Submitted by Deepcaster:
The Fact that the Equities Markets have been chopping near their 2015 highs recently (except for the serious November 27 5.5% Drop in the Shanghai Composite) is quite Deceptive.
Critical Mega-Trends in Key Sectors are increasingly Manifesting themselves, Mega-Trends which will generate both immediate Mega Moves and Multi-Decade Impacts.
To consider them and the Potential for Great Profits and Great Losses, consider the Summary below and our December Letter and Forecasts below.
The Warning Signs of Impending Key Sector Mega Moves are Multiplying. Consider
- The Great Bond Bubble Bursting Threat, over $100 Trillion outstanding in (3 times the size of the 2008 Housing Bubble) and, including leveraged Derivatives based on Bond Prices, it is $555 Trillion!!!
- But the Corporate Bond Market is showing increasing Stress and not just in the Energy Sectors.
- Consumer Confidence typically Peaks before a Recession and it was 99 in October but dropped to 90 by November.
- Corporate Profits are down2% Year On Year.
- Consumer Spending peaked in January 2015.
- Japan’s QE for the Banks has not boosted their Economy so the Bank of Japan is instituting a QE for lower income citizens of Direct $215 Cash Grants.
- S. Sovereign Debt has doubled to nearly $19 Trillion since Obama took office.
- A weak PMI number showed U.S. Manufacturing is slowing.
- And Worse, Major Central Banks claim to be solving the Debt Crisis by competitively issuing more Debt, not a Sustainable Strategy in the long Run.
- Record Low Capital Spending.
And Consider the following Symptoms, Causes and Consequences of Current Mega-Trends.
- Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.
- Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.
- The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.
- The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.
“One by One the Central Banks are Losing Control,” Phoenix Capital Research, 11/27/2015
And if the foregoing were not bad enough, Major Governments consistently lie about their economies.
Anyone who believes that China’s GDP Growth is just under 7% needs counseling. At best, it is 3% if one looks at Real Numbers, like Power Usage.
And the U.S. Statistics are no better. Compare the Bogus BLS Statistics with the Real Numbers courtesy of Shadowstats.
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 November 17, 2015
0.17% / 7.77%
U.S. Unemployment reported December 4, 2015
5.05% & 9.90% / 22.9%
U.S. GDP Annual Growth/Decline reported November 24, 2015
2.17% / -1.43%
U.S. M3 reported December 3, 2015 (Month of November, Y.O.Y.)
No Official Report / (e) 5.25% (i.e., total M3 Now at $17.065 Trillion!)
But there is an Upside to Considering the Real Numbers and other Unpleasant Realities. Consideration of the foregoing Mega-Trends and Real Numbers has facilitated Deepcaster’s Profitable Recommendations recently. (Note 1)
U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates
Short-term, the $US has been and will likely Continue to Strengthen, and remain bouncing around 100ish basis USDX.
When the Yuan took a step closer to Reserve Currency Status with the recent announcement that it would be added to the IMF’s Reserve Currency “Basket,” the $US did not move much. That announcement was already “in the Market.” And the Yuan is already the fourth most used currency in the world for 2% of Transactions, whereas the $US is used for over 40%. By the Way, the Yuan is already a de facto Reserve Currency (de facto increasingly Gold-backed as well!)
And, although The Fed should not raise rates into the Global Economies’ Slowdown in its December Meeting, it is now more likely than not (but not certain) they will do so by 25 BPS since they have backed themselves into a corner.
This too will be $US positive, short-term. And recent Terrorism Actions/Threats have boosted the $US also.
In sum, Short-term (i.e., a Few Weeks to Very Few Months) we are $US Bulls. Indeed, one Technical Target for the $US in this period is 130 basis USDX. But we do not think it will reach that high before some $US Negative Event/s which we describe in detail in our latest Letter.
The U.S. Economy is ostensibly the strongest in the World these days. In Reality, the U.S. Labor Force Participation Rate is at a 40-year low and the recent pop in jobs numbers does not alter the Declining Trend.
In fact, U.S. Industrial Production Growth is a mere 0.3%, US manufacturing is in a recession and, indeed, so is the rest of the economy. And this will Greatly Worsen if the U.S. Job-Killing TPP “Trade” (including Open Borders! Via “Free Movement of Persons” among the TPP signatories) Deal Passes.
