“Euphoric Inflation Insanity. Buying U.S. stocks because the Fed says it will proactively debase the U.S. dollar is like sitting on the beach in order to get a great view of an incoming tsunami. Any pleasure so derived should be short-lived, when the terror of underlying reality quickly takes hold.
If one were to view movement in the price of gold as a surrogate for anticipated inflation, for example, the issues begin to come into focus…
While stock prices do tend to rise in an inflationary environment — where revenues and profits are inflated — rising stock prices do not always stay ahead of inflation. On a constant-dollar or real, inflation-adjusted basis, stocks go through bull and bear markets, just as they do otherwise. If prices do not stay ahead of inflation, investors lose value in terms of the purchasing power of their assets. The equity markets may rally in the upcoming inflation, but the systemic implications and current gold behavior suggest that the circumstance will not give investors a positive real return…”
“Commentary Number 329: Inflation, Retail Sales, Trade Deficit and Debased Money”
John Williams’ Shadow Government Statistics, 10/15/10
Not since The Great Depression have there been such Formidable Challenges to those who wish to Profit and Protect their Wealth.
If it was not clear before 2008, the Fall, 2008 Markets Crash, Credit Freeze, and Financial Institutions Collapse made it clear, that we have entered into an Entirely New High Risk Era in the Economy and Markets.
Several Time-honored Investment Strategies and Techniques have been Entirely Discredited and Serious New Risks, including The Threats of another Market Meltdown and Hyperinflation resulting from increasingly Massive Quantitative Easing (Q.E.) abound.
For example, as we explain in greater Detail below, the formerly widely accepted “Rule” of “Buy and Hold” has not only been largely discredited – the Major Equities Markets are Trading about where they were a decade ago – but also have caused typical “Buy and Hold” Investors to Lose Money over that decade, at least 30%, when adjusted for Real Inflation (see below).
Facing these Challenges requires careful Attention to Goals and Strategies.
On the other hand, These Challenges Provide Great Opportunities for Profit, while at the same time Require Great Vigilance to Avoid Wealth Destruction.
Allocating one’s Investment and Risk Capital among three separate Portfolios as Deepcaster recommends, each employing a somewhat different Strategy, is an excellent way to Maximize Opportunities for Profit and Avoidance of Wealth Destruction.
A Primary Overall Strategy is first to seek “Beta” by Investing or Speculating to achieve Profit from Broad Market or Sector Trends (Beta), whether Uptrends or Downtrends. We seek Beta above all, because even the strongest individual Securities are often vulnerable to Equities Market Crashes. The Evidence indicates that Beta-Followers perform better than mere Alpha-Seekers.
Even so, we often seek Alpha (Appreciation of Individual Securities) as well in addition to Beta with specific Selections which we expect to Rise or Fall more than the Rise or Fall of the Beta of particular Sector.
As well, we are not at all hesitant about seeking Profits via Short Positions including via Exchange Traded Fund including leveraged ETFs. Why not Profit when Markets Fall as well as when they rise? There are several Good Reasons to do so, especially since, in recent years, Bearish trends have provided more of these Opportunities.
Finally, we tend to favor (predominately but not exclusively) Investments in Real Assets (such as Gold, Silver, Energy, and Agricultural products in relatively inelastic Demand) as opposed to Financial Assets (See our “Opportunities to Profitably Escape Paper “Wealth” into 2011” (10/07/10) in the ‘Articles by Deepcaster’ Cache).
The World of Financial Assets is increasingly fraught with Danger for Investors, as the Market Crash of the Fall, 2008, and the ongoing Mortgage Crises demonstrate.
Moreover, Major Central Banks Massive Printing of Fiat Currency increasingly heightens the Risk of Hyperinflation as well as Economic Stagnation. As many of our Articles (and increasing numbers of Investment Analysts) demonstrate, the Private For-Profit Fed is the lead Culprit of a Cartel* of Central Bankers and Agents and Allies is regularly engaged in Manipulation of a Wide Variety of Markets, and especially in attempted suppression of Gold and Silver Prices, because heightened Investor Interest in these Precious Metals tends to delegitimize the Central Bankers Treasury Securities and Fiat Currencies.
