“The rate at which the majority of the eurozone is descending into insolvency is accelerating. The rescue package for Spanish banks, which appears to have been provisionally set at a figure designed to impress the markets, hardly even produced a dead-cat bounce. All it has achieved is to draw attention yet again to the helplessness of the authorities in dealing with multiple debt-traps. So what is the answer?
“Explain why it is that those countries, driven by the consumption so loved by Keynesians and monetarists alike, have turned into basket-cases, while economies driven by a savings culture persistently confound all neoclassical theory by making their citizens better off, in every case.”
“A call to arms for central banks”
Alasdair Macleod, GoldMoney, 6/16/2012
Amid all the increasing challenges in the Markets and Economy there are three “Fortress Asset” Sectors which will likely return Profits over the mid and long-term regardless of Boom or Bust, Inflation or Deflation. To understand why we select just these three Sectors first consider
“The Bureau of Labor statistics reported the increase/decrease in non-farm payrolls and the unemployment rate for June 2012 on Friday, July 6th. Stocks plunged on the news. Why? The BLS reported that non-farm payrolls increased by 80,000 new jobs in June. Isn’t that good? Well first of all, it is a false figure. The true figure is there was a net loss of 44,000 jobs in June. The BLS decided in their infinite wisdom that they think, they guess, they pretended that new businesses that started up in June created 126,000 new jobs. They have no idea what new businesses started, nor did they count new jobs in these phantom new businesses. This 126,000 phony figure was added to the loss of 44,000 jobs to fudge a positive number for the release of the June jobs report. This phony figure is called the CESBD adjustment, or the Birth/Death adjustment. Birth/Death refers to businesses, not people. The truth is the economy lost 44,000 jobs in June. This is abysmal. This is recession. This is an indictment of government fiscal policy, of Fed monetary policy, of tax policy and regulation of businesses. We need a true increase of 150,000 new jobs each month just to break even with population growth, and need millions more to put displaced workers back in a job.
“The truth is, the economy is falling off a cliff, housing transactions are essentially non-existent, jobs are declining, growth is shrinking.”
“Current Weekend Report”
Robert McHugh, Main Line Investors, 7/7/12
There is a War going on between the forces of Inflation (e.g. mainly Central Bank Money Printing and 80 Million/Yr. World Population-growth-generated Demand) and the forces of Deflation (e.g. several contracting Major Economies around the world, resulting in Increasing Unemployment and a slowing Velocity of Money). The “War” is disguised by Bogus Official Figures as indicated by shadowstats.com (see Note 1 below) and Robert McHugh (above).
The Central banks will ultimately “Win” via QE-to-Infinity but that “Win” will be a Pyrrhic victory because it will bring Hyperinflation and Stagnant Economies, i.e. Hyperstagflation. Fortunately there are three “Fortress Profit Sectors” which will suffice to Protect and Profit, despite Hyperstagflation.
Jim Sinclair correctly forecast the Central Banks of the World would implement QE-to-Infinity. And so they continue to do so. Just in the last few weeks:
- The ECB cut its benchmark Interest Rate to 0.75%
- China cut bank lending rates for the second time in a month
- The Bank of England announced an expansion of its government Bond Purchases
- The private for-profit Fed promised to “Twist” until Year-End
This Q.E. et al. has already resulted in Threshold Hyperinflation, e.g. 9.3% in the US (per Shadowstats). Bogus Official Statistics Mask these Realities of Threshold Hyperinflation, Increasing Unemployment [22.7% in the U.S.] and Negative GDP Growth (-2.17% in the USA).
Indeed the supposed “Deflation” much Ballyhooed by the Mainstream Financial Media is just Fiction. Consider Adrian Douglas’ point:
“There are frequent claims that the U.S. economy has entered a period of “deflation.” These claims are totally unfounded and are false. Deflation can only be a persistent state of general price decline. In fact, in examining price trends, the U.S. is experiencing shocking price increases of over 15% per annum. To illustrate this, …the Continuous Commodities Index, CCI over the past ten years.
