“…when it comes to debt and to the prospects for future debt, the U.S. is not a ‘clean dirty shirt.’ The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth….
“The International Monetary Fund, the Congressional Budget Office and the Bank of International Settlements compute a ‘fiscal gap’, which is a deficit that must be closed either with spending cuts, tax hikes or a combinations of both which keeps a country’s debt/GDP ratio under control…
“Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline… Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the ‘Ring of Fire’.”
Bill Gross, Chairman, PIMCO 10/02/2012
It is refreshing to hear a Lionized Establishment Figure such as Bill Gross (whose PIMCO has $1.8 Trillion under Management) make a Public Statement which approaches the Truth.
While Gross’s Statements are True, they do not tell the “Whole Truth”, and therein lies Opportunity for Investors.
The Whole Truth is that the “Ring of Fire” is here already and we have been temporarily Insulated from it only through a combination of Fed and ECB Interventions (which depress Rates in the short-term, but guarantee Galloping Price Inflation in the mid and long-term) and Bogus Official Figures (see Note 1).
Regarding Price Inflation, the Major cause is the Central Banks/Official Interventions via QE and otherwise.
And now QE4 has just been unofficially announced by Charles Evans, Chicago Fed President and voting FOMC Member in 2013. He says The Fed should continue buying (unsterilized!) Treasuries after January when Twist ends. Indeed, “Unsterilized purchases mean that they will surely be Price-Inflationary.
By the way, regarding ‘Bogus Official Numbers’, Former General Electric CEO, Jack Welch, nailed it when, referring to President Obama’s Poor Debate Performance and the Subsequently Released Ostensibly Improved Job Numbers,
“Can’t debate, so they changed the job numbers.”
In fact, the Ostensible Net U.S. 114,000 Jobs created does not even keep up with (Official) Population Growth of 175,000 per Month.
Real U.S. Population Growth is Twice that with Virtually all of it generated by Legal and Illegal Immigration.
Regular Readers indicate they appreciate our keeping them updated on the march to Hyperinflation – CPI in the U.S. is now at 9.33% e.g., per shadowstats.com (See Note 1).
And with QE3 ongoing and QE4 coming down the Pike, (aimed at keeping Rates low and propping up the Mega-Banks). The Inflation of which Gross warns has already begun.
The resulting (from ongoing QE) Price Inflation is already obvious in the Prices of Tangible Assets which get used up such as Energy and Food.
Gross’s comment “…inflation would follow…” would have us believe Inflation is not already here, a serious omission.
But Gross’s reduction of PIMCO’s Total Return Fund’s holdings of U.S. Government and Treasury Debt from 33% to 21 per cent recently indicates he knows Inflation is intensifying and wants to get out of bonds before they are “burned to a crisp”.
Marc Faber’s consistent Forecast is also correct.
“Central bankers are counterfeit money printers and Federal Reserve Chairman Ben Bernanke should resign for messing up the U.S. Economy so badly. Bernanke was one of the main proponents of an ultra-expansionist economic monetary policy that was to blame for the latest financial crisis. ‘If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous — it doesn’t work that way. It’s a temporary boost followed by a crash.’” (emphasis added)
Interview with CNBC, Marc Faber, author of the Gloom, Doom, and Boom, 9/14/2012
And successful Advisor and Trader, Tom Kee (Stock Traders Daily) echoes our views.
“I am much more bearish now than I have been in a very long time. In fact, I am even more bearish now than I was in 2008, primarily because the market is now more like it was in the middle of 2007”
“My Apple short and the sour market”
Thomas Klee, marketwatch.com, 10/4/2012
But Kee’s proactive approach (Trading both Directions in the Market) is one we share. And that is why Deepcaster expects to begin recommending putting on short positions in the next few weeks.
And while being proactively prepared to “go short” Investors should simultaneously be prepared to go long “Inflation Assets” such as Food for example.
Well before the Drought in the U.S. drove grain prices through the roof, Food Prices were on the rise around the World. They touched off the ‘Arab Spring,’ after all.
But for a whole list of reasons which we have repeatedly enumerated, Food Price Inflation is here to stay. Consider:
- World Population Growth 80 Million per year, many of whom have
- Increasing Purchasing Power in the Emerging Markets
- Most Arable land is already under Cultivation and Maximally Producing
- Modern Agriculture continues to be very Energy-Intensive and very Portable Energy Intensive (as in Crude Oil)
All the above mean inexorably Increasing Demand against limited Supplies.
