“The U.S. Dollar is being devalued by the Federal Reserve…
QE2 is nothing more than devaluation of the dollar for the benefit of only Wall Street Money Center Banks. This is a fraud on the American people who will get nothing from QE2, not jobs, no reduction of their debts, no increase in the values of their homes, no reduction of taxes, no cash, nothing.”
Robert McHugh, McHugh’s Weekend Market Newsletter, 1/14/11
“There are numskulls in the financial media — toadies to the Federal Reserve — who would like to think that energy and food inflation do not count. Simply put, the monthly December inflation releases for the CPI-U (annualized 6.2% inflation), CPI-W (annualized 7.8% inflation) and PPI (14.0% annualized inflation) were disasters, with December inflation far from being calm, as touted in one widespread media report. The sharp increases in December energy and food prices were not due to normal price volatility in those areas, instead, they were created directly by Federal Reserve Chairman Bernanke’s ongoing push to debase the U.S. dollar — to destroy the purchasing value of the U.S. currency. As Mr. Bernanke moves to prove his contention that a central bank and central government can create inflation at will, by debasing their currency, the bad news for the Fed remains that the inflation created here reflects monetary policy distortions, not strong economic demand, as naively advertized…
As to retail sales, keep in mind that the December increase was due to higher prices, not to underlying strong demand. There remains no recovery at hand.
Increasingly, global investors will shun the U.S. dollar, as its purchasing power increasingly gets hammered by Mr. Bernanke…
…the reported CPI has started to reflect net rising prices for consumer goods and services. The higher inflation is not due to surging economic demand, but rather to official U.S. dollar debasement. The effects of the Fed’s actions on prices will not be fleeting. Keep in mind that higher oil prices eventually permeate much of U.S. economic activity…
…the SGS-Alternate Consumer Inflation Measure, which reverses gimmicked changes to official CPI reporting methodologies back to 1980, rose to about 8.9% (8.91% for those using the extra digit) from about 8.5% in November.”….
“The housing market is taking a renewed hit. After housing starts took an historic plunge of 79% from January 2006 through January 2009, the series effectively bottom-bounced at an historically low-level plateau for two years. A renewed downturn, however, now appears to have taken hold, with fourth-quarter 2010 housing starts falling at an annualized pace of 29.9% versus an 8.8% annualized decline in the second quarter. This is bad news for broad economic activity, for the banking industry and for the systemic solvency crisis. It also should take a small notch out of the positive economic growth anticipated by the markets for the fourth-quarter GDP.”
Commentaries Numbers 345 & 346: “December Inflation, Retail Sales, Production” & “December Housing Starts”
John Williams, Shadow Government Statistics, 1/14 & 1/19/11
“Greece, Ireland, Spain, Portugal, and Italy have all made the same mistake. They responded to the collapse of real estate prices and debts by guaranteeing the private obligations of their banks with their country's treasury. (America is doing the same, by the way.) The problem is, the debts are vastly larger than the governments can afford to repay… far larger…
Total debts owed to foreign investors in the so-called "PIIGS" countries are $2.6 trillion…
The collapse of the euro will cause all kinds of big problems this year and almost surely lead to a huge correction in commodities and a rise in the dollar.”
“Two of 2011's Surest Bets”
Porter Stansberry, Daily Wealth Premium, 1/15/11
“Laos is one of the most sparsely populated countries in Asia; with just 6.3 million people…
…the country is home to some of the most fertile soil in the world: more than 20% of its land mass is ripe for agricultural use. This is an astounding number…
Put another way, Laos, with its vast resources and small population, might loosely be considered an agricultural version of Kuwait…
Given its resources, it certainly seems ironic that the prices of staple foods in Laos, including rice, have soared in recent months…
Thing is, it's not that there are food shortages in Laos; this isn't an issue where supply has failed to keep up with demand (thus resulting in rising prices). The price hikes are simply another indicator of monetary inflation causing severe price inflation, particularly in the developing world.
