasing purchasing power.

These burgeoning new middle classes demand more of the good things in life, but they also need food and potable water, and increasing amounts of each. Thus these facts have given rise to several of Deepcaster’s Buy Recommendations.

Accordingly, costs for Food have been and are rising rapidly with concomitant social upheaval (and were, e.g., the primary cause of The Arab Spring Riots) as is inflation generally, though most Bogus Official figures disguise it (See Shadowstats Note 1 below re True Inflation (9.69%) and Unemployment (23.2%) in the USA. Relying on such accurate figures has facilitated Deepcaster’s recent profitable recommendations – (see Note 2).

Consider

“There's quite a bit of research to support the idea that people who spend above a certain percent of their income on food are more likely to protest, riot, or otherwise become restive. That number seems to have a minimum threshold of 40% of income to food costs, give or take:

“Since the beginning of 2014, riots have occurred in countries including Thailand and Venezuela. Although they’re different cultures on different continents, these mass protests movements may all have one commonality; increasing food prices may have contributed to their occurrence. The cost of food has been steadily increasing in both Thailand and Venezuela; last month demonstrators in Caracas took to the streets marching with empty pots to protest food shortages. According to Dr. Yaneer Bar-Yam and fellow researchers at the New England Complex Systems Institute (NECSI), events such as these may be anticipated by a mathematical model that examines rising food costs.

“The events of 2014 aren’t without precedent; the price of food has provoked (and placated) throughout history, beginning in Imperial Rome when Augustus introduced grain subsidies. In recent years, the Middle East has been particularly affected by the cost of grain. Centuries after Egypt developed bread as we recognize it, the nation experienced a bread intifada – the country rioted for two days in January 1977 following Anwar Sadat’s decision to drastically decrease food subsidies. More recently, under the rule of Hosni Mubarak, the price of grain rose 30 percent between 2010 and 2011. Then, on January 25, 2011 a new revolution began in Egypt….

”Saudi Arabia’s main aquifer is slated to run out as early as 2016. Because it has abundant energy resources Saudi Arabia will be able to turn to desalination plants, but for how long and at what costs to their ability to export oil as that same oil is being used to power those plants?

“It takes up to 1,000 tons of water to grow one ton of wheat. Therefore, when China imports grains, like corn, soybeans and wheat, it is actually importing water, something it increasingly needs to do because of aquifer depletion and surface water pollution.

“Given the trends in world food production, energy prices, droughts, El Niños, depleting aquifers, and the like -- we actually have to work very hard to come up with any scenarios wherein food prices might fall instead of rise.”

“Rising Resource Costs Escalate Odds of Global Unrest: The critical 40% income-to-food threshold,” C. Martenson, 05/13/2014

Thus rising essential resource costs are pushing all of us toward an inflationary future.

Indeed, because most Major Central Banks continue to debase their currencies via intensifying printing of their Fiat Currencies (cf. our essays on the Currency Wars) it is highly likely Hyperinflation is in our future. In other words, the Cost of Essentials with limited (“easy”) availability like Food, and Potable Water and Energy will increasingly Rise. Indeed, if one considers the Real Numbers, the U.S. is already on the Hyperinflationary (i.e., intensifying U.S.$ debasing) Threshold (Note 1).

This concern that there not be a run on the $US, is why the private, for-profit U.S. Federal Reserve takes pains to conceal the fact that it is not tapering but rather intensifying its Bond Buying Program.

“Is the Fed ‘tapering’? Did the Fed really cut its bond purchases during the three month period November 2013 through January 2014? Apparently not if foreign holders of Treasuries are unloading them.

“From November 2013 through January 2014 Belgium with a GDP of $480 billion purchased $141.2 billion of US Treasury bonds. Somehow Belgium came up with enough money to allocate during a 3-month period 29 percent of its annual GDP to the purchase of US Treasury bonds.

“Certainly Belgium did not have a budget surplus of $141.2 billion. Was Belgium running a trade surplus during a 3-month period equal to 29 percent of Belgium GDP?

“No, Belgium’s trade and current accounts are in deficit.

“Did Belgium’s central bank print $141.2 billion worth of euros in order to make the purchase?

“No, Belgium is a member of the euro system, and its central bank cannot increase the money supply.

“So where did the $141.2 billion come from?

“There is only one source. The money came from the US Federal Reserve, and the purchase was laundered through Belgium in order to hide the fact that actual Federal Reserve bond purchases during November 2013 through January 2014 were $112 billion per month….

“Why did the Federal Reserve have to purchase so many bonds above the announced amounts and why did the Fed have to launder and hide the purchase?

“Some country or countries, unknown at this time, for reasons we do not know dumped $104 billion in Treasuries in one week….