*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 December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘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. 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.
These Interventions Require that, to the extent possible, Investors and Speculators track The Interventionals, as well as the Fundamentals and Technicals.
Thus three Dynamic Portfolios – Fortress Assets, Speculative, and High-Yield, offer three related Strategies Essential to achieving the Goals of Profit and Protection.
I. A ‘FORTRESS ASSETS’ PORTFOLIO
The increasing Vulnerability of Wealth and the recent past and prospective failure of several traditional means of protecting it, coupled with the aforementioned risks, require development of Fortress Assets Portfolio.
This portfolio is based on several principles:
1) Acquire assets which are fundamentally strong at a technically propitious time, BUT, subject to ongoing consideration of the "Trump Card" of Cartel Market Intervention.
2) Focus on Acquiring Real Assets (primarily Gold, Silver, Energy and Agricultural Products or businesses focused on these) At The Right Time
Those Paper Assets which represent less Real Value than they nominally reflect in their Market Price, are increasingly risky. We have already described how those Paper Assets in many wallets, U.S. dollars, have been deteriorating mightily in Purchasing Power since 2002 – about 35%. Indeed the Vulnerability of Paper Assets was amply demonstrated in the Fall, 2008 Market Crash.
Thus, when investing in a paper/electronic security, it is important to carefully analyze what Real Asset, if any, the security actually represents and the contingencies to which that security is vulnerable.
But it is critical to time one’s investment in Real Assets correctly. This means the timing must not only take account of Fundamental and Technical analysis, but also of interventional analysis. Investing in Real Assets in the headwind of an ongoing or pending Cartel Intervention is often futile, or worse.
Bottom line: to maximize the chances of protecting wealth and Profiting, a substantial portion of one’s portfolio must be in Real Assets, or Paper Assets that genuinely represent Real Assets. Consider that hundreds of billions of dollars of Ostensible Assets could, and did, simply vanish in the tech-wreck of the year 2000 and again the Fall, 2008 Crash. One reasonable inference from this loss is that the Real Value in those Paper/Digital Securities was not there to begin with; otherwise it would not have vanished so quickly. The Real Assets behind all that paper (to the extent there were any Real Assets behind that Paper) simply were not valuable enough to justify the sky-high prices, so in the spring of 2000 the NASDAQ began a fall, which would end only when 60% of the ostensible pre-crash value would disappear. A Similar Scenario occurred in the Fall, 2008 Market Crash with devastating Results. Thus one goal of the Fortress Assets Portfolio is to prevent such a Wipeout from devastating our subscribers.
Conclusion: One must invest in Assets which have inherent, or strong and durable contextual, value, at the time at which that value has just begun to be recognized by the market. And the Market Intervenors must not be in the way.
3) Perform a Basic “Reality Evaluation” On Current Paper Assets
For example, consider a typical equity on the NASDAQ which pays no dividend, or a negligible one, and sells for a typical price-earnings ratio of about twenty (20). What this means is that the company has to have 20 years of earnings at the current level to generate the value equivalent to one share of its stock. One must ask whether the placement of one’s wealth in such a stock could ever be justified by the (hoped for) ever-increasing appreciation of that stock, and that the changes of that happening are high enough to make that purchase a good one. Remember, we are considering a stock (typical on the NASDAQ) that has miniscule or no dividends, and which reflects a price earnings ratio higher than the entire equities market immediately prior to the 1929 crash.
And when one considers the (generally declining) Purchasing Power of the U.S. Dollar or other Fiat Currencies into which those Assets can be converted, one realizes the chances of achieving Real Profit or even Wealth Protection are miniscule.
Bottom line: the only way that such a stock purchase could be seen to be sensible is if one can legitimately project that there is a high probability that the price will continue to appreciate and, that this appreciation, taken together with any yield, will Achieve a Total Return well in excess of present and Prospective Inflation.
4) Prepare for Increasing Uncertainty and Volatility
In the summer of 2005 and again at the end of 2006, market volatility as reflected in the VIX (a volatility index) was at record lows. But the Fall, 2008 Crash sent it to record highs. And the Spring and Summer and early Fall Rallies, 2010 sent it down again. Low VIX levels are unlikely to continue given the lousy Fundamentals, including high unemployment, a propped-up Mortgage and Banking System, and increasing, and unpayable, Sovereign Debts.
