|
The Bank (Goldman Sachs Ed.) has raised the possibility that
there is a danger that somebody who knew how to use this program could use it
to manipulate markets in unfair ways. Joseph Facciponti, Assistant
U.S. Attorney, July 4, 2009
The significance of the Assistant U.S. Attorneys statement at the
Bail Hearing for the former Goldman employee, Sergey Aleynikov, who was
charged with stealing Goldman Sachs trading software, goes far beyond the
issue of the alleged theft.
Consider:
What was/is Goldman doing with software which could be used, by its
own apparent admission, to manipulate the markets in unfair
ways. We do not know. But are there not only two logical inferences
possible from Goldmans claim (about the softwares capacity to
manipulate the markets in unfair ways) transmitted via the
Assistant U.S. Attorney?
Either:
Nothing was to stop Goldman from manipulating the market in unfair ways
itself should it have chosen to do so (And if they did not intend to do so
what were they doing in possession of such software?)
Or:
2.
Goldman developed the software to be used by another entity perhaps The Fed-led Cartel* of Key
Central Bankers and favored Financial Institutions to facilitate their
manipulating Precious Metals, Equities and Strategic Commodities Markets
among others using Goldman, (and its software) as a Primary Dealer. (See
below)
We will
not address the allegations buzzing around the internet that Goldman was
illegally using the software for frontrunning the markets for its
own profit.
But the
fact that Goldman received over $10 billion in U.S. Taxpayerprovided Bailout
Money in late 2008 which allowed it to profit to the tune of $2.7 billion in
the second quarter 2009 alone (profits apparently not shared with U.S.
Taxpayers!) certainly raises the issue of fairness, if not outright scamming.
Indeed,
we use this entire sordid example as a springboard for articulating key
guidelines for surmounting deception, distortion and intervention in the
markets and thus for protecting profits and wealth.
Generally
speaking, there are two levels at which deceivers, distorters and intervenors
operate -- the Macro-level (usually certain Cartels and certain Governments)
and at the (relatively) Micro-level.
First,
lets consider some guidelines and precaution for surmounting Scams
distortions and Intervention at the Micro-level.
1.
Check Derivatives Exposure of companies in which you are considering
investing. AIGs demise was brought about in large part because of the
highly leveraged derivatives risks to which they exposed themselves.
2.
Investigate, to the extent you can, the existence of off-balance sheet transactions,
commitments, and liability exposure. Not an easy task!
3.
To the extent you are able, determine the strengths and weaknesses of
counterparties to transactions/derivatives with whom the party on which you
are focusing is involved.
4.
If a primary rationale for considering investing in a security is that it is
the leader (laggard) in a Sector you expect to rise (or fall) consider
investing in a long (or short) Sector Exchange Traded Fund. In that way you
minimize individual company risk.
5.
If you are considering investing in a Sector which receives special attention
from The Cartel* or Government Market Intervenors (e.g. Precious Metals and
Strategic Commodities) then pay close attention to the Interventionals as
well as the fundamentals and technicals. (See discussion of The Cartel*
below.)
6.
Be Just as Willing to Go Short as to Go Long. Given
the Foregoing Economic and Financial Market Realities, there will be many
months and probably several years before the markets-in-general are in a
durable healthy uptrend, as we have demonstrated in several articles.
Thus, one must be just as willing and able to go short as to
go long. Fortunately, there are unprecedented opportunities
to go short (as well as long) via, for example, literally scores of
short Exchange-Traded Funds. Carefully chosen and timed, these can be
excellent vehicles for garnering profit in fear markets. For
example, Deepcaster entered September, 2008 having recommended a total of
five short positions because he earlier forecast a Market Takedown. The
Market then crashed, and all of those positions subsequently were liquidated
for significant profits.
7.
Buy and Hold Rarely Works Anymore. As the market performance in the
past year has demonstrated, those who adhered to the Outdated Strategy of
Buy and Hold likely got smashed. Many have lost up to 50% of
the price value of their portfolio with little prospect of recovery
(absent employing Strategies suggested here). See Opportunities to
Escape Paper Wealth (11/07/2008) in the Articles by
Deepcaster Cache at www.deepcaster.com. What many of these
investors did not realize, and hopefully now realize, is that we are now in a
radically different economic and market environment (especially important is
that Investors are forced to operate in an Interventional Universe!) which
will, with very few exceptions, make Buy and Hold a very
unprofitable strategy for several years.
8.
The Basic Reality: Hyper Stagflation. We are in an Apparent
Deflationary Environment (e.g. energy prices have dropped dramatically and
the Equities Markets and other Assets have lost Trillions in
Nominal Value). This Apparent Deflationary Environment masks an
underlying Hyperinflationary Reality - - the Trillions in Fiat Currencies
which are being printed and lent in a futile (in the long term) Attempt to
stimulate the Economy are substantially greater than the Trillions lost in
Equities Markets Takedowns and other Asset Devaluations. Thus The Basic
Long Term Trend is a Hyperinflationary Economic Decline - - the worst of both
Worlds. We expect $20 hamburgers in three or four years. See
Statistical Manipulation versus The Real Numbers section below for
Real Reflection numbers.