One result: farmers attempt to increase yields through the application of Fertilizer, with Phosphate being the Number One Fertilizer demanded. (Deepcaster has recently recommended one such company with great Potential trading just above 40¢/share [see Note 2 below, and others aimed at riding the Inflation Rocket – see Notes 3 & 4 below.)
Thus the overall QE consequences/Inflation outlook is:
- For the medium and long term this QE3 to infinity signals that The Fed is willing to Destroy the $US to support the Banks and Wall Street (and the Middle Class be damned to suffer further rising food and energy costs).
- However, at any time the $US Takedown could be a preamble to a Global Rush to Dump the $US Dollar – a real Disaster. Or course, this is a Consequence of The Fed’s Dollar-Destructive Policies.
- Perhaps More Important and less obvious, since The Fed is now targeting (via Q.E. 3) Agency Debt (Mortgage Backed Securities) and not Treasuries, this diminishes the demand for Treasuries which will likely result in increasing yields and thus, increasing Interest Rates somewhat in the short term.
- The Central Banks will continue QE to Infinity with Hyperstagflationary consequences in the Medium and Long Term.
One consequence is that more likely than not, we have seen the Top in U.S. Treasuries, and that Mother of all Bubbles in World History is starting to deflate as we earlier forecast.
And as we have repeatedly pointed out, serious inflation is already here, with Real U.S. Inflation over 9% per shadowstats, and is only likely to worsen in the Months and Years to come. (If any of our Readers are aware of Reliable and Authentic Real Inflation Measures for any of the other Major Countries’ Economies, we would like to hear about them.)
One look at the Continuous Commodities Index shows 15% annual average inflation over the last ten years; that alone should be sufficient to dispel any Central Banker or Main Stream Media claims that we are in a Deleveraging Deflation. And other Real Numbers confirm the intensifying inflation.
In sum, we are already approaching Hyperstagflation.
Even so, a Positive consequence is that for Gold and Silver, the Price outlook is Most Encouraging.
Gold and Silver have now strongly launched up as we earlier forecast. Recently and very short term, The Cartel has been effective in orchestrating a Price Takedown. But the Good News recently is that no Takedown has been sustained for long.
For example, recently Gold was unable to close above resistance zone of $1785-$1800. This mimics a similar failure in October, 2011 and Jan/Feb, 2012. Subsequent to those failures, Gold reversed and Tanked down to the $1525-$1550 level. But not this time, so far anyway.
In sum, in the past few days Market Action has been very Precious Metals Bullish. Thus we have made recommendations aimed at profiting from this Bull.
This time there has been very significant Buying beginning at $1770ish and strengthening down around the $1740 level. If $1770 to $1780-ish level holds, and it is likely it will, then the next stops should be $1825 and then $1900. We address the question of “when” in our recent Alerts.
And for Silver:
- The next major resistance is $37.50, then $40, and then $44.
- Resistance for Silver is $34ish and that has held pretty well in spite of ongoing Cartel Takedown Attempts.
Deepcaster’s mid and long-term targets are adjusted for Inflation. So adjusted Gold and Silver Prices have yet to hit their 1980 highs. And indeed those CPI-U Inflation-Adjusted Highs (per shadowstats.com) are our Mid-Term Targets:
- $2,517 per ounce per official CPI-U-adjusted $ and
- $9,445 per ounce per shadowstats.com adjusted $
For Silver the 1980 (official) Inflation adjusted peak would be $146 per ounce
In shadowstats-adjusted-Dollars $549 per ounce would be the Target.
No wonder that the Silver Up-Trend Channel is signaling a $100 plus high within the next year. Silver would have to drop below $29 to break out of its uptrend channel – not likely.
Of course, the march up to and beyond the foregoing Numbers will likely be interrupted by the Great Equities Crash of 2013.
In sum, Investors should heed Bill Gross’ advice. Gold and Tangible Assets are the places to Be to Surmount the Ring of Fire.
And Jack Welch’s advice not to rely on Bogus Official Numbers is also Well-Taken.
October 4, 2012