5) The Fortress Assets Portfolio Must Continually Change
For the aforementioned reasons, Deepcaster Fortress Assets Portfolio must be a nimble, “Flying Fortress” with both offensive and defensive capability. Relatively timeless stores of value (with the exceptions noted below) are increasingly rare. Moreover, with only a few exceptions, many traditionally legitimate stores of value (e.g. U.S. Government Securities) are increasingly vulnerable.
Consider “Dr. Copper.” Among the commodities, the cognoscenti call copper “Dr. Copper” because its price is so sensitive to real or perceived economic health. Through the end of 2004 and continuing into 2005, Dr. Copper was in a substantial price up-trend due to many factors (i.e., the perceived improvement of the U.S. and global economies especially including the increasing demand of China and India, for this important industrial metal). Thus, through the summer of 2005 one would see copper in many sensibly constructed portfolios. But the Fall, 2008 Crash caused it to plunge. And it has rallied again since March, 2009.
Bottom line: the Fortress Assets Portfolio is designed to be dynamic, flexible, and aggressive - - both offensive and defensive. The appropriate metaphor for a Fortress Assets Portfolio therefore is not that of a Defensive Fortress on the ground with great earthen works. Instead, the more appropriate historical metaphor would be the B29, the “Flying Fortress” of World War II. The B29 was flexible and aggressive, with both offensive and defensive capabilities. It could be directed against a number of military targets to enhance the United States’ military position, but it was also well defended with many machine gun turrets.
The foregoing principles provide the macro-perspective in which Deepcaster makes its selections. Deepcaster also makes use of the traditional and non-traditional techniques outlined here.
Afterword: The Fundamental Overhanging Threat: Addressing the Increasing Systemic Risks and the Fundamental Flaws of Most Portfolios
An essential consideration in creating the Fortress Assets Portfolio is the fundamental and increasing Systemic Risks that severely threaten many Asset Values. To briefly recapitulate, a major component of those risks are the massive, unprecedented levels of Sovereign and consumer debt, relatively low level of personal savings and business capital investment, the consequent trend of the declining value of the dollar, and persistent unemployment, among many others.
Record high, and still increasing budget, current account, and trade deficits in several Major Nations, and some $600 Trillion Notional Value of dollars of “private” OTC (i.e. not exchange traded) Derivatives threaten our entire financial and economic system. The integrity of these derivatives depends inter alia on the strength of their counterparties. And the derivative based failures of Orange County, California, Long Term Capital Management, Bear Stearns, Lehman Brothers and AIG just in the last two decades shows how fragile counterparty strength can be. It is not too much of an oversimplification to say the USA and many Nations of the Eurozone are increasingly living on money borrowed from other countries plus Fiat Currency created out of thin Air, and thus are at risk from “private” OTC derivatives. Indeed, the risks to the international economy and financial system are still enormous.
So far as the U.S. is concerned, when one considers this phenomenon of very high debt and a declining dollar trend, coupled with mass immigration and increasing outsourcing driving down wage rates and sending good manufacturing jobs overseas, the U.S., at best, will, in the foreseeable future, experience a stagnating economy with increasing price inflation. Thus, we reiterate that it is highly probable that the U.S. is headed into a period of serious stagflation as are several Major Nations in the Eurozone, and even in the Emerging Markets Countries. Many portfolios are not constructed to cope with these prospects.
Systemic unraveling and/or spasmodic market setbacks (which are now increasingly likely) as a result of these factors are quite likely. Consider Argentina just a few years ago. Although in most respects not a Third World Country, it nonetheless defaulted on its obligations and devalued its currency. It can happen anywhere.
II. HIGH POTENTIAL SPECULATIVE PORTFOLIO
The goal of a Fortress Assets Portfolio is to select assets which have relatively low downside risk and significant capital appreciation and/or income potential.