9.
Raise Cash - - Cash is King in this Credit Squeezed Environment. What
Cash? So long as the deleveraging continues the U.S. Dollar should
remain relatively strong. When the deleveraging is perceived to be
beginning to end, the U.S. Dollar will begin its collapse. In such an
environment the Swiss Franc is the currency of choice. Of course, the
ultimate Money is the Precious Monetary Metals, Gold and Silver but, given
The Cartels* periodic Interventions (see below) to drive lower their price
we advocate acquiring them using the Strategy described in our Article
Defeating The Cartelwith Profit (3/28/08) in the Articles by
Deepcaster cache at www.deepcaster.com.
10.
Liquidate Debt - - Debt is the Enemy of Cash in this Cash is King
Environment. Debt demands Repayment, with Cash that is ever harder to
obtain.
11.
Credit: Use it or Lose It: But only if you Must for Safetys
Sake. Lenders are Cutting Back or Eliminating Credit lines and raising
rates. (Outrageous, of course, since it is the U.S. Taxpayer who has bailed
many of these lenders out!) So if you do not have a sufficient cash cushion
and can foreseeably make the payments, consider borrowing from that credit
line. If you fail to do so, it may be reduced or eliminated.
12.
Become more Self-Reliant. The Hard Econo-Reality is that in
this increasingly Hard Times Era of increasing unemployment and
decreasing economic strength - - a Hard Times Era which will likely
persist for several years - - there will be more, much more, potential for
civil disturbances and reduction in, or outright cut-off of, basic public
services, and essential supplies as well. Given the increasing
desperation of an increasingly large number of the population there will be
more personal safety risks. Public infrastructure services upon which
we have come to rely such as utilities and roads are likely to be compromised
periodically, and increasingly severely. Prepare for blackouts,
periodic interruptions of water and food supplies, and civil, and very uncivil,
disturbances. Be prepared to combat increasing threats to Liberty and
Privacy in the deceptive guise of ostensible Security. Be
prepared is not just a wise motto for Boy Scouts.
MacroConsiderations
The
generally accepted Theory is that Markets trade freely and that Market Prices
are determined by supply and demand. If this theory were always correct,
Investors with a superior grasp of fundamentals and technicals could
regularly profit.
Unfortunately,
the aforementioned Theory does not work for certain Sectors, especially Gold
and Silver and Strategic Commodities, because their prices are subject to
Cartel* intervention. Thus one must consider the following.
1.
Gold and Silver Prices and Cartel* Intervention
Investors
justifiably increasingly concerned about adverse developments in the
financial markets and economy, are seeking Safe Haven in Gold and Silver, as
well as in traditional retirement vehicles (such as 401(k)s and similar
accounts).
But
investors have often been frustrated in finding such Safe Haven, largely due
to the policies and Market Interventions of The Fed-led Cartel* of Key
Central Bankers and their Favored Financial Institutions.
Indeed,
regarding Gold and Silver, it is becoming ever more widely known that, The
Cartel* regularly intervenes to drive down prices of Gold and Silver in the
market. These Precious Metals are the primary targets of The Cartels
interventions because they legitimately compete with The Cartels Fiat
Currencies and Treasury Securities as the Ultimate Measures and Stores of
Value.
As well,
it is becoming increasingly apparent that The Cartel regularly intervenes in
the Equities and Strategic Commodities Markets. Reflecting the acknowledgment
of massive ongoing overt and covert intervention, no less an authority than
the Dean of the Newsletter writers Richard Russell recently finally
acknowledged:
This
government will stop at nothing, even including manipulation. What the Fed
does not want is a swooning stock market, surging Gold, or sinking
bonds.
Richard Russell, 05/06/09 www.lemetropolecafe.com
Deepcaster
entirely agrees with Richard Russells recent conclusion, (and, indeed
has been writing about these Interventions for several years now), but we
would add one addendum. The evidence is overwhelming that Covert (as well as
Overt) manipulation is all aforementioned sectors have been ongoing for
several years. It is not just a recent phenomenon. Confirming this view, the
Secretary-Treasurer of the Gold Anti-trust Action Committee (www.gata.org),
Chris Powell, has written an excellent comprehensive article There are
No Markets Anymore, Just Interventions, which can be found at
www.gata.org.
*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 Deepcasters December, 2008 Letter containing a summary overview
of Intervention entitled A Strategy for Profiting from the Cartels
Dark Interventions & Evolving Techniques and Deepcasters July,
2009 Letter entitled "A Strategy For Profiting From The
Cartels 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. Deepcasters profitable recommendations
displayed at www.deepcaster.com have been facilitated by attention to these
Interventionals.