How does this happen? The trillions of new currency units being compulsively manufactured by central bankers are finding their way to developing countries. This surge heats up local markets, causing prices to rise.
The government in Laos will most likely raise the minimum wage.
Rising wages like this are a common ingredient in hyperinflation, spawning a vicious cycle of higher prices, which then beget higher wages, which then beget higher prices, and so on.”
Simon Black, SovereignMan.com, 1/18/11
Indeed, the Mainstream Financial Media and Wall Street Toadies to The Fed would like to think Energy and Food Inflation do not count.
Try telling this to the Protestors and Demonstrators in Laos, or Tunisia, or Jordan, or India or much of Africa, or in the USA or Eurozone for that matter, who are suffering from Food and Energy Price Spikes facilitated or caused by Massive Central Bank Currency Printing, as Simon Black points out.
And Crude Oil is threatening to top $100/bbl again.
As John Williams and Simon Black both suggest, the Main Culprit behind the recent Food, Energy and other Commodities Price Inflation is the Money Printing Q.E. of The Fed. (Another Culprit is World and U.S. Population Growth increasing by 85 million (World) and 4 million/year (U.S.) Respectively. This increases Food and Energy demand, and thus Prices, for those who have money to buy.)
The Fed’s ongoing Q.E. has increased Mega-Bank Balance Sheets and thus maintained their Mega Profits and allowed Speculators to bid up the Prices of Food and Energy far beyond what they would have been bid up at this time due to population-growth driven demand.
But Middle Class and lower-middle Class Households in the U.S.A. (and Eurozone or elsewhere for that matter) have not benefited one jot from Q.E. 1 or 2 (or Eurozone Bailouts); indeed they are increasingly hurt by It.
“It” is Q.E. (Money Printing) induced Price Inflation – I.E. “The Beast”.
In fact, Real U.S. Inflation increased to 8.91% in December – an Ominous Sign. The Beast is Awakening.
Indeed, Consider the Real Numbers.
Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s, before systematic Official Data Distortion and Interventions began in earnest.
Bogus Official Numbers vs.Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported January 14, 2011
1.50% / 8.91% (annualized December, 2010 Rate)
U.S. Unemployment reported January 7, 2011
9.4% / 22.4%
U.S. GDP Annual Growth/Decline reported December 22, 2010
3.25% / -1.44%
U.S. M3 reported January 15, 2011 (Month of December, Y.O.Y.)
No Official Report / -2.76%
N.B. The current 8.91% inflation level is not tame, but rather is quite substantial; indeed it is a Threshold Level for Hyperinflation.
Ironically, The Fed (and ECB) are now between a Rock and a Hard Place of their own Making, going Forward.
Without more Q.E. there will likely be Sovereign and Private Debt Defaults threatening major Players in The Financial System, including the Shareholders of the Private for-profit Fed.
With more Q.E. (Q.E. 3 and 4 and ?), there will be increasing Price Inflation -- I.E. US Dollar (Euro and other Fiat Currency) Purchasing Power Degradation -- especially with regard to Essential Food and Energy Goods, leading eventually to Hyperinflation I.E. the destruction of the U.S. Dollar as the World’s Reserve Currency, and Prices Spiraling out of Control, and much more Social Chaos.
A Central Question is, Short-term, will The Fed and other Major Fiat Currency Purveyors will find further Commodities Price Inflation intolerable? If so, will they Act to take down Equities and Commodities Markets by reducing Q.E. and/or POMO Pumping? (See Deepcaster’s Forecasts in his ‘Latest Letter’ and ‘Alerts Cache’ at www.deepcaster.com.)
In responding to these questions, Consider the following Realities:
Just a very few days ago, the People’s Bank of China once again decided to up their banks Required Reserve Ratio to dampen Inflation.
And leading hedge funds such as Corriente Advisors (who made millions from the Sub-Prime Debt and Sovereign Debt Crises) who actually have money on the line, have increasingly been betting that the Chinese economy will slow dramatically.