The goal of a High Potential Speculator Portfolio (DHPS) is to achieve relatively higher, or very substantial, returns while recognizing that potentially higher returns entail higher risks.
Nonetheless, in selecting a Speculative Portfolio one must employ many of the same selection criteria and techniques. Thus selections for both portfolios are considered from fundamental, technical and interventional perspectives.
Equity Selection Criteria - - Traditional, Non-Traditional and More
Such a Portfolio should take account of the following traditional and non-traditional selection criteria.
1. Is the asset undervalued in relation to its inherent value, or prospective contextual value?
2. Are overall markets, geopolitical and governmental conditions favorable?
An asset can have excellent inherent fundamental or prospective contextual value, but the governmental or geopolitical conditions may not be right to realize that value. In other words, a rising market tide tends to float most equities and other Assets, as a falling market tide tends to depress them.
3. Is the Asset undervalued?
4. How does the interest rate and inflation environment affect the asset?
5. Has the market just begun to recognize the assets appreciation potential?
6. What are the prospects for interventions affecting the assets value?
7. Finally, Deepcaster makes use of fundamental, technical and interventional analysis techniques. These techniques are sometimes trumped by the other principles and criteria described in this section.
III. HIGH-YIELD PORTFOLIO
On Dividends And The Power Of Compounding
Several Years ago the renowned and very successful mutual fund manager, Jeremy Grantham stated that the outlook for the appreciation of small cap stocks for the foreseeable future was a negative 1.6% per year. And his outlook for large and medium cap stocks was not significantly better. Market Developments have proved Grantham correct.
If one had followed Grantham’s implicit advice, one would have been “out” of Equities-in-General since then. Can any rational person reasonably believe that one’s wealth is protected and enhanced by capital appreciation prospects of a negative 1.6% per year for equities? This is especially true today when the Realistic prospects for Equities are no better (and arguably are worse) and given that Real Inflation is 8.48% annualized. Therefore, if one must invest in equities, and the Fortress Assets Portfolio does include a select number, one should dramatically favor, in one’s evaluations, equities that pay a significant dividend (preferably 10% or more, per year). That way, one has the benefit of the power of compounding. [Obviously the high-dividend equities must have value according to other Deepcaster criteria, as well.]
Let us consider how powerful compounding can be. To determine the effect of compounding, bankers use a rule called “the rule of 72s.” This rule allows one to determine the length of time it takes for any amount increasing by a certain percent per year to double. For our 10% dividend yielding example, 72 divided by 10 is 7.2; which is to say a $50 stock that pays 10% per year will return an additional $50 in just 7.2 years, even if the stock price itself does not appreciate one thin dime.
Indeed, it is essential to address the challenge of Inflation by looking at the Real Numbers. Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s, before systematic Data Distortion and Interventions began in earnest.
Consider for example, the Numbers in Early November, 2010:
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported October 15, 2010
1.14% 8.48% (annualized September, 2010 Rate)
U.S. Unemployment reported October 8, 2010
9.6% 22.5%
U.S. GDP Annual Growth/Decline reported October 29, 2010
3.11% -1.44%
U.S. M3 reported October 17, 2010 (Month of September, Y.O.Y.)
No Official Report -3.71%
Bottom line: be skeptical of buying equities that don’t pay a dividend which, coupled with their prospects for price Appreciation, exceeds Real Inflation. While there are many other considerations to take into account when buying equities (and while we do, for other reasons, recommend purchase of certain equities that do not have a dividend) whether or not a Security pays a significant dividend is an extremely important consideration in Portfolio Selection in these increasingly perilous times, since Equities-in-general have gone nowhere for the past decade (and have lost 30% or more when adjusted for inflation), and are in a Bear Market, and most highly rated Bonds and CD’s provide niggardly or negative returns after adjusting for Real Inflation.
Thus, making Significant Profit without Great Risk and in spite of Real U.S. Consumer Price Inflation (in November, 2010, for example, at 8.48% per Shadowstats.com) which robs Purchasing Power, is a Daunting Challenge.
But it is possible if one is willing to take reasonable risks.
One Potentially Profitable Solution to this Challenge is selecting High-Yield Securities which typically should also have substantial Price Appreciation Potential, such that their prospective Total Return Substantially exceeds Real Inflation.
