Reality Therapy for Abused Investors

“Renewed economic contraction has started to show up in the reporting of major economic series. Headline June retail sales declined by 0.5% versus May, in the context of earlier monthly contractions…

“The general outlook remains unchanged …. Official reporting shows a plunge in economic activity from fourth-quarter 2007 to second-quarter 2009, with an ensuing upturn in activity that led to a full recovery as of third-quarter 2011. In contrast, I contend the economy began turning down in 2006, plunging in 2008 into 2009 and subsequently stagnating—bottom-bouncing—at a low level of activity ever since. There has been no recovery, and the economic downturn is intensifying anew.

“The official recovery simply is a statistical illusion created by the government’s use of understated inflation in deflating the GDP. Use of understated inflation in such a manner results in overstated economic growth.

“The long-term fiscal solvency issues of the United States—where GAAP-based accounting shows annual deficits running in the $5 trillion range—are not being addressed…

“Neither economic nor systemic-solvency issues have been resolved by U.S. government or Federal Reserve actions. With the economy weak enough to provide cover for further Fed accommodation to the still-struggling banking system, the next easing by the Fed likely will trigger a massive dollar selling crisis and begin the process of a rapid upturn in domestic consumer inflation…” (emphasis added)

“Commentary #455: June Retail Sales,”

John Williams, www.shadowstats.com, 07/16/2012

Unreliable Official Statistics and poor or just flat inaccurate Mainstream Media reporting leaves many Investors in a quite vulnerable position. Investors are thus so disadvantaged by having to rely on such lousy data (or lack of any data) that it is arguably tantamount to financial abuse.

Indeed, Key Mainstream Financial and other Media generally have done such an abysmally poor job of reporting lately (indeed, at times distorting or apparently even censoring the most important Developments) that we thought it would be useful to summarize Important Recent Developments because this knowledge is essential to help Investors Profit and Protect.

The following Real News is from sources which we have generally found to be reliable. Fortunately, much of the Real News is Good News, but much is Negative.

In any event, perhaps most important is the Mainstream Media and Mainstream Financial Media refusal to report on the ongoing suppression of Precious Metal Prices. Knowing the Real News is essential to profiting and protecting wealth.

Notwithstanding The Cartel’s (Note 1) attempt to demoralize Precious Metals Partisans with their repeated Price Takedowns, one should consider the following Good News which indicates Gold and Silver are setting up to Rally in spite of ongoing Cartel Price suppression attempts.

— Japan has recently ceased exporting Gold.

— China’s Gold Imports have Increased dramatically even though China is now the World’s largest Producer.

— Cartel Takedowns of The Gold and Silver Price are regularly getting bought by Heavyweight Buyers (mainly from Asia) in the $1570s for Gold and in the $27 range for Silver. China apparently has put a floor under this market (but N.B. this would not prevent The Cartel from temporarily running the stops down to say $1530s for Gold and $25 for Silver).

— Another Dose of Overt QE is likely sometime this year – a Dose that would surely launch Gold and Silver Prices upward.

— For the first time in a long time, Swaps Dealers (Big Banks and Large Traders) are net long the Gold Markets. They have Strong Hands.

— The Cartel has increasingly been unable to sustain its Takedowns for very long.

But the News is not all positive. Even so, knowing the Negatives is essential to Profitable Investing and Wealth Protection.

— For example, as John Williams of shadowstats.com points out, there is no economic recovery and “the economic downturn is intensifying anew.”

— Real inflation is already Threshold Hyperinflationary (e.g. 9.3% in the U.S.) per shadowstats.com (Note 2).

— The weakening Economy is reflected in the Federal Reserve Bank of New York’s recent report stating that fully half the stock market returns of the past decade resulted from Fed Actions’. Of course, this means the ostensible Economic Recovery is built on the Quicksand of Fiat Currency Creation, and Overindebtedness. Regarding Profiting and Protecting Wealth from Inflation and other Negatives, see Notes 3 and 4 below.

— The LIBOR Fixing Scandal has only just begun. Literally Trillions in loans around the Planet have been pegged ultimately to LIBOR or a LIBOR Pegged Rate. The lawsuits and scandals only just began. And they will shake the Banking System to its core (and thus be Gold and Silver Bullish).