Fortunately,
Deepcaster has developed a Strategy for Profiting from Gold and Silver
despite Cartel Interventions. The highlights of that Strategy are laid out in
Surmounting Cartel Advantages (5/8/09) available in the
Articles by Deepcaster cache at www.deepcaster.com.
2.
Statistical Manipulation versus The Real Numbers
Substantial
Cartel advantage is the ability to manipulate and/or manufacture (e.g. by
using the classic technique of Painting the Charts) Key Market
Price Patterns and Statistics. Key Official Statistics are often far removed
from the Realities of the economy and market place. For example, consider the
latest Real Numbers versus the Official Versions, thanks to Shadow Government
Statistics.
Official
Numbers vs. Real
Numbers
Annual
Consumer Price Inflation reported July 15th, 2009
-1.4%
9.3% (annualized June Rate)
U.S.
Unemployment reported July 13th, 2009
9%
20.5%
U.S. GDP
Annual Growth/Declined reported June 25th, 2009
-2.5%
-5%
All the
above Real Numbers are calculated by Shadow Government Statistics the old-fashioned
way i.e. with the methods used before the official gimmicking of these
numbers, which began in the 1980s and 1990s. See
www.shadowstats.com and click on Alternate Data.
3. Track
the Interventionals and the Real Statistics. Many Otherwise Astute Investors
were Blindsided by the Takedowns in the Equities and Precious Metals Markets
in September, October and November, 2008. But they need not have been!
If these
Otherwise Astute Investors had been tracking the Interventionals and
monitoring the Genuine Key Statistics rather than the Gimmicked ones issued
by Official Sources they would likely have seen the Takedowns coming and
would not only have taken steps for Protection, but also for Profit.
Given
the Interventional Regime described above, perhaps the single most important
factors in the recent performance of certain Major Market Sectors are the
Interventionals and manipulation of Statistics - - often even more important
than the Fundamentals or the Technicals.
Consider,
in more detail for example, U.S. Consumer Price Inflation and other key Data
cited above: the sky-high energy and food costs of 2007 and 2008 tend to
belie what we were told by Official Sources about the CPI. According to
Official Sources, from 1992 through the beginning of 2008 the CPI never went
much above 4% annually but only bumped up to about 6% late in 2008. But these
figures simply do not square with our own experience of the inflation of
prices of practically everything during that period. Nor do they square
with certain objective measures as e.g. those from shadowstats.com (see
above).
4.
Profit Opportunities from Money Supply Inflation
By
encouraging massive lending and massive expansion of the actual Money Supply
for years, the private for-profit Fed has guaranteed massive inflation.
(Of course the private owners of The for-profit Fed profit immensely from
this money which they print for free, because they then lend it to
American Taxpayer with interest!) See Coping with the Superpower-Cartel
Threat! (1/30/2009) in the Articles by Deepcaster cache at
www.deepcaster.com. Similarly, key Central Banks around the world that
have conducted similar actions and have thus bolstered massive monetary inflation.
What this means is that, in the long run, the U.S. Dollar and many other
major currencies will buy less, much less, in the future.
However,
given that the financial system and key heavyweight investors are awash with
printed and borrowed money, certain Key Sectors should explode upward very
soon until the long-term negative Economic Fundamentals drag them down
again. Of course, this would not happen in one fell swoop, it would
happen in Spurts. And, indeed, we think that one Spurt resulting from
this Monetary Inflationary Juice is not far off. Indeed, we
have already forecast that this monetary injection should be reflected in
higher prices in certain Key Sectors identified in Deepcasters latest
Alerts and Letters posted at www.deepcaster.com.
Thus,
these considerations provide speculative opportunities, which have high
profit potential as well as high risk. The Primary Trend is, after all,
a worsening Bear Market. But the Rampant Monetary Inflation reflected
in M3 and in the various Bailouts and Loans will provide several trillion
dollars for equity investment. And this tremendously increased monetary
base is available to inflate the paper value of the Equities and other
Markets, when money managers first think the markets have a chance for a
sustained (for a few months, or even weeks) Rally, and, when The Cartel
Interventional Regime agrees with them.
5.
Ascertain the Facts; Eschew Big Media Fictions
Other
key figures are gimmicked or spun as well, with the complicity of
the Mainstream Media. Consider the cost of The Bailouts. We were
told that the cost of The first Bailout alone would be $700
billion. But the true cost of that Bailout to American Taxpayers (and,
indirectly to investors around the world) will be much higher. One November,
2008 estimate put it at $3.5 trillion and growing, and this did not (and
could not have) included any subsequent Stimulus Bill or other Obama
Administration authorizations.