Deepcaster has identified several High-Yielders in his HIGH YIELD PORTFOLIO launched in the Summer, 2010. The Recent Yields of our five Inaugural Selections were 15.6%, 26%, 18.5%, 8% and 10.6%, when added to the Portfolio.
Wealth Protection - - Beyond the Portfolio
On the other hand, Fortress Assets in the context of today’s world and the probable future, inherently have built-in risk insulation - - not absolute immunity from risk, but insulation from risk. Moreover, the benefit of these Deepcaster Fortress Assets is that individuals with fairly moderate amounts of wealth can directly obtain them. Someone wishing to protect his wealth should not rely on Fortress Assets alone. Certain legal/structural entities provide additional wealth protection and risk insulation. They include forming one’s own corporation or limited liability company, family limited partnerships, charitable remainder trusts, off shore trusts, and others. Fortress Assets should be used in conjunction with these other legal structural techniques and entities, as determined by you and your personal financial advisor or lawyer.
And Finally, One Must Consider Market Manipulation and Its Consequences
Richard Russell, Dean of Newsletter Writers, commented a few years ago that
"One of the great mysteries of the markets is shown below (this one fooled the great majority of pros). If business is as good as is claimed, how is it that interest rates have remained so low, and bonds have held up so well? Below we see the 30-year Treasury bond going back one year. The bond bottomed in May 2004, climbed into the September period, and has been going sideways ever since. As of today, the yield on the long Treasury bond is only 4.85%, and the long bond is higher than it was six months ago."
"Has foreign buying held up the bonds? Is it liquidity that is floating the bonds up? Is the Fed manipulating the bond market? Is the bond market simply looking ahead and saying “I don’t see any big pick-up in business and I don’t see any inflation ahead…” I’m thinking we can see quite a bit of manipulation ahead. After all with a group able to buy a thousand or five thousand S&P futures in the space of one minute, manipulation has never been easier.”
Deepcaster, along with Richard Russell, is seeing much evidence of market manipulation in many sectors. Thus we always try to account for actual and prospective manipulation in all our Portfolios selections but we would note that manipulation is not always tantamount to market control. Moreover, no manipulative scheme to artificially set the price for a desired, tangible asset can last forever. Selling of physical gold into the market is required to suppress the gold price. But Central Bankers have limited amounts of physical gold that they can cause to be sold into the market. Once a market can be successfully manipulated no longer, the ensuing correction is often swift, brutal, and violent.
Thus, a Fortress Assets Portfolio should be quite helpful in insulating and increasing your wealth against developments yet to come.
A High Potential Speculator Portfolio can generate high potential Portfolio appreciation and/or income.
And a High Yield Portfolio can help you increase your Wealth at a rate greater than Real Inflation.
Best Regards,
Deepcaster LLC
Deepcaster.com
Wealth Preservation - Wealth Enhancement
Financial and Geopolitical Intelligence
Gravitas, Pietas, Virtus
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Showing posts with label Profit. Show all posts
Showing posts with label Profit. Show all posts
Thursday, November 18, 2010
Tuesday, November 16, 2010
Three Strategic Portfolios for Profit & Protection in the Q.E. Era
“Euphoric Inflation Insanity. Buying U.S. stocks because the Fed says it will proactively debase the U.S. dollar is like sitting on the beach in order to get a great view of an incoming tsunami. Any pleasure so derived should be short-lived, when the terror of underlying reality quickly takes hold.
If one were to view movement in the price of gold as a surrogate for anticipated inflation, for example, the issues begin to come into focus…
While stock prices do tend to rise in an inflationary environment — where revenues and profits are inflated — rising stock prices do not always stay ahead of inflation. On a constant-dollar or real, inflation-adjusted basis, stocks go through bull and bear markets, just as they do otherwise. If prices do not stay ahead of inflation, investors lose value in terms of the purchasing power of their assets. The equity markets may rally in the upcoming inflation, but the systemic implications and current gold behavior suggest that the circumstance will not give investors a positive real return…”
“Commentary Number 329: Inflation, Retail Sales, Trade Deficit and Debased Money”
John Williams’ Shadow Government Statistics, 10/15/10
Not since The Great Depression have there been such Formidable Challenges to those who wish to Profit and Protect their Wealth.