Importantly, the likely Trigger for the next Major $US Crash will likely be the next Round of Fed QE (see recent Deepcaster Letter and Alerts for specific Timing Forecasts) which will likely come after a Major Equities Crash Leg plays out
Lousy U.S. Economic Data is foreshadowing this Equities Train Wreck—Recently, New Home Sales and Durable Goods Orders and Consumer Confidence all missed!
Mid-term, a few weeks/months after that Equities Crash Leg, and quite likely before private heavily-leveraged Debtors (e.g., Think Frackers in the U.S. and Emerging Market Debtors with $US-denominated Debt) will have begun to default on substantial tranches of their $9 Trillion! In US$ Denominated Debt it will create another Power Move — probably yet another Equities Crash Leg. And Note that Credit Defaults have a Domino Effect!
After that,(i.e., late 2016 or in 2017) the U.S. Government Bond Bubble also will likely begin to burst because the $US will, by then, have begun to be substantially devalued. And The Key Signal that the Bond Bubble Burst is impending (likely months away) in 2016 will likely be a Spike Up in yields for the 10 and 30 Year U.S. Treasury Bonds. The foregoing will be Signals the Massive $555 Trillion Bond Bubble is Bursting.
But before that (next very few months) we expect U.S. Treasuries to strengthen as Ostensible Safe Havens during the Initial Equities Crash.
But although Economic Deflation is occurring, Price Inflationary Pressures are building thanks to The Fed’s and other Central Banks’ Competitive Money Printing Policies (i.e., Monetary Inflation) despite ongoing Cartel Price Suppression Efforts (See Note 2).
Indeed, when The Fed launches another Round of QE, it will further weaken the Exchange Rate Value of the $US and likely launch serious Price Inflation. Then Gold and Silver will likely Skyrocket.
We expect this to occur after the forecast next Major Equities Crash Leg runs its course.
In sum, beginning no later than the second half of 2016, we expect the $US to begin to Tank vis à vis the Precious Metals and eventually, vis à vis stronger Currencies (e.g., the CHF & Canadian & Aussie $ and the (de facto Gold-Backed) Yuan). And the $US Drop will be amplified when The Fed initiates another round of QE.
Mid- to Longer term, the Euro and Yen too will also likely weaken vis à vis the aforementioned stronger Currencies and the Precious Metals. Indeed, the weakening vis à vis the Precious Metals has begun, albeit fitfully.
Longer term, we agree with Shadowstats’ John Williams who says
“Significant upside Inflation pressures are building, as oil prices rebound, a process that should accelerate rapidly with the eventual sharp downturn in the Exchange Rate Value of the $US.”
Yes, Stagflation is coming.
Hyper Price Inflation is coming, and the way to prepare is with Gold, Silver and selected (e.g., in Agriculture) Hard Assets which are both Inflation and Deflation Resistant.
The Paris Massacres and Million(s) Migrant Incursion into the Eurozone plus Chinese and Japanese Economic Weakness have not only help propel U.S. Equities near All-Time Highs.
These Events/Developments have also delayed for a few weeks (and quite possibly through the end of this year) but not eliminated the High Likelihood of a Major Market Crash Leg.
In the meantime, we may well see all-time highs on U.S. Equities Markets, but not necessarily.
One Great Delusion is that the U.S. Economy can/is somehow stronger than all the rest and can stay stronger despite the decelerating Eurozone and China and Japan and the Emerging Markets.
Even putting aside the USA’s $19 Trillion Deficit and its $200 Trillion plus downstream unfunded liabilities and a congeries of lousy Economic News, the Fact is that Prospects for the U.S. Economy are closely linked to the prospects for the rest of the World.
As earlier mentioned, There is $9 Trillion of $US denominated credit outstanding to Non-Bank Borrowers outside the USA. Consider the potential Ripple (Tsunami!) Effect when Significant Numbers of Defaults begin and, especially, when the $555 Trillion Bond Bubble begins to Burst.
The U.S. Equities Market has risen recently because of the Paris Massacres and high Mideast Tension leading people to think the US is The Safe Haven, but, in fact, it is The Ostensible Safe Haven.
But notice that the recent Equities Price Rise has been on lower volume and higher volatility both very Bearish (i.e., non-confirming signals).
We have already laid out Triggers for and Signals of an impending Crash and will make that Timing Forecast in our Alerts as we did successfully prior to the 2008 Crash when we recommended our subscribers be in five leveraged short funds, all of which positions were profitable.
Gold and Silver
It is elementary that $US Strength typically leads to Gold and Silver price weakness in $US Terms.