“…shows there are periods of high inflation and brief periods of “disinflation.” “Disinflation” is a period when the money supply expansion slows but does not contract. …(But) There is absolutely no sign of any reversal in the general trend of inflation.
“…The index covers a broad range of industrial raw materials for the production of energy, food, metals, and textiles. The CCI composition remains unchanged since 1995 and so suffers no hedonistic massaging or adjustments unlike the government produced Consumer Price Index, CPI, and Producer Price Index, PPI.”
“Deflation – Nowhere to be Seen”
Adrian Douglas, Market Force Analysis, 7/7/12
Three Sectors have exceeded or at least “Kept up with Real Inflation” in recent years and of those Fortress Asset Sectors, two will likely do so consistently in the Long Run.
As well, one Mini-Sector looks to return Spectacular Profits over the short to mid-term. Indeed, Deepcaster expects to make a specific stock recommendation/s on our forecast Pull-Back in the next few weeks.
One Inflation-Sensitive Sector will not automatically do well but will be quite profitable at times and not so much at others. Crude Oil is a Truth Teller about Real Inflation because it gets used up (and thus is not easily subject to Price Manipulation over the Mid and Long Term). Despite recent Pundit forecasts of $70 or $60 oil, Oil and Energy shares rallied recently (as we forecast) and shot up 6% on the Eurozone announcement that it would liquefy the Eurozone Banks for free (i.e. at Taxpayer expense). Indeed Crude marched even higher to $87ish last week. Bottom line: More paper/digital money chasing limited Crude Supplies in increasing demand means higher prices, especially with a wider Mideast War a possibility.
Crude Prices will fall temporarily on Bad Fundamentals News (e.g., on a Negative Employment Report) and will rise on QE and Equities Positive Events. But until the Next Major Equities Takedown the Crude Price Trend is likely still up. After all, for example, even though China is slowing, its Crude Usage is still increasing, albeit at a lower rate.
But mid to long-term that Uptrend will be punctuated by significant drops in the Crude Price when, for example, that Equities Downturn is coupled with increasing supply from the Bakken, Eagle Ford, and other Frac-Fields.
Thus those who have bought their Oil Producer Stocks with the idea that they will reflect sustained Gain and Yield without interruption will be most disappointed. For the short term, the quality O & G companies should continue to perform well. Longer term, there will be Major Downturns and Rebounds.
However, the two Sectors which will do well going forward regardless are Essential Food Commodities and the Precious Monetary Metals (with Periodic Price setbacks in the latter from Cartel Price Suppression). Needless to say, it is essential to invest in the latter two Sectors with the right timing and in the right “vehicle”.
Another Essential Profit Citadel is High-Yield Stocks whose Total Return (Gain plus Yield) is aimed at beating Real Inflation (9.3% in the U.S., e.g.) as is Deepcaster’s High Yield Portfolio (see Note 2). Investors lose significant Purchasing Power if they hold Fiat Currency denominated Assets which return less than Real Inflation (see Note 1).
Holders of Gold and Silver bullion and their Miner’s shares have been disappointed in recent months as repeated Cartel Price Takedowns have depressed Prices, when Economic and Financial Developments would (without manipulation) have otherwise dictated Explosively Bullish moves.
But we Precious Metals Partisans should not be disappointed, but rather see such Price Takedown as Superb Buying Opportunities. There is increasing demand for Physical Gold and Silver, increasing Central Bank Buying, and both are in a long-term uptrend. And The Cartel is increasingly unlikely to be able to generate deep Takedowns, or sustain Takedowns for long time periods.
Our Investment “Mantra” – “Buy and Hold rarely works Anymore” does not apply to Gold and Silver Bullion held in one’s own Physical Possession. Buying and Holding Physical Bullion on dips is the very best way to Profit and Protect Wealth, thus creating a Durable Profit Citadel.
July 12, 2012