— Legal and Illegal Mass Immigration generates immense Net Costs to the U.S., (and probably to European Nations). For example in the U.S., a majority of households headed by a Illegal Immigrants are collecting welfare. According to a recent study, 8 major welfare programs cost the U.S. Government (Taxpayers) over $517 Billion/yr. Mass Immigration imposes similar net costs for Healthcare and Education. President Obama’s recent Illegal Alien Amnesty granted work permits to 1.4 million (former) Illegals. This not only depresses Wages but also increases Job competition for some 25 Million Unemployed Americans. Except for highly skilled Immigrants, Mass Immigration typically imposes Net Economic losses for the Host Country, not to mention stressing social and political cohesion.

— The Bilateral Currency Swap arrangements China is establishing with Australia, Chile, Japan, Russia, Iran, India, and Brazil spell doom for the $US Dollar as the World’s Reserve Currency in the next few months or very few years. Be prepared for devastating consequences for the U.S. Economy (but this Development too is Gold and Silver Bullish).

— Those who believe they are Owners of Physical Gold and Silver stored in Allocated and Segregated storage in Bank Vaults, are increasingly disappointed.

— Increasing numbers of Investors are finding it difficult to obtain actual Delivery of the Physical they supposedly own. Or when they actually get Delivery they find the bars were smelted long after they supposedly purchased and stored them in ostensibly Segregated and Allocated Accounts.

Deepcaster agrees with Von Greyerz and Buckler: Get Gold, Physical Gold.

“But in spite of all the adversity that gold has encountered in the last 12 years, the yellow metal has still appreciated over 6 times since 1999.

“So why is gold likely to erupt in the next few weeks? After a strong move into late August 2011 we have had a correction/consolidation for almost 11 months. During this time, every single fundamental factor in the world economy has deteriorated. The Eurozone countries are in a complete mess and can never recover. The UK economy is in a terrible state but they are just lucky that they can print money which Eurozone countries can’t do. The same is the case with the US. Debts are increasing at an exponential rate and there is no attempt by government to stop the spending of money the country doesn’t have. Total debts and exposure in the US is approaching $500 trillion. This includes unfunded liabilities and derivatives. The latter are likely to become worthless when counterparty fails, something which is very likely to be the case. Most economic figures are deteriorating in the US. The US has had the fortune of all the focus being on Europe but that will soon change.

“Japan has massive debts and the economy is extremely weak. And China with its major credit explosion will also suffer badly when the whole world stops buying their goods.

“…Governments will continue to apply the only method they know (with the blessing of economists like Paul Krugman and Martin Wolf) which is issuing unlimited amounts of worthless paper that they call money. This is of course no solution and only adding insult to injury.

“A concerted (ECB, FED, IMF etc) money printing bonanza is likely to start in 2012. This will lead to all currencies collapsing in real terms. Collapsing currencies will lead to a hyperinflationary depression. But many assets will deflate in real terms, especially the ones that were inflated by the credit bubble. This includes stocks, property and bonds as well as debt which have all been in a massive bubble for at least four decades. Gold will be a major beneficiary.

“Gold will also appreciate because there is a total distrust in governments’ ability to govern. The more governments fail, the more they will want to control the system and the citizens and the more regulation they introduce. There is also distrust in the financial system. Lehman, MF Global and PFG amongst others are only the very beginning of a serial collapse of banks and finance houses.

“There is also distrust in a system that prints money with the beneficiaries primarily being bankers and the financial system. Bankers and banks keep failing and keep on being rewarded more for each time they fail. No banker is ever penalised for losing billions which the tax payers ultimately are responsible for.

“All the king’s horses and all the king’s men

Could never hold gold down, Amen!”

Egon von Greyerz, GoldSwitzerland.com, 7/18/2012

“Asia is accumulating Gold. Russia is accumulating Gold. (Supposedly) backward nations all over the world are accumulating Gold, on both an individual and a government level. While the (supposedly) developed world has developed an idea of monetary safety which turns all history on its head, the rest of the world is not going along with them. We will leave it to you to decide which are the credulous and which are not.”

Bill Buckler, editor of The Privateer Australia, 7/2012

Best regards,

Deepcaster,

July 21, 2012

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 January 19, 2012
2.96% / 10.57% (annualized December, 2011 Rate)

U.S. Unemployment reported February 3, 2012
8.3% / 22.5%

U.S. GDP Annual Growth/Decline reported January 27, 2012
1.56% / -2.70%

U.S. M3 reported February 13, 2012 (Month of December, Y.O.Y.)
No Official Report / 3.87%

And Official Source Disinformation continues, consider Shadowstats comments on the January 6, 2012 release of U.S. Employment data:

“The reported seasonally-adjusted 200,000 jobs surge in December 2011 payrolls included a false, seasonally-adjusted gain of roughly 42,000 in the “Couriers and Messengers” category. That gain was an artifact of the seasonal-adjustment process and will remove itself in the January 2012 numbers.