If it was not clear before 2008, the Fall, 2008 Markets Crash, Credit Freeze, and Financial Institutions Collapse made it clear, that we have entered into an Entirely New High Risk Era in the Economy and Markets.
Several Time-honored Investment Strategies and Techniques have been Entirely Discredited and Serious New Risks, including The Threats of another Market Meltdown and Hyperinflation resulting from increasingly Massive Quantitative Easing (Q.E.) abound.
For example, as we explain in greater Detail below, the formerly widely accepted “Rule” of “Buy and Hold” has not only been largely discredited – the Major Equities Markets are Trading about where they were a decade ago – but also have caused typical “Buy and Hold” Investors to Lose Money over that decade, at least 30%, when adjusted for Real Inflation (see below).
Facing these Challenges requires careful Attention to Goals and Strategies.
On the other hand, These Challenges Provide Great Opportunities for Profit, while at the same time Require Great Vigilance to Avoid Wealth Destruction.
Allocating one’s Investment and Risk Capital among three separate Portfolios as Deepcaster recommends, each employing a somewhat different Strategy, is an excellent way to Maximize Opportunities for Profit and Avoidance of Wealth Destruction.
A Primary Overall Strategy is first to seek “Beta” by Investing or Speculating to achieve Profit from Broad Market or Sector Trends (Beta), whether Uptrends or Downtrends. We seek Beta above all, because even the strongest individual Securities are often vulnerable to Equities Market Crashes. The Evidence indicates that Beta-Followers perform better than mere Alpha-Seekers.
Even so, we often seek Alpha (Appreciation of Individual Securities) as well in addition to Beta with specific Selections which we expect to Rise or Fall more than the Rise or Fall of the Beta of particular Sector.
As well, we are not at all hesitant about seeking Profits via Short Positions including via Exchange Traded Fund including leveraged ETFs. Why not Profit when Markets Fall as well as when they rise? There are several Good Reasons to do so, especially since, in recent years, Bearish trends have provided more of these Opportunities.
Finally, we tend to favor (predominately but not exclusively) Investments in Real Assets (such as Gold, Silver, Energy, and Agricultural products in relatively inelastic Demand) as opposed to Financial Assets (See our “Opportunities to Profitably Escape Paper “Wealth” into 2011” (10/07/10) in the ‘Articles by Deepcaster’ Cache).
The World of Financial Assets is increasingly fraught with Danger for Investors, as the Market Crash of the Fall, 2008, and the ongoing Mortgage Crises demonstrate.
Moreover, Major Central Banks Massive Printing of Fiat Currency increasingly heightens the Risk of Hyperinflation as well as Economic Stagnation. As many of our Articles (and increasing numbers of Investment Analysts) demonstrate, the Private For-Profit Fed is the lead Culprit of a Cartel* of Central Bankers and Agents and Allies is regularly engaged in Manipulation of a Wide Variety of Markets, and especially in attempted suppression of Gold and Silver Prices, because heightened Investor Interest in these Precious Metals tends to delegitimize the Central Bankers Treasury Securities and Fiat Currencies.
*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 December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘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. 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.
These Interventions Require that, to the extent possible, Investors and Speculators track The Interventionals, as well as the Fundamentals and Technicals.
Thus three Dynamic Portfolios – Fortress Assets, Speculative, and High-Yield, offer three related Strategies Essential to achieving the Goals of Profit and Protection.
I. A ‘FORTRESS ASSETS’ PORTFOLIO
The increasing Vulnerability of Wealth and the recent past and prospective failure of several traditional means of protecting it, coupled with the aforementioned risks, require development of Fortress Assets Portfolio.
This portfolio is based on several principles:
1) Acquire assets which are fundamentally strong at a technically propitious time, BUT, subject to ongoing consideration of the "Trump Card" of Cartel Market Intervention.
