Golden Numbers, Ersatz Numbers & Profit Nuggets

 

By Deepcaster

 

          “Can’t debate, so they changed the job numbers.”

Jack Welch, former General Electric CEO

 

Jack Welch’s Intuition – that the Official Numbers from the Bureau of Labor Statistics are Bogus -- is correct (as we demonstrate below). The Real U.S. Unemployment Rate is 22.8% per shadowstats.com.

 

But of equal importance is Welch’s focus on the importance of having reliable numbers as the basis for making sound Business Decisions (and Investment Decisions, we add) in order to protect Wealth and Profit.

 

So we lay out here certain critically important Numbers, and indicate resultant Profit Potential.

 

Consider, for example, Key Numbers which will help determine the future Gold Price (and notwithstanding the Idle comments of Fossils who consider Gold to be an Archaic Relic).

 

In the first two months of Last Year, Chinese Gold Imports from Hong Kong were about 11,000 kilograms. This year, for the same period Imports were 72,000 kilograms for the same period, about a 650% Increase.

 

Yet China is now the largest Gold producer on the Earth. Conclusion: China is Hoarding Gold. And several Central Banks are increasing their Gold Holdings as well.

 

Key Profit Nuggets: Despite the foregoing, Gold Stocks are in the aggregate are trading at levels similar to when Gold was under $1000/oz. Conclusion: Gold Shares are going higher and the only question is “when”, a question to which we respond in our Alerts.

 

Intensifying our focus on Jobs Numbers, they are Critically Important to Investors because they are a Reflection of Economic Health (and thus the Tenure of Politicians) and thus the “Earnings Climate” for Corporations.

 

Consider:

“The August-to-September change in the headline unemployment rate almost certainly was not a 0.3% decline.  The Bureau of Labor Statistics (BLS) knows the reported change in unemployment was wrong—other than by extreme coincidence—and it knows what consistent reporting actually showed.  Only politics prevents the BLS from releasing the correct number, whether the unemployment rate actually declined, held even, or rose as predicted by consensus forecasters.  The lack of transparency here in the data preparation allows for direct political manipulation.

 

“The problem is that the BLS knowingly has been preparing the seasonally-adjusted headline unemployment numbers on an inconsistent and non-comparable basis for some time.  The September number was prepared using a different set of seasonal factors than was used in coming up with the August number.”

 

“No. 473: September Employment and Unemployment, August Construction Spending, PCEDeflator”
John Williams, shadowstats.com, 10/5/12

 

 

Thus, we reiterate, the US Jobs Numbers for September released in early October were Bogus. Real Unemployment is 22.8%.

 

Moreover, contrary to the False Claim of Secretary of Labor, Hilda Solis, that the upward revisions of jobs were from the Private Sector, they were actually from upward revisions to State and Federal Government Payroll. Private Sector job Growth actually decreased by 5000, Joel B. Pollak - Breitbart.

 

The broader official U6 rate, i.e., the part-time and discouraged workers Unemployment Rate, actually stayed unchanged at 14.7%.

 

Significantly, if the labor force participation rate were the same as when President Obama took office, the Official Unemployment Rate would be 10.7% and the Real Rate higher than 22.8%. Moreover, we are still on pace to create fewer jobs than last year according to a report by James Pethokoukis, American Enterprise Inst.

 

And consider another critically Important number -- the Money Supply Growth and consequent Hyperinflation Potential.

 

John Williams:

 

“…the preliminary estimate of annual growth for the September 2012 SGS Ongoing-M3 Estimate… is on track to hit 3.3%, up from a revised 3.2% (previously 3.1%) in August… the upturn in annual broad money growth that began in February 2011, had faltered, leveled out and now is notching higher again.  Such a pattern—in an environment of massive Federal Reserve accommodation—still remains suggestive of an intensifying systemic-solvency crisis.”

 

Id.

 

Yes, indeed. And, following up on that same point, consider the Inflationary Implications of the Fact that a chart of True Money Supply plus Excess Bank Reserves parked at The Fed is Now going Hyperbolic, indeed, virtually straight Up in recent months.

 

“On October 6, GoldMoney posted my podcast with Robert Wenzel of EconomicPolicyJournal.com. In that podcast, Wenzel expressed concern about the future inflationary implications of the build-up of excess reserves on the Federal Reserve’s balance sheet. Excess reserves represent balance sheet cash parked at the Federal Reserve Board by commercial banks.

 

“Being the banks’ own money, they can gear up their balance sheets on it whenever they choose to do so. However, putting aside the gearing potential of excess reserves, we should at least treat it as cash, despite it being regarded as out of public circulation. There is therefore a strong case for it to be included in the True, or Austrian Money Supply quantity.

 

“TMS is basically cash plus instantly encashable accounts. The chart below is of TMS plus excess deposits at the Fed from 1960 to the present day.

 

“Worryingly it conforms to a hyperbolic curve, which is already going vertical in the fashion of a hockey-stick. Where this measure of money has deviated from the hyperbola it has done so by increasing faster than the hyperbola itself…

 

“We can be sure the Fed doesn’t want to look at things this way; but now that the increase in TMS plus excess reserves is beginning to lag behind the curve, it indicates that monetary policy is failing…

 

“Confirmation of this alarming discovery is to be found in the chart below, which is of gold from 1900 onwards, and has its own hyperbola…

 

“… together they represent confirmation of the ultimate collapse of paper money.”

