“Last week I was both surprised and
pleased when the Supreme Court upheld lower court decisions requiring the
Federal Reserve Bank to comply with requests for information made by
Bloomberg under the Freedom of Information Act ("FOIA"). Bloomberg
simply wanted to know who received loans from the Fed's discount window in
the aftermath of the 2008 financial market crisis, and how much each entity
received. Surely this is basic information that should be available to every
American taxpayer. But the Fed fought tooth and nail all the way to the
Supreme Court to preserve their privileged secrecy…
The Fed lent huge sums of our money to
foreign banks. This in itself was not surprising, but the actual amount is
staggering! In one week at the height of the crisis, about 70% of the money
doled out went to foreign banks. We were told that bailing out banks was
going to stave off a massive depression. Depression for whom? We now know
that the Fed's bailout had nothing to do with helping the American people,
who have gotten their depression anyway with continued job losses and
…perhaps the most staggering revelation
is that quite a bit of money went to the Arab Banking Corp., in which the
Libyan Central Bank owned about a third of its stock. This occurred while
Libya, a declared state sponsor of terrorism, was under strict economic
sanctions! How erratic the US must appear when we shower a dictator
alternately with dollars and bombs!... This would not be the first time the covert activities of the Fed have
undermined not only our economy and the value of the dollar, but our foreign
policy as well…
As the world economy continues to falter in
spite of - or rather because of - cheap money doled out by the Federal
Reserve, its ability to deceive financial markets and American taxpayers is
coming to an end. People are beginning to realize that when the fed in effect
doubles the worldwide supply of US dollars in a relatively short time, it has
the effect of stealing half your money through reduced purchasing power.
Rapid inflation will continue as trillions in new money and credit recently
created by the Fed flood into the commodity markets.
It is becoming more and more obvious that the
Fed operates for the benefit of a few privileged banks, banks that never
suffer for bad decisions they make.”
Rep. Ron Paul (R-TX): "At The Height Of
The Crisis 70% Of Fed Loans Went To Foreign Banks, While Americans Were
The Daily Bail, 4/4/11
“We now have an economy in which five
banks control over 50 percent of the entire banking industry, four or five
corporations own most of the mainstream media, and the top one percent of
families hold a greater share of the nation’s wealth than any time
since 1930. This sort of concentration of wealth and power is a classic setup
for the failure of a democratic republic and the stifling of organic economic
growth.” (emphasis added)
- "In April 2009
the FASB caved in to pressure from the Federal Reserve, Treasury, and
Wall Street to suspend mark to market rules, allowing the Wall Street
banks to value their loans and derivatives as if they were worth 100% of
their book value.
- The Federal Reserve
balance sheet consistently totaled about $900 billion until September
2008. By December 2008, the balance sheet had swollen to $2.2 trillion as
the Federal Reserve bought $1.3 trillion of toxic assets from the Wall
Street banks, paying 100 cents on the dollar for assets worth 50% of
- By December 2008 the Federal Reserve had
moved their discount rate to 0%. For the last two years, the Wall Street
banks have been able to borrow from the Federal Reserve for free and
earn a risk free return of 2%. The Federal Reserve has essentially
handed billions of dollars to Wall Street.
- When it became clear in October 2010
that after almost two years of unlimited liquidity being injected into
the veins of zombie banks was failing, Ben Bernanke announced QE2. He
has expanded the Fed balance sheet to $2.6 trillion by injecting $3.5
billion per day into the stock market by buying US Treasury bonds. Bernanke’s
stated goal has been to pump up the stock market. While taking credit
for driving stock prices higher, he denies any responsibility for the
energy and food inflation that is spurring unrest around the world.
- The Federal Reserve
has increased the monetary base by $500 billion in the last three months
in a desperate attempt to give the appearance of recovery to a
It should warm your heart to know that
Financial Profits have amazingly reached their pre-crash highs. All it took
was the Federal Reserve taking $1.3 trillion of bad loans off their books,
overstating the value of their remaining loans by 40%, borrowing money from
the Fed at 0%, relying on the Bernanke Put so their trading operations could
gamble without fear of losses, and lastly by pretending their future losses
will be lower and relieving their loan loss reserves. The banking industry
didn’t need to do any of that stodgy old school stuff like make loans
to small businesses. Extending and pretending is much more profitable.”
“Extend and Pretend Is Wall Street's
Jim Quinn, The BurningPlatform.com, 3/30/11
“Stocks are levitating on a near-ocean
Richard Russell, Dow Theory Letters, 4/1/11
The Bubbles in the
Markets and Economy are No Secret.
But it is important to
clearly identify them and to indicate how to protect against, and profit
from, their Popping, and, in two Non-Bubble cases, to profit from their
First, consider the
- Recent Estimates indicate that the Fed itself is
buying over 70% of all long-dated U.S. Treasury Securities. We think the
percentage is higher.
Whatever the percentage, the effect of this buying is to keep Treasury Prices
artificially High and thus Treasury Yields artificially Low – a Bubble
We expect this condition will persist through the next Equities Takedown leg
(because U.S. Treasuries are ostensibly a Safe Haven) and have given specific
forecasts regarding Timing in our recent Alerts.
This Bubble is caused primarily by the Fed’s Destructive (of the
Purchasing Power of the US Dollar) Policies of Excessive Q.E. which have also
fueled the dramatic Food and Energy Price Inflation we have seen recently.
In sum, U.S. Treasury Strength is a Bubble which surely will Pop.