2) Focus on Acquiring Real Assets (primarily Gold, Silver, Energy and Agricultural Products or businesses focused on these) At The Right Time
Those Paper Assets which represent less Real Value than they nominally reflect in their Market Price, are increasingly risky. We have already described how those Paper Assets in many wallets, U.S. dollars, have been deteriorating mightily in Purchasing Power since 2002 – about 35%. Indeed the Vulnerability of Paper Assets was amply demonstrated in the Fall, 2008 Market Crash.
Thus, when investing in a paper/electronic security, it is important to carefully analyze what Real Asset, if any, the security actually represents and the contingencies to which that security is vulnerable.
But it is critical to time one’s investment in Real Assets correctly. This means the timing must not only take account of Fundamental and Technical analysis, but also of interventional analysis. Investing in Real Assets in the headwind of an ongoing or pending Cartel Intervention is often futile, or worse.
Bottom line: to maximize the chances of protecting wealth and Profiting, a substantial portion of one’s portfolio must be in Real Assets, or Paper Assets that genuinely represent Real Assets. Consider that hundreds of billions of dollars of Ostensible Assets could, and did, simply vanish in the tech-wreck of the year 2000 and again the Fall, 2008 Crash. One reasonable inference from this loss is that the Real Value in those Paper/Digital Securities was not there to begin with; otherwise it would not have vanished so quickly. The Real Assets behind all that paper (to the extent there were any Real Assets behind that Paper) simply were not valuable enough to justify the sky-high prices, so in the spring of 2000 the NASDAQ began a fall, which would end only when 60% of the ostensible pre-crash value would disappear. A Similar Scenario occurred in the Fall, 2008 Market Crash with devastating Results. Thus one goal of the Fortress Assets Portfolio is to prevent such a Wipeout from devastating our subscribers.
Conclusion: One must invest in Assets which have inherent, or strong and durable contextual, value, at the time at which that value has just begun to be recognized by the market. And the Market Intervenors must not be in the way.
3) Perform a Basic “Reality Evaluation” On Current Paper Assets
For example, consider a typical equity on the NASDAQ which pays no dividend, or a negligible one, and sells for a typical price-earnings ratio of about twenty (20). What this means is that the company has to have 20 years of earnings at the current level to generate the value equivalent to one share of its stock. One must ask whether the placement of one’s wealth in such a stock could ever be justified by the (hoped for) ever-increasing appreciation of that stock, and that the changes of that happening are high enough to make that purchase a good one. Remember, we are considering a stock (typical on the NASDAQ) that has miniscule or no dividends, and which reflects a price earnings ratio higher than the entire equities market immediately prior to the 1929 crash.
And when one considers the (generally declining) Purchasing Power of the U.S. Dollar or other Fiat Currencies into which those Assets can be converted, one realizes the chances of achieving Real Profit or even Wealth Protection are miniscule.
Bottom line: the only way that such a stock purchase could be seen to be sensible is if one can legitimately project that there is a high probability that the price will continue to appreciate and, that this appreciation, taken together with any yield, will Achieve a Total Return well in excess of present and Prospective Inflation.
4) Prepare for Increasing Uncertainty and Volatility
In the summer of 2005 and again at the end of 2006, market volatility as reflected in the VIX (a volatility index) was at record lows. But the Fall, 2008 Crash sent it to record highs. And the Spring and Summer and early Fall Rallies, 2010 sent it down again. Low VIX levels are unlikely to continue given the lousy Fundamentals, including high unemployment, a propped-up Mortgage and Banking System, and increasing, and unpayable, Sovereign Debts.
5) The Fortress Assets Portfolio Must Continually Change
For the aforementioned reasons, Deepcaster Fortress Assets Portfolio must be a nimble, “Flying Fortress” with both offensive and defensive capability. Relatively timeless stores of value (with the exceptions noted below) are increasingly rare. Moreover, with only a few exceptions, many traditionally legitimate stores of value (e.g. U.S. Government Securities) are increasingly vulnerable.