So, as the $US has strengthened recently toward, and more recently, over 100 basis USDX, the Gold Price has fallen to the $1050s and Silver to around $14.
In light of the Massacres and Wars and given that the USA is TOSH, U.S. Equities and especially the $US have been strong recently as well as Cartel Price Suppression, and these have delayed the Precious Metals’ launch up.
And, short-term, as the $US rises (and with the prospect of further $US strength via a Fed Rate Hike) Gold and Silver tend to be pushed down in $US terms. And pushed down especially given the fact that relatively high Equities prices provide the Illusion that the U.S. Economy is recovering.
Thus $US strength plus ongoing Cartel Precious Metals price Suppression both have had Gold and Silver Prices Moving somewhat lower Short-term.
So, very short-term, and as long as the U.S. Economy APPEARS strong vis à vis the other Major Economies, the $US will remain strong; and Gold and Silver may well weaken further but not for long.
Caveat: Both Precious Metals could spike at any time in the event of a Major Geopolitical or Unforeseen Economic Event.
But those levels should be the lows of the nearly complete multi-year bottoming process and the Launch Pad, as it were, for the Precious Metals launch up. Such should be the definitive turning point up.
Indeed, Consider that, Mid- and Long-Term, with:
- The Threat of more Terrorist Attacks in Europe and the U.S.
- The Threat of Wider War in the Mideast or War over the Spratleys in the South China Sea
- The Eurozone in recession, and
- China and the Emerging Markets in Deceleration or Outright Contraction, and
- Japan still slowing and
- The USA in an unacknowledged Recession
- And Major Central Banks are competing to devalue their currencies!
- And $9 Trillion is $US denominated Private Debt at Risk.
…and all despite various Forms of Massive Intervention, there simply is, increasingly, nowhere to turn for a Safe Haven mid- and long-term, with the Potential for both Profit and Protection but Gold and Silver, and selected Agricultural and Water Assets and Enterprises. Consider our recent Alerts re the Forecast Timing of the Precious Metals Launch.
Crude Oil & Copper
The Crude Price continues to be cross pressured lately. Among the “Higher Prices” Forces are
- Migrant Terrorist Attacks in Paris, the USA and elsewhere
- Violence: the Threat of Wider War in the Mideast and War elsewhere (Syria and possibly The Spratleys)
- almost 5 million barrels per day of planned drilling projects have been cut off or cancelled
And pushing prices lower the recently predominant forces have been
- Adequate and record high (highest since 1930) above-ground supplies
- Demand Dampening or destruction resulting from the Worldwide Economic Slowdown/Contraction, and
- the fact the Saudis and other Major Producers continue to pump and intend to produce more
- Iranian Production should be coming online soon.
For now, the “Lower” Farces are Prevailing. Thus WTI Crude has been bouncing around $40 lately and is trending lower still! Consider our Alerts for specific Timing Forecasts Going Forward.
Incorporating the foregoing (including the qualifications) Commodities-in-general should continue to weaken going forward because
- Weakening Consumer Confidence
- Slowing Economic Global Growth
- Earnings Trending Down
- Worldwide Economic Deflation
- The prospectively Bursting Credit Bubble
December 4, 2015
Note 1: Our attention to Key Timing Signals and Interventionals and accurate statistics has facilitated Recommendations which have performed well lately. Consider our profits taken in recent months in our Speculative and Fortress Assets Portfolios*
- 45% Profit on Long Treasury Bond Treasury Bond Position on October 1, 2015 after just 22 days (i.e., about 775% Annualized)
- 265% Profit on Short NASDAQ Position on September 29, 2015 after just 57 days (i.e., about 1690% Annualized)
- 110% Profit on Short Russell 2000 Position on August 21, 2015 after just 3 days (i.e., about 13500% Annualized)
- 65% Profit on Short Russell 2000 Position on August 20, 2015 after just 2 days (i.e., about 12000% Annualized)
- 40% Profit on Short a Retail Sector ETF Position on August 7, 2015 after just 4 days (i.e., about 3630% Annualized)
- 80% Profit on Short a Retail Sector ETF Position on July 27, 2015 after just 6 days (i.e., about 4850% Annualized)
Note 2: 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 July, 2014 Letter entitled “Profit, Protection, Despite Cartel Intervention” 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, including testimony before the CFTC, for information on precious metals price manipulation, and manipulation in other Markets. 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.