But the Talking Heads in the Mainstream Financial Media, have been talking as if the Emerging Markets, led by China, will rescue the International Economy. Most agree that a slowing China = NO Economic Rescue for the rest of the World.
Specifically, China stepping hard on the brakes would Tank Commodities and Equities around the World.
Indeed, even China’s Robust Growth over the Past two years has not been sufficient to pull the USA and Eurozone out of the Economic Abyss.
Nor has Q.E. 1 or Q.E. 2 helped out households (including Taxpayers and most Investors) but rather helps mainly the Money Center Mega Banks as Robert McHugh Points out.
The Brutal Reality is that the U.S. Eurozone and International Economies are weakening, not strengthening.
No facts illustrate this Reality more than the
1.)Worsening State Budget/Muni Bond Crises in the U.S.A. Many municipalities and some States are close to Default on their Muni Bonds which finance essential services like… Schools, Hospitals, Waste Treatment, etc.
Yet, were a Q.E. 3 to be used to help the Muni Bond Market stay afloat, it would quite possibly create the Liquification that launches Hyperinflation.
2.)The deepening Housing Depression described above by John Williams.
So, short term, will Commodities/Equities be taken down?
And what about Gold and Silver, those Precious Monetary Metals which are increasingly but not fully, Canaries in the Coal Mine?
We say “not fully” because, as regular Readers are aware, a Fed-led Cartel of Mega-Bankers and Factota have long intervened to suppress their prices.
*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 liquidated profitably.
But recently The Cartel has become weakened as we explain in Deepcaster’s articles: “Saving Investments, Sovereignty, & Freedom from The Cartel ‘End-Game’” (1/13/11), “2011 Profit & Protection Essentials; Bubbles to Pop & Bullish Sectors” (12/30/10) and “Essential Preparation for 2011” (10/28/10) at www.deepcaster.com.
We forecast ongoing Specific Cartel Effects on these Precious Metals and Equities Prices in our latest Letter and Alerts at www.deepcaster.com, in the ‘Latest Letter’ and ‘Alerts Cache’.
Consider our General Overview of the Effects of Increasing Inflation on the following Sectors.
Gold & Silver
Given the Prospects for a Hyperinflationary future, Mid-and Long Term, Gold and Silver are the Best Assets for Profit and Protection from that Beast of Hyperinflation. (HI)
But we think Gold and Silver Shares are especially vulnerable to an Equities Market Takedown, with the HUI already signaling Negative Technicals. Yet Silver Bullion may be a special case; with an increasingly Serious Physical Supply Shortage.
And of course in the event of an Equities Takedown, Gold Shares, and, especially Silver Shares, would be weaker than Gold, or, Especially, Silver Bullion. See our Forecasts for all these in our ‘Latest Letter’ Cache at www.deepcaster.com.
U.S. Dollar
If The Fed-led Cartel sees The Beast (HI) as the Greater Threat Short-Term (given Crude over $90 and Food Riots the World around), they would arguably act to deflate the HI Beast with an Equities and Commodities Takedown launching soon.
Short-term, this would strengthen the U.S. Dollar perhaps even to the mid-80’s basis the USDX. In that event the recent Euro Rally would likely reverse into a Fall.
Longer term, Increasing Inflation entails Destruction of the Purchasing Power of the U.S. Dollar.
Equities
Given the Real Key Statistics, and considering Key Technicals (Bearish Ascending Wedge, Operative Hindenburg Omen, and super Bullish Sentiment – a contrarian Indicator) are Equities-in-General setting themselves up for the launch of a Multi-leg 2011 Crash?
But if the Short-term Technicals are any indications, we may see the Dow Flirt with 12,000 (as we earlier indicated last December when we forecast the Santa Claus Rally would likely extend into the New Year) juiced by near-insanely Optimistic Overreactions to Positive Earnings. Consider that The Musicians on the Titanic played brilliantly, we understand, as that ship was going down.