 

“Accelerating money supply and gold prices”

goldmoney.com, 10/8/12

 

TMS plus excess reserves

True Money Supply compared to the Price of Gold.

 

Therefore, it is not surprising that Real U.S. Inflation is 9.33% -- Threshold Hyperinflationary.

 

From all the foregoing, John Williams correctly concludes:

 

“…while general circumstances have continued to advance towards the ultimate demise of the dollar, the general outlook is unchanged.  While QE3 is an enabling action for the onset of massive inflation, the outside timing of 2014 for the ShadowStats.com hyperinflation forecast remains in place…

 

The official recovery simply is a statistical illusion created by the government’s use of understated inflation in deflating the GDP, which overstates deflated economic growth…

 

The long-term fiscal solvency issues of the United States—where GAAP-based accounting shows annual deficits running in the $5 trillion range—are not being addressed…

 

Neither economic nor systemic-solvency issues have been resolved by U.S. government or Federal Reserve actions, and the most recent readings on income variance suggest that the worst is yet to be seen…

 

With the economy weak enough to provide political cover for further Federal Reserve accommodation to the still-struggling banking system, QE3 was introduced on September 13th.  That action effectively provided for open-ended monetization of U.S. Treasury debt at the Fed’s discretion.  The mechanism for eventual full debasement of the dollar now is in place, and it likely will come into full play, as needed to support the banking system and as needed to assure “successful” auctions of Treasury debt.

 

QE3 likely will lead to a massive dollar-selling crisis, and that will begin the process of a rapid upturn in domestic consumer inflation.  A near-term dollar-selling crisis is now of a much greater risk, post-QE3.  Separately, though, a dollar-selling crisis could begin at any time…”

 

“No. 473: September Employment and Unemployment, August Construction Spending, PCEDeflator”
John Williams, shadowstats.com, 10/5/12

 

Profit Nugget: Only the Monetary Metals, Gold and Silver, and certain essential Tangible Assets such as Energy and Food will serve as Profit Centers and Stores of value as the Inflation Acceleration proceeds. Deepcaster has made specific Recommendations aimed at Protection and Profit from these in recent Letters and Alerts referenced in the Notes below.

 

And since Real Jobs Growth or lack thereof is a reflection of Economic Health, consider Williams’ conclusion:

 

“The BLS reported today (October 5th) a statistically-insignificant, seasonally-adjusted September 2012 month-to-month payroll employment gain of 114,000…

 

 

http://www.shadowstats.com/imgs/2012/792/image016.gif?vcode=a80094806113945b

 

“Despite the ongoing and regular overstatement of monthly payroll employment—as evidenced usually by regular and massive, annual downward benchmark revisions (2011 and the just-announced 2012, excepted)—the BLS generally adds in upside monthly biases to the payroll employment numbers.  The process was created simply by adding in a monthly “bias factor,” so as to prevent the otherwise potential political embarrassment of the BLS understating monthly jobs growth… That process eventually was recast as the now infamous Birth-Death Model (BDM), which purportedly models the effects of new business creation versus existing business bankruptcies.

 

“…At present that is a monthly average of roughly 47,000 jobs created out of thin air… as part of the BDM…

 

“The aggregated upside annual reporting bias in the BDM reflects an ongoing assumption of a net positive jobs creation by new companies versus…

 

“The broadest unemployment rate published by the BLS, U.6 includes accounting for those marginally attached to the labor force (including short-term discouraged workers) and those who are employed part-time for economic reasons (they cannot find a full-time job).  The September U.6 unemployment rate held at a seasonally-adjusted 14.7%...

 

“In 1994, during the Clinton Administration, “discouraged workers”—those who had given up looking for a job because there were no jobs to be had—were redefined so as to be counted only if they had been “discouraged” for less than a year.  This time qualification defined away the long-term discouraged workers.  The remaining short-term discouraged workers (less than one year) are included in U.6.

 

“Adding the SGS estimate of excluded long-term discouraged workers back into the total unemployed and labor force, unemployment—more in line with common experience as estimated by the SGS-Alternate Unemployment Measure—held at 22.8% in September, the same as in August…”

 

Id.

 

Profit Nugget: When considering the Prospects for any Investment or Trade, it is essential to consider The Real Numbers which reflect the Actual and Prospective Economic and Financial Context in which the Investment or Trade is Made.

 

Conclusion: regarding the effect of the foregoing Real Numbers, Marc Faber recently agreed with Deepcaster’s earlier forecast that there would be a “Great Equities Crash in 2013.”

 

“‘Basically, I think QE3, which I think is unlimited, and bond purchases by the ECB bailout of countries have been largely discounted by the market, and the markets have been weakening technically, so I believe that we hamy have here quite a serious setback,’ he said….

 

“’I justwant to have a lot of cash because I think that within the next six to nine months, we can buy just about anything 20 percent lower than it is now.’…

 

“’…if I look at the presidential candidates today, if Obama is elected, I think the Dow Jones should be negative -13,473, and if Romney gets elected, it should be minus ‘6,000.’”

 

“Marc Faber: Market Setting Up for ‘Serious Setback”,

Bruno J Navarrro, CNBC, finance.yahoo.com, 10/10/12

 

 

 

Profit Nugget: Be Prepared to short Most Equities at the right time in the next few months.

 

Best regards,

 

Deepcaster

October 11, 2012

 

 

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