The Key to Markets Performance Until November 2012
“Financial currency inflated hell by global debt monetization is the condition from which there is no escape, except through burning down the old system and making a new one. This is the dead end sign at the end of the road for can kicking. It is the condition of financial perdition. It is not something coming in a distant future. It is here and now, clear and present, if you have the eyes to see.
“The means to this end is the combination of sick sovereign debt, risk insurance issued against the default of debt without sufficient liquid capital to do so, and the fact that those entities who issued this insurance are themselves and in truth illiquid under strain thanks to the capitulation of FASB on true market value of their legacy and other assets. This is the construction of the house of financial cards that will not survive intact during the period of 2012 to 2015. This is what gold at $1700 is indicating to those unfortunate enough to understand the practical workings of a system whose life force has been stolen to a degree that can only be deemed epic….
“Only a resurgence of business based on solid foundations of equity and not debt can do the final clean up and provide a door to a better future.
“No politician anywhere can do the necessary without causing the explosion of the results being heard almost as a new big bang. We are going to inflate this debt away or those in power will be swept away by the violence inherent in the suffering citizen….”
Jim Sinclair, “The Lonely Road We Take Together”, 02/13/2012
Under “Operation Twist” the Fed bought 64% of all U.S. Treasury Securities with maturities of 8 to 10 years, and 91%! of those maturing in 20 to 30 years. All with hundreds of billions of fiat money created for “free” out of thin air (no wonder wheat prices were up 12% and corn up 10% at one point in January!). The bond vigilantes have been nearly neutered by the Fed, temporarily.
And: the Fed made $1 Trillion in de facto loans to the ECB and tacitly admitted QE3 is on the way (of course, it is already here).
Moodys warns it may downgrade credit ratings of 17 international and 114 European banks. But European banks have borrowed $3.2 trillion and want $1 trillion more. And via the LTRO the Eurozone has injected hundreds of billions of euros more into the financial system and will add a second tranche (likely $800 billion) at the end of Feb, 2012 with more likely to come. Q.E. to infinity it is called, and will surely result in a very bad end.
Clearly the Mega-Banker-Political Cartel has chosen to cram the system with money and credit to keep the banks, especially, and key market sectors, secondarily, afloat (and to avoid for a few months, the market crash which would otherwise surely have occurred) until after…
…French elections this Spring
…German elections this Spring
…U.S. elections this Fall
Indeed U.S. elections are 9 months from now, in November, 2012.
And that “cramming” is the key to the next 9 months’ market performance.
And that cramming is disguised by bogus official statistics
"Once again, January Retail Sales Gain Was Not Statistically Meaningful and Likely Was All from Rising Prices. As has been the case in eight of the last nine months, the monthly change in January 2012 retail sales was not statistically meaningful, and it likely was flat-to-minus, adjusted for official CPI inflation, as had been the case in four of the last seven months. The evidence here continues to be for a bottom-bouncing economy….
"Where the purported month-to-month January retail sales gain was 0.4%, seasonally adjusted, it was a contraction of 21.4% not seasonally adjusted….
"Under such circumstances, where the markets effectively are flying blind as to actual economic activity, consideration of broad underlying fundamentals is essential. Consumer income and credit remain structurally impaired and continue to signal economic deterioration, not recovery, with the broad economy remaining in serious trouble…."
John Williams, Retail Sales, shadowstats.com, 02/15/2012
See Note 1 below re shadowstats.com
Of course all this cramming will be (and already is) increasingly hyperinflationary.
And that disguised hyperinflation (already at 10.57% in the U.S., e.g.) provides magnificent opportunities for profit and protection.
Recent downgrading (and ultimate defaults) of Spain, Italy and Portugal and Watch-listing of France and U.K. were earlier forecast by us and other honest analysts. But the key takeaway is the ongoing and prospective hyperinflation-inducing response of the Mega-Bank-Political Cartel, and the resulting prospects for these nations and Greece.
Although the Greek austerity package passed, “the Market” rightly questions the ability of the Greeks to implement the package. Understandably since Greek manufacturing is down 15.5% in December, industrial production is down 11.3% in December, and unemployment is at 20.9%. So the Euro bounced up a little bit after the package passed but not enough to move the U.S.$ much lower than 79ish basis USDX.
Though the Eurozone expects another LTRO injection (likely $800 billion) at the end of February the smart money knows this will only create another temporary sugar (liquidity) high. But the basic unsolved problem in the Eurozone, and the U.S.! is solvency not liquidity. Eurozone crises merely deflect from the larger U.S. solvency crisis.
Indeed, China is not exempt. In China, credit outstanding is 200% of GDP and they just approved rolling $1.7 trillion in loans to local governments, a de facto default.
For the long run, few structural problems have been “solved.”
In sum, over the mid and long term that Euro strength (and probably the Euro itself at least in its current form) is unsustainable for the whole host of reasons including not only the ultimate de facto default of Greece, Portugal, and Ireland, but also probably eventually default of Italy and Spain, and perhaps even France and the U.K.
Thus the Q.E. to infinity.
With all the juicing and goosing the Fed and ECB has provided the Markets, and promised to continue, the Equities Rally could last fitfully for a while.
But such a Rally goosed by excess money and credit provided by the Fed and Eurozone, will only exacerbate the great equities crash when it surely arrives. Deepcaster has forecast the approximate timing of that crash. And the developing multi-year jaws of death technical pattern emphasizes this prospect.
Meanwhile, food and energy costs will likely soar more, further financially disabling consumers, which are 70% of the U.S. economy and a similar % of other major economies.
In this connection, the Crude Oil price is the most difficult of all major commodity prices for the Cartel to manipulate but it can be manipulated but only over the short-term. Over time, supply and demand determine price because crude is a necessity and it gets used up.
Important to Note: the Crude Oil price at over $100 bbl is sending us a message: commodity price inflation, and, indeed, overall inflation is increasing regardless of what the (bogus) official numbers say. Therefore, Deepcaster recommends opportunities for profit and protection available in key market sectors in its recent Letters and Alerts.
This fact of continuing high (and increasing) energy and food prices underscores the extraordinary reckless policy error (or intent) of both the Fed and ECB which create too much money and credit (in their attempt to save their owners, the Mega-Bankers), and the Obama Administration which continues to increase the U.S. National Debt to over $15 trillion (from $10 trillion when they were elected) plus downstream unfunded liabilities of over $100 trillion for Social Security, Medicare, etc…
All this will of course, generate hyperstagflation down the road for which we will all pay (and are already paying) a very high price in destroyed savings and wealth in general.
February 15, 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
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