Can The Cartel prevent an Equities Crash Launch within the Next few weeks? We think they have much diminished Incentive to do so, given the HI Beast’s recent awakening in the Commodities and other Markets. Quo Vadis?
The December Inflation Spike – from 8.5 November CPI to 8.9 December CPI is plenty reason enough to “encourage” a Takedown. Thus Deepcaster has designed a Portfolio to Protect and Profit from the H.I. Beast. We discuss it below.
U.S. T-Notes & T-Bonds
With the Troubles in the Eurozone only Kicked with The Can Down the Road, courtesy of (mainly) Chinese purchases of Spanish and Portuguese Debt. U.S. Debt looks better than much other Paper.
Thus, Short-term Bullish Technicals (e.g. Daily and Weekly Stochastics) are no surprise to us.
10 yr. Yields have retreated a bit to 3.35%ish as we write, as Eurozone Debt Problems resurface.
Thus, short term, if and to the extent we see an Equities and Commodities Takedown, we expect U.S. Treasuries Strengthening.
However, mid and long-term, a prospectively weakening U.S. Dollar coupled with past, present and probable future Q.E., spells Major Degradation for the long-dated U.S. Treasury Securities.
Similarly, continuing Eurozone Q.E. spells Major Purchasing Power Degradation for the Euro long-term as well.
As more and more investors realize that Massive Q.E. (Money Printing) will dramatically reduce the purchasing Power of those Dollars (and Euros), they are scheduled to get back in 10 or 30 years, the more those 10 and 30 year Securities will weaken, thereby requiring ever-higher yields to attract purchasers.
At some point, this realization, slow in coming thus far, will become a Mass Awakening, resulting in a rush to Exit from U.S. (and European) long-dated paper. At that time this Bubble will have burst, thus giving the lie to those who claim U.S. (or Euro Nations) Treasuries are among the Safest Repositories of Wealth.
Longer term, U.S. Treasury Securities will likely be in very serious trouble as it becomes increasingly difficult to fund increasingly unpayable U.S. and other Sovereign Debts, but it is too early to short U.S. Treasuries yet.
Much higher U.S. Paper Yields, and The Hyperinflation Beast Courtesy of the Private For-Profit Fed, are thus our long-term Forecast.
Crude Oil
Arguably, short term, Crude appears to be topping around 90.
With ample above-Ground supplies, China putting on the Brakes, negative Real U.S. GDP, Unemployment, and the top we called at 90ish in place, the Short Term move could be down.
A Takedown would be most likely to launch if and when an Equities Takedown launches.
Long term, after that Takedown, another Big Ride up to $100 or more as Hyperinflation Beast kicks into gear. See our Alerts for Timing and Targets.”
Portfolio Essential for Profit & Protection Despite The Awakening Beast --
The Portfolio Essential:
The Brutal Bottom-Line Fact is this: to Protect Wealth and Profit, Ones Investments’ Total Return (Gain plus Yield) must exceed Real Inflation. For Holders of U.S. Dollar denominated Assets, for example, that means Investments must exceed a Total Return of 8.9% annually (and N.B. this figure rose from 8.5% just one month earlier).
Deepcaster’s High Yield Portfolio is designed to do just that.
We note with pride that since its inception most of our six Recommendations have gained, and none is substantially below, where we recommended them.
Moreover, they all still sport Healthy Recent Yields ranging from 6.7% to 18.32%, as we write.
See our High-Yield Portfolio at www.deepcaster.com for Specifics.
And, of course, in addition to our six specific recommendations, we recommend buying Gold and Silver Bullion (in one specific form) for ones Core Precious Metal holdings.
In sum, Core Precious Metal Holdings of Gold and Silver Bullion and Agricultural Products in relatively inelastic Demand, and businesses which focus on them, plus a High Yield Portfolio designed to provide a Total Return exceeding Real Inflation would provide excellent Wealth Protection and Profit to Surmount The Awakening Beast.