“The problem is that this 42,000 gain is part of a seasonal pattern that fully reverses itself each January…”

            “December Payroll Seasonal-Adjustment Problem”

            www.shadowstats.com, John Williams, 1/6/12

Note 2: Deepcaster addresses the questions of Profit and Protection in light of Fiat Currency Purchasing Power Destruction and provides Guidelines in his article – “Essentials for Wealth Acquisition Acceleration” found in ‘Articles by Deepcaster’ Cache.

Using such Guidelines facilitated Deepcaster’s making buy and sell recommendations resulting in remarkable profits recently if acquired and liquidated when we recommended, approximately*:

45% Profit on Platinum ETF on February 8, 2012 after just 42 days (i.e., about 390% annualized!)

40% Profit on March 2012 $55 Dollar GDX Calls on January 27, 2012 after just 23 days (i.e., about 635% annualized!)

34% Profit on Gold Royalty Streaming Company on December 5, 2011 after just 166 days (i.e., about 74% annualized!)

42% Profit on Volatility Index Futures ETN on October 3, 2011 after just 292 days (i.e. about 52% annualized!)

36% Profit on Double Short Euro ETF on September 7, 2011 after just 43 days (i.e. about 300% annualized!)

35% Profit on Double Long Gold ETN on August 23, 2011 after just 41 days (i.e. about 280% annualized!)

26% Profit on Double Long Gold ETN on August 17, 2011 after just 35 days (i.e. about 260% annualized!)

25% Profit on Gold Stock on August 8, 2011 after just 201 days (i.e. about 45% annualized!)

150% Profit on Gold Stock Calls on July 13, 2011 after just 56 days (i.e. about 975% annualized!)

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

Note3: “A Great Opportunity and A Dangerous Trap; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar, U.S. T-Notes, T- Bonds, & Interest Rates” – February Letter

“The Fed doesn’t have a clue about markets or economics. They are dangerous people.
Printing money is not good for the world and will lead to more problems for the world….

“What the Federal Reserve is doing now is ruining an entire class of investors.”

Jim Rogers, Bloomberg Interview, 6/29/11

We are not so Negative about the Near-Term Prospects for Nominal Asset Price Growth in Certain Sectors as we were six months or a year ago.

That is mainly because the E.U., Mega-Banks, and the Fed, have already de facto launched a Massive Quantitative Easing 3, with more likely to come.

This QE will serve as a Major Force impelling (but not necessarily successfully) Nominal Asset Prices UP in certain Sectors, for example, for Equities.

But before one becomes too enthusiastic about the Prospects one should consider the implications of our Forecast for Nominal Assets Prices Strength in certain Sectors.

The practice of issuing Bogus (U.S. and other Key official) Inflation figures obscures the Fact that Monetary Inflation (generated mainly by reckless Q.E.) is very rapidly depreciating the purchasing Power of most Fiat Currencies – by about 11% per year in the U.S. e.g. (per shadowstats.com).

Our High Yield Portfolio is aimed at achieving Total Return in excess of Real Inflation. Stocks in that Portfolio with Recent Yields of 18.5%, 8.6%, 10.6%, 26%, 6.7%, 8%, 10.6%, 10% and 15.6% when they were added to the Portfolio.

Also important to note is that, while massive Q.E. is a Major Inflationary Force tending to pump up Prices in certain sectors, there are Powerful Deflationary forces operating as well – the depreciating Housing Markets in the U.S. and China come to mind. Real Estate in some areas in China is down over 25%, but Food prices are up 9% year over year.

The key to identifying The Great Opportunities (and Great Potential Losses) is knowing which Sectors will likely have Inflating Asset Prices and which will have Deflating ones.

Investors failing to Evaluate Inflation/Deflation Prospects on a Sector by Sector Basis will have missed Great Opportunities and fallen into a Dangerous Trap.

Deepcaster’s Letter --“A Great Opportunity and A Dangerous Trap; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar, U.S. T-Notes, T- Bonds, & Interest Rates; February Letter” -- posted in the ‘Latest Letter & Archives’ Cache at www.deepcaster.com, identifies which Sectors will likely be helped (albeit temporarily) by this Massive QE3 and which will likely be hurt, and provides Forecasts for all. And in his March Letter, “The Pause Before The Great Bull; 3 Buy Recos! Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates, March Letter”, Deepcaster makes 3 Buy Recommendations designed for Protection and Profit.