“The Fed realized that its policy of Quantitative Easing initiated in order to support the balance sheets of ‘banks too big to fail’ and to lower the Treasury’s borrowing cost was putting pressure on the US dollar’s value. Tapering was a way of reassuring holders of dollars and dollar-denominated financial instruments that the Fed was going to reduce and eventually end the printing of new dollars with which to support financial markets. The image of foreign governments bailing out of Treasuries could unsettle the markets that the Fed was attempting to sooth by tapering….

“Washington’s power ultimately rests on the dollar as world reserve currency. …

“If the world loses confidence in the dollar, the cost of living in the US would rise sharply as the dollar drops in value. Economic hardship and poverty would worsen. Political instability would rise.

“If the dollar lost substantial value, the dollar would lose its reserve currency status. Washington would not be able to issue new debt or new dollars in order to pay its bills….”

“Fed Disguising QE by laundering it through Belgium,” Paul Craig Roberts, paulcraigroberts.org, 05/12/2014

What incentive would a country like Belgium have for cooperating with The Fed?

Money

Consider the following from the Establishment The Wall Street Journal of all places.

“Foreign banks are collecting billions of dollars in interest from the Federal Reserve, analysts said, a sum that stands to rise when the central bank ultimately begins raising interest rates.

“In 2014, the Fed will pay … an estimated $3.37 billion headed to foreign banks specifically, according to an analysis from J.P. Morgan, which used Fed data.”

“Foreign Banks Collecting Billions from the Fed,” Mike Cherney

Blogs.wsj.com, 05/08/2014

Ah yes, $3.37 billion in printed $US “paid” to Non-US Banks for “Interest.” Such a deal!

Of course, this intensifying printing increasingly diminishes the Value (Purchasing Power) of the $US denominated Assets, and the Purchasing Power of the Dollars in which they are denominated. And while the value of paper Assets can be “gamed,” the cost of Tangible Assets in de facto Limited Supply (e.g., Food, Water, Energy) will continue to increase in Fiat $ terms so long as Money Printing intensifies.

That is one reason all that money printing will come to a very bad end according to noted Investor, Jim Rogers, with whom we agree.

Consider that Russia reduced its holdings of (sold) U.S. Treasuries by 20% in March 2014 – no surprise there. And China just agreed to a non-$US Settlement deal with Russia’s largest bank, VTB. And China and Russia just agreed to a $400 Billion 30 year Natural Gas Purchase Agreement.

The move away from the $US and the Currency Wars, in general, are intensifying and it is increasingly likely the Chinese Yuan will displace the $US as the World’s Reserve Currency.

For Profit and Protection as this Displacement and Currency Wars intensify, Investors will want to own or hold ownership interests in the Fortress Assets Quartet: Food, Water, and Gold and Silver.

Best regards,

Deepcaster
May­­­ 23, 2014

Note 1: *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 May 15, 2014

1.95%/9.69%

U.S. Unemployment reported May 2, 2014

6.3%/23.2%

U.S. GDP Annual Growth/Decline reported April 30, 2014

2.33%/-1.85%

U.S. M3 reported May 12, 2014 (Month of February, Y.O.Y.)

No Official Report/4.15% (i.e., total M3 Now at $15.782 Trillion!)

Note 2: Our attention to Key Timing Signals and accurate statistics has facilitated Recommendations which have performed well lately. Consider our profits taken in the last eight months*:

•30% Profit on Equity Index Puts on May 13, 2014 after 34 days (i.e., about 320% Annualized)

•75% Profit on Crude Oil Call on April 14, 2014 after 13 days (i.e., about 2000% Annualized)

•60% Profit on Water Management Company on March 3, 2014 after 454 days (i.e., about 50% Annualized)

•100% Profit on Crude Oil Call on February 10, 2014 after 27 days (i.e., about 1400% Annualized)

•30% Profit on Equity Index Puts on February 5, 2014 after 8 days (i.e., about 1440% Annualized)

•55% Profit on Water Management Company on January 15, 2014 after 406 days (i.e., about 50% Annualized)

•140% Profit on Equity Index Call on December 27, 2013 after just 10 days (i.e., about 5200% Annualized)

•40% Profit on Equity Index Call on December 19, 2013 after just 2 days (i.e., about 7500% Annualized)

•135% Profit on Equity Index Call on October 28, 2013 after just 13 days (i.e., about 3800% Annualized)

•110% Profit on Equity Index Call on October 22, 2013 after just 7 days (i.e., about 5800% Annualized)

•120% Profit on Equity Index Put on October 9, 2013 after just 16 days (i.e., about 2700% Annualized)

*Past Profitable Performance is no assurance of future Profitable Performance.