The Equities Market Sell-Off and Economic Data continue to support Deepcaster’s often-expressed View that the International and the USA’s Economy is slowing with Key downstream consequences being that there will be many more Debt Defaults and Earnings Misses, with predictable Negative Consequences for Equities and other Markets and Economies.
Key Profit Opportunities and Risks will thus be magnified going forward into 2016.
Submitted by Deepcaster:
China’s lousy Manufacturing Data and the USA’s lousy (recessionary) ISM Number both released earlier this year Testify to this fact. And the impending Debt Defaults will by no means be limited to the Oil Shale Frackers though they will be hit the first and hardest.
Indeed, Deepcaster’s earlier Key Forecasts for the 2015-2016 Transition Period have been or are being fulfilled with Profitable Consequences (Note 2). And the Mega-Trends (even the Negative ones) we identified recently provide Superb Profit and Wealth Protection Opportunities going Forward.
In sum, the U.S. Economy is not nearly as strong as the Mainstream Media spin would have us believe and it and China’s and the Eurozone all look to get weaker.
Worse, the $US is moving inexorably toward losing its Reserve Currency Status though its exchange rate status is still strong, for now.
The USA recently expanded China’s IMF Vote by 50%. Thus, the (de facto Gold-backed) Yuan is well on its way toward displacing the $US as World Reserve Currency, not immediately, but likely in the coming months, with very Negative Consequences for the USA!
Indeed, China is the New Neo-Colonialist Power increasingly manipulating the Yuan for leverage, a battering ram or Tool to acquire Real Resources (commodities, Farmland, etc.) in Increasing Political Power (!) around the World on the Cheap. Welcome to The Future! (Sarcasm intended!) And, remarkably, despite months of Weakening data visible to all, The Fed tightened last December into that Economic Weakness!, a Move which is and will continue to exacerbate the Economic Slowdown.
Of course, this is not as surprising as it might seem when one considers that the private-for-profit Fed’s Actions before, during and after the 2008 Crash were aimed at mainly at helping Fed-Shareholder Mega-Banks rather than the U.S. Economy or Workers.
But this may not save many banks in the long or middle run because the biggest Banks collectively have over $240 Trillion Derivatives Exposure, much of it directly or indirectly tied (via Derivatives) to Debts many of which will Default in the next couple of years.
To Profit and Protect, we must first Consider the Impending (ongoing) U.S. and Global Recession which the following Data indicate:
- The Profit Cycle is Peaking
- Consumer Confidence is topping and beginning to decline
- U. S. Jobless Claims are increasing and the Labor Force’s Participation rate continues to decline, (see Shadowstats at Note 1 for the Real Numbers) and the Eurozone employment picture is even grimmer
- Manufacturing is weakening
[And the risks are greater when one considers that the four largest U.S. Banks are approximately 40% larger than they were in 2008! As Mike Snyder points out, “The problem of ‘too big to Fail’ is now bigger than ever!” (Financial Armageddon Approaches, 12/29/15).]
The International Economy is Slowing! And the U.S. Economy too despite the Happy Talk in the Mainstream Media.
If this resulted in Price Deflation that would arguably be good for Consumers, but Price Deflation is not happening (Note 1).
But what we are seeing is not only an Economic Slowdown but a Debt Deflation due to the Trillions in Private and Sovereign Debt outstanding (greater than the 2007-2008 Peak), which makes Debt, especially $US-denominated Debt, harder to repay, because it is done with “more expensive” Currency.
Therefore, sophisticated Investors see what is coming and are pulling their money out of Junk and Corporate Bond Funds. And this is only the first beginning sign of the Great Credit Collapse coming — the Credit Collapse and Slowing Growth are two of the Great Mega-Trends of which we speak. (But Deepcaster sees these as Profit Opportunities.)