That is why the Founder of the World’s largest Bond fund, Bill Gross of
PIMCO, recently caused that fund to sell all of its U.S. Treasuries – a
- Unfortunately, The Fed’s Easy Credit and
Ongoing Q.E. Policies have been mainly responsible for the U.S. Dollar Bubble
which has already been “Popping”. Its Purchasing Power has
declined by over one-third in the last decade – from 120 to 76ish on
the USDX, as we write, thus confiscating the wealth of Investors, Savers and
Eventually the U.S. Dollar Bubble will deflate even More, thus further
eroding the Wealth of the U.S. Dollar denominated Asset Holders including
Investors, Savers and Retirees. Short-term we have forecast a somewhat
- Indeed, Stocks are levitating on a near ocean of
liquidity, as Richard Russell correctly notes above.
And Artificial Equities Boosting is what the Cartel continues to do (and has
done for two years), with the Fed regularly pumping POMO’s – a
humongous $8.03 Billion on April 4, 2011 for example, and an average of over
$3 billion per trading day! See Graham Summers’ excellent article
“The Only Reason Stocks Have Rallied This Month” quoted in our
“Surmounting the Wealth Destruction
Juggernaut (09/30/10)” at www.deepcaster.com.
Indeed, we just (Monday April 4, 2011) got a Dow Theory Confirmation of a
Short Term Bull – The Dow hit a new year high and similarly The
Transports hit a confirming high.
We address the issue of whether Cartel
pumping plus generally positive Earnings will continue to push Equities to
the Upside in our latest Alert.
Policies and the Creation of Bogus Official Numbers mislead the public
regarding Economic and Financial Realities.
- Indeed there is an “Information Bubble”
caused by Bogus Official Statistics. As more become aware of the Irreality of Official Numbers that Bubble too will pop.
calculates Key U.S. 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 March 17, 2011
(annualized February, 2011 Rate)
U.S. Unemployment reported April 1, 2011
U.S. GDP Annual Growth/Decline reported
March 25, 2011
U.S. M3 reported April 2, 2011
(Month of March, Y.O.Y.)
No Official Report -
The Antidotes to the
foregoing Bubbles (and the consequent misallocation of Capital due to
reliance on Bogus Statistics) are two Burgeoning “Bubbles” that
should be Bought into.
These two Bubbles are,
in fact, not Real Bubbles at all.
They are Genuine Bulls
which have much higher to Fly.
Of course, I am
referring to Gold and Silver.
They are on this Bull
Run because they are Real Money, and, to the extent that Years of Easy Credit
and Ongoing Q.E. have debased Fiat Currencies like the U.S. Dollar and, de
facto the Euro and others, Gold and Silver have Skyrocketed.
But there is one Caveat
regarding Investing in these Precious Metals – ongoing Cartel* Price
*We encourage 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, 2009, Special Alert
containing a summary overview of Intervention entitled “Forecasts and
December, 2009 Special Alert: Profiting From The Cartel’s Dark
Interventions - III” and Deepcaster’s
July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S.
Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts
Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com.
Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including
testimony before the CFTC, 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.”
Attention to The Interventionals facilitated Deepcaster’s recommending five short positions
prior to the Fall, 2008 Market Crash all of which were subsequently
However, Cartel Power
has diminished in recent months. Thanks to GATA and others, dramatic
Revelations that not all Precious Metals Repositories have all the actual
metal they claim they have, have surfaced.
This include the Spectacular
Allegation that the LBMA sold some 45 ounces of Gold for every ounce they
actually hold. All this has led to a weakening of Cartel* ability to cap
prices because more and more Precious Metal Investors are demanding Delivery and
Personal Possession (no Bank Vaults please!) – it
is likely there is some “Fractional Reserve” Gold
“Storage” going on of the Physical Metal.
But The Cartel is still
Potent. Thus properly timed Precious Metal purchases can enhance Profits.
(See Deepcaster’s Alert for the week April
16, 2010: “Cartel Failing? Precious Metal Buy Reco!
Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes
& Bonds" and subsequent Alerts in the ‘Alerts Cache’ at www.deepcaster.com)
But there is another
Burgeoning “Bubble” which should be bought into.
And it too is not
a Real Bubble, but rather a Genuine Bull.
Already Q.E. has been
reflected in skyrocketing Food and Energy Prices i.e. reflecting a dramatic
reduction in the Purchasing Power of the U.S. Dollar, and many other Fiat
More than Energy or Even
Precious Metals, Food and Potable Water must be at the top of Consumer
Shopping lists everywhere around the world. With demand increasing from the
80 million plus annual world population increase, and increased resources of
a growing Middle Class, especially in BRIC countries, to buy more and better
Food, Food Producers are in the Catbird Seat. The Problem is exacerbated by
the fact that most of the World’s best arable land is already under
Thus, Deepcaster recently recommended two such Food Producers
and one Water Producer and Management Company, all of which we believe to be
deeply undervalued (one is trading at under $6/share and the other two under
$2/share), in our latest Letter and Alerts.
One is China’s
largest producer and Seller of Fresh Fruits and Vegetables. It also grows
Rice and breeds and sells livestock and has over 20,000 employees.
It recently had a P/E
Ratio under 4 and profits have grown over 20%/yr.
As we write it is
trading at around 65 cents per share U.S. or just below $5 HK, near its 52
Given that P/E Ratio,
profit Growth and share price, you can see why we have called
“Food” a “Sleeper” Subsector.
In sum, well timed
Investments in Burgeoning non-Bubbles in Gold, Silver, and Food and Potable
Water Production provide the best Profit Opportunities and the best
“Popping Protection” against the aforementioned Genuine Bubbles.
Preservation - Wealth Enhancement
and Geopolitical Intelligence