Astoundingly,
the much-touted recently passed Obama administration Stimulus Bill will
likely not create any net new jobs for American Workers.
That is
because:
1.
The Stimulus Bill allows 300,000 construction jobs to go to Illegal Aliens,
as reported in a study by Robert Rector of The Heritage Foundation, and
2.
According to various Official Sources, about 138,000 work authorizations
per month are issued to permanent (e.g. via green cards) and ostensibly
temporary (e.g. H1b etc.) legal immigrant workers.
Thats
over one and one half MILLION foreign workers per year! (even
after deducting 156,000 from the annual number that are estimated
reauthorizations)
The
Stimulus Bill Does Nothing To Reduce This Flow!
So in
other words and considering all the above, the flow
of New Legal And Illegal Immigrant Workers In
The Next Two Years will Take Virtually All The Three To Four Million Jobs
Ostensibly Created By The Stimulus Bill!
The
foregoing is excerpted from an Alert Issued by the Washington D.C. non-profit
Carrying Capacity Network, which sensibly advocates solving this problem with
a zero-net-immigration Moratorium www.carryingcapacity.organd Real (not
virtual) Fencing at the Border. Such a Moratorium would dramatically reduce
the approximately two million annual legal (and help reduce the approximately
two million illegal) immigrants and their offspring added to the U.S.
Population annually. (As well, it is pushing an Abolish The Fed! U.S.
Treasury Instead! Initiative.)
Thus,
The Stimulus Bill is not likely to create or save three to four million jobs
for American Workers. Indeed, if the recently introduced Illegal Alien
Amnesty bills are enacted the job losses and social service costs will
dramatically increase.
Crucial
to consider also is The Reality of the U.S. Housing Market today. One of the
two Government Sponsored Entities (controlled now by The Feds) is Fannie Mae.
Fannie Mae reportedly lost in $23.2 billion in the first 3 months of 2009
alone since mortgage defaults are increasing, not only in risky loans, but
increasingly in loans made to borrowers that were formerly considered good
credit risks.
Indeed,
Freddie Mac is in much worse shape than Fannie Mae. It has already obtained
$45 billion in tax payer funds. And it is expected to need billions more in
funding from U.S. Taxpayers.
But
consider that Freddie and Fannie together own $5.4 trillion in Mortgage
Assets, an increasingly large portion of which are at great risk of default.
Conclusion:
The Cartel*
is still Potent, but not Omnipotent.
Many
Hard Assets Partisans recently had the distasteful experience of being
victims of the Cartels March 18 20, 2008 and subsequent Takedowns of
Gold, Silver, Crude Oil, and other Hard Assets. Other Hard Assets Partisans,
including Deepcaster, profited.
While
anger is a natural and understandable reaction to such continuing Perfidious
Covert Market Intervention, we suggest it is more constructive to adopt an
Investing/Trading Strategy which will help eventually to defeat The Cartel*
and to profit along the way.
The
Basic Rule is to acquire Gold, Silver and Strategic Commodities as Fortress
Assets, but with Caveats described in our Strategy.
A major
premise of The Strategy is that one can certainly remain a Hard Assets
Partisan while at the same time insulating oneself from future
Takedowns. The details of this Strategy are set forth in
Deepcasters Article Surmounting Cartel Advantages (5/08/09)
available in the Articles by Deepcaster cache at www.deepcaster.com.
The Strategy (particularly as applied to the Gold and Silver Markets) is
designed to help avoid such unpleasantness, or even possible financial ruin,
in the future, as well as to profit along the way in Gold, Silver and
Strategic Assets Investments, in spite of Cartel Interventions.
Mainstream
Media Boosters of the Notion that the economy is on the mend and that the
Equities Markets recent Rally is founded on the beginning of a Real and Sustainable
Recovery, are seriously mistaken. Those who are captivated by this Fantasy
will likely have an unprofitable year or, worse, suffer substantial losses.
Indeed,
investors who are taken in by this Fantasy are turning a Blind Eye to several
Worsening Negatives resulting from the current course of monetary and
economic policies.
In fact,
U.S. taxpaying investors will be increasingly taxed to pay principal and
interest on U.S. government borrowings of monies from the private for-profit
U.S. Federal Reserve (which prints money for free out of thin air or with a
few keystrokes).
Moreover,
the Bailouts of Government Sponsored Enterprises and others plus The
Feds Dollar Debasement policies are in fact causing Retirement Accounts
to be in increasing jeopardy.
Notwithstanding
Deception, Distortion, Intervention, and other Negatives, the Strategy and
Guidelines outlined above can help insulate Investors from losses and can
provide potential for substantial profit.
Best
regards,
Deepcaster LLC
Deepcaster.com
All the other articles by Deepcaster
Wealth Preservation - Wealth Enhancement
Financial and Geopolitical Intelligence
Gravitas, Pietas, Virtus
| 