Bank of America has recently acknowledged what Deepcaster has earlier forecast, that a “Carnage in Fixed Income” is developing as a result of “the largest Outflow in Bond Funds since June, 2013” Bank of America Notes:
- Huge $5.3bn outflows from HY bond funds (largest in 12 months)
- $3.3bn outflows from IG bond funds (outflows in 4 of past 5 weeks) (2nd biggest in 2 years)
- $2.2bn outflows from EM debt funds (largest in 15 weeks) (outflows in 20 of 21 weeks)
- Huge $1.8bn outflows from bank loan funds (largest in 12 months) (outflows in 19 of past 20 weeks)
Bank of America, 12/16/2015
As we forecast recently, the High Yield Junk Bond Market has taken, and will continue to take a hit. And this is only the beginning, because when Debt Defaults begin, they tend to Multiply in a “Domino Effect.” We are beginning a months-long Debt Deflationary Economic Contagion and it will be Brutal. As former OMB Director David Stockman says of our over-financialized — courtesy of The Fed — Economy:
“There is going to be carnage in the casino, and the proof lies in the transcript of Janet Yellen’s press conference. She did not say one word about the real world; it was all about the hypothetical world embedded in the Fed’s tinker toy model of the US economy….
“This stupendously naïve old school marm still believes the received Keynesian scriptures as penned by the 1960s-era apostles James (Tobin), John (Galbraith), Paul (Samuelson) and Walter (Heller).
“But c’mon. Those ancient texts have no relevance to the debt-saturated, state-dominated, hideously over- capacitated global economy of 2015. They just convey a stupid little paint-by-the-numbers simulacrum of what a purportedly closed domestic economy looked like even back then.
“That is, before Richard Nixon had finally destroyed Bretton Woods and turned over the Fed’s printing presses to power aggrandizing PhDs; and before Mr. Deng had thrown out Mao’s little red book in favor of a central bank based credit Ponzi.
“As you listened to Yellen babble on about the purported cyclical “slack” remaining in the US economy, the current unusually low “natural rate” of federal funds, all the numerous and sundry “transient” factors affecting the outlook, and the Fed’s fetishly literal quest for 2.00% inflation (yes, these fools apparently think they can hit their inflation target to the second decimal place), only one conclusion was possible.
“To wit, sell the bonds, sell the stocks, sell the house, dread the Fed!
“In a global economy that is plunging into an epic deflationary contraction, Yellen & Co still embrace mythical and unmeasurable benchmarks for domestic full employment and other idealized performance targets….”
“Sell The Bonds, Sell The Stocks, Sell The House – Dread The Fed!,” David Stockman, via lemetrepolecafe.com, 12/18/2015
In sum, The Private-for-Profit Fed’s ZIRP has created Massive Bond and Equities Bubbles. For Deepcaster’s Forecasts for which Sectors likely to make Mega-Moves first and for our Consequent Buy Recommendations, see our recent Letters and Alerts.
Looking farther down the Road (months away), if The Fed is compelled (i.e., by a Market Crash, or Credit Default Domino Effect), to do another round of QE (as we expect it eventually will), then the recently strong $US will begin to Fall.
Such a Negative Catalyst is a virtual Certainty, the Only Question is the timing.
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 of slow Economic Growth. (Note 2 from Shadowstats.com)
In fact, 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” (Mandating Open Borders!) Deal Passes.
But note that One Great Delusion (which is gradually being dispelled) 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.
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 (including Derivatives) Credit Bubble begins to Burst.
We have already laid out Triggers for and Signals of an impending Crash Leg.
And the Fundamentals we have earlier laid out support our View, e.g., U.S. Consumption Growth Peaked in Q1 2015!
And consider the Worldwide Market—Euro Data (especially German Data) are in the red and decelerating. And admitting Millions of Dependent and largely unassimilable, discontented migrants will only exacerbate their problems (and the USA’s as well — over 50% of legal (1.5 million per Year) and hundreds of thousands of illegal immigrants to the USA annually are on one or more taxpayer-funded welfare programs – cis.org.). Europe is headed for a Deeper recession, and thus the ECB will likely do more QE, and the Euro will suffer more weakening, and now we add Geopolitical Risk of Wider War in the Mideast, which still supplies much of the US’s and World’s Oil.
In sum, there is a Bearish Divergence between Prices and other indicators. And the Economic Fundamentals (Global Contraction, e.g., Inventories at Levels typically preceding crashes) and Interventionals—years of Artificial Equities Market Elevation by The Fed and other Central Banks leading to Bubbles—now support/generate the Technicals signaling most Equities-in-General have begun a Major Multi-Month downtrend around the World.
And we reiterate that $9 Trillion in $US denominated debt Worldwide will start to implode sometime in the next few months and create a Negative Chain Reaction — a Mega-Trend to be sure.
The Mega-Trend is down.
Importantly, the likely Trigger for the next Major $US Crash will likely be the next Round of Fed QE (probably mid to late 2016) which will likely come after a Major Equities Crash Leg plays out.
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 (including Credit-Based Derivatives) Trillion Bond Bubble is Bursting.
But we reiterate that before that (next very few months) we expect U.S. Treasuries to strengthen as Ostensible Safe Havens during the Initial Equities Crash, as they have just this January.
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).
Indeed, when (late 2016-2017) 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.
In sum, likely beginning no later than the end 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.
So consider the likely response of the Mega-Banks to the foregoing Financial Armageddon(and then consider Deepcaster’s Recommendations for Profit and Protection).
One likely response is “Bailins”. As Ellen Brown points out…
“…Bank bail-ins have begun in Europe, and the infrastructure is in place in the US. (! Emphasis added) Poverty also kills…
“At the end of November, an Italian pensioner hanged himself after his entire €100,000 savings were confiscated in a bank ‘rescue’ scheme. He left a suicide note blaming the bank, where he had been a customer for 50 years and had invested in bank-issued bonds. But he might better have blamed the EU and the G20’s Financial Stability Board, … (which imposed an ‘Orderly Resolution’ regime) that keeps insolvent banks afloat by confiscating the savings of investors and depositors. Some 130,000 shareholders and junior bond holders suffered losses in the ‘rescue.’…
“A Crisis Worse than ISIS?” Ellen Brown,
And all this is a Harbinger for what is coming in the U.S.
Yes, indeed, we mean there is a Real Possibility your Savings and Investments will be confiscated!! And All for what? Ellen Brown explains …
“That is what is predicted for 2016: massive sacrifice of savings and jobs to prop up a ‘systemically risky’ global banking scheme….
“[It is] entirely possible in the next banking crisis that depositors in giant too-big-to-fail failing banks could have their money confiscated and turned into equity shares. . . .
“If your too-big-to-fail (TBTF) bank is failing because they can’t pay off derivative bets they made, and the government refuses to bail them out, under a mandate titled ‘Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,’ approved on Nov. 16, 2014, by the G20’s Financial Stability Board, they can take your deposited money and turn it into shares of equity capital to try and keep your TBTF bank from failing.
“Once your money is deposited in the bank, it legally becomes the property of the bank. Gilani explains:
“Your deposited cash is an unsecured debt obligation of your bank. It owes you that money back.
As well, Note that, in a crisis, your chances of recovering your money from Bailins are low to zero.
“At first glance, the “bail-in” resembles the normal capitalist process of liabilities restructuring that should occur when a bank becomes insolvent. …
“The difference with the “bail-in” is that the order of creditor seniority is changed. In the end, it amounts to the cronies (other banks and government) and non-cronies. The cronies get 100% or more; the non- cronies, including non-interest-bearing depositors who should be super-senior, get a kick in the guts instead. …
“In principle, depositors are the most senior creditors in a bank. However, that was changed in the 2005 bankruptcy law, which made derivatives liabilities most senior. …
“What about FDIC insurance? It covers deposits up to $250,000, but the FDIC fund had only $67.6 billion in it as of June 30, 2015, insuring about $6.35 trillion in deposits. …
“When super-senior depositors have huge losses of 50% or more, after a ‘bail-in’ restructuring, you know that a crime was committed.” [Emphasis added.]
Indeed! And what are possible Solutions?
“You can move your money into one of the credit unions with their own deposit insurance protection; but credit unions and their insurance plans are also under attack. …
“In short, the goal of the bail-in scheme is to place losses on private creditors. …
“Meanwhile, local legislators would do well to set up some publicly-owned banks on the model of the state-owned Bank of North Dakota – banks that do not gamble in derivatives and are safe places to store our public and private funds.”
And there are other alternatives which we lay out in our recent Letters and Alerts.
Key among them are Physical Gold and Silver and some Physical Cash.
As well, Trading the Markets on the Short Side is essential for both Profit and Protection!!
In addition, remarkably, and notwithstanding the $US move up in recent weeks (usually $US Up Moves are Gold and Silver price-Negative in $US Terms), Gold has popped back up over $1090s and Silver back up to around $14 as we write, despite ongoing Cartel (Note 3) Price Suppression Efforts.
Slowly but surely, the Equities Weakness and heightened Geopolitical Risks and Weaker Economies, will be persuading Investors that the True Safe Haven Assets are these Precious Metals. In sum, the long painful wait for Gold and Silver Partisans is soon to be over, notwithstanding Cartel Price Suppression Efforts. As Equities experience another Crash Leg and the Credit Bubble shows more signs of The Big Burst, we expect that the Precious Metals launch will accelerate.
We expect Silver to jump higher too, if not lead the Way, because it is both an industrial Metal (which gets used up!) and Store of Value. Re. Silver Note
- The Average Yield fell from 13oz per tonne in 2005 to 7.8oz per tonne in 2014
- But Production Costs are Rising notwithstanding recent lower energy costs
In sum, Today, the Market Price of both Gold and Silver is close to the cost of production and that can not continue much longer.
However, very short-term (next few days or very few weeks), given The Fed rate rise and ongoing Cartel price suppression efforts, Gold and Silver could tank (with Cartel Help, of course) back toward $1050 and $13 over the next few days or very few weeks but this is less and less likely as the days pass.
In any event, Gold and Silver will probably spike up even more, sometime in the next few weeks or very few Months, smelling that more QE and Chaos are coming soon.
Furthermore, consider that, in light of the Massacres and Wars, and given that the USA is The Ostensible Safe Haven, U.S. Treasuries and especially the $US have been strong recently, and these have delayed the Precious Metals’ launch up.
And the Precious Metals have been pushed down too, given the fact that (until recently) relatively high Equities prices provide cover for the Illusion that the U.S. Economy is recovering.
In sum, $US strength plus ongoing Cartel Precious Metals price Suppression both have had Gold and Silver Prices Chopping Sideways. But all this is changing.
Indeed, Consider that, Mid- and Long-Term, with:
- 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 deepening Recession
- The Threat of more Immigrant Terrorist Attacks in Europe and the U.S.
- And Major Central Banks are competing to devalue their currencies!
- And $9 Trillion is $US denominated Private Debt at Risk
- The Fed’s ZIRP-created Bubbles
- $550 Trillion in Credit Derivatives Exposure
…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.
Therefore, the Trend should soon be clearly UP again for these Precious Metals albeit slowly and very choppily at first.
January 15, 2016
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 December 15, 2015
0.50% / 8.12%
U.S. Unemployment reported January 8, 2016
5.01% / 22.9%
U.S. GDP Annual Growth/Decline reported December 22, 2015
2.15% / -1.43%
U.S. M3 reported January 8, 2016 (Month of December, Y.O.Y.)
No Official Report / (e) 4.49% (i.e., total M3 Now at $17.05 Trillion!)
Note 2: 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*
- Appx 75% Profit on short U.S. Equities Sector TODAY! (01/15/2016)
- 28% Profit on a Long Treasury Bond Treasury Bond Position on January 12, 2016 after just 71 days (i.e., about 140% Annualized)
- 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 3: 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.