Consider “Dr. Copper.” Among the commodities, the cognoscenti call copper “Dr. Copper” because its price is so sensitive to real or perceived economic health. Through the end of 2004 and continuing into 2005, Dr. Copper was in a substantial price up-trend due to many factors (i.e., the perceived improvement of the U.S. and global economies especially including the increasing demand of China and India, for this important industrial metal). Thus, through the summer of 2005 one would see copper in many sensibly constructed portfolios. But the Fall, 2008 Crash caused it to plunge. And it has rallied again since March, 2009.
Bottom line: the Fortress Assets Portfolio is designed to be dynamic, flexible, and aggressive - - both offensive and defensive. The appropriate metaphor for a Fortress Assets Portfolio therefore is not that of a Defensive Fortress on the ground with great earthen works. Instead, the more appropriate historical metaphor would be the B29, the “Flying Fortress” of World War II. The B29 was flexible and aggressive, with both offensive and defensive capabilities. It could be directed against a number of military targets to enhance the United States’ military position, but it was also well defended with many machine gun turrets.
The foregoing principles provide the macro-perspective in which Deepcaster makes its selections. Deepcaster also makes use of the traditional and non-traditional techniques outlined here.
Afterword: The Fundamental Overhanging Threat: Addressing the Increasing Systemic Risks and the Fundamental Flaws of Most Portfolios
An essential consideration in creating the Fortress Assets Portfolio is the fundamental and increasing Systemic Risks that severely threaten many Asset Values. To briefly recapitulate, a major component of those risks are the massive, unprecedented levels of Sovereign and consumer debt, relatively low level of personal savings and business capital investment, the consequent trend of the declining value of the dollar, and persistent unemployment, among many others.
Record high, and still increasing budget, current account, and trade deficits in several Major Nations, and some $600 Trillion Notional Value of dollars of “private” OTC (i.e. not exchange traded) Derivatives threaten our entire financial and economic system. The integrity of these derivatives depends inter alia on the strength of their counterparties. And the derivative based failures of Orange County, California, Long Term Capital Management, Bear Stearns, Lehman Brothers and AIG just in the last two decades shows how fragile counterparty strength can be. It is not too much of an oversimplification to say the USA and many Nations of the Eurozone are increasingly living on money borrowed from other countries plus Fiat Currency created out of thin Air, and thus are at risk from “private” OTC derivatives. Indeed, the risks to the international economy and financial system are still enormous.
So far as the U.S. is concerned, when one considers this phenomenon of very high debt and a declining dollar trend, coupled with mass immigration and increasing outsourcing driving down wage rates and sending good manufacturing jobs overseas, the U.S., at best, will, in the foreseeable future, experience a stagnating economy with increasing price inflation. Thus, we reiterate that it is highly probable that the U.S. is headed into a period of serious stagflation as are several Major Nations in the Eurozone, and even in the Emerging Markets Countries. Many portfolios are not constructed to cope with these prospects.
Systemic unraveling and/or spasmodic market setbacks (which are now increasingly likely) as a result of these factors are quite likely. Consider Argentina just a few years ago. Although in most respects not a Third World Country, it nonetheless defaulted on its obligations and devalued its currency. It can happen anywhere.
II. HIGH POTENTIAL SPECULATIVE PORTFOLIO
The goal of a Fortress Assets Portfolio is to select assets which have relatively low downside risk and significant capital appreciation and/or income potential.
The goal of a High Potential Speculator Portfolio (DHPS) is to achieve relatively higher, or very substantial, returns while recognizing that potentially higher returns entail higher risks.
Nonetheless, in selecting a Speculative Portfolio one must employ many of the same selection criteria and techniques. Thus selections for both portfolios are considered from fundamental, technical and interventional perspectives.
Equity Selection Criteria - - Traditional, Non-Traditional and More
Such a Portfolio should take account of the following traditional and non-traditional selection criteria.
1. Is the asset undervalued in relation to its inherent value, or prospective contextual value?
2. Are overall markets, geopolitical and governmental conditions favorable?
An asset can have excellent inherent fundamental or prospective contextual value, but the governmental or geopolitical conditions may not be right to realize that value. In other words, a rising market tide tends to float most equities and other Assets, as a falling market tide tends to depress them.
3. Is the Asset undervalued?
4. How does the interest rate and inflation environment affect the asset?
5. Has the market just begun to recognize the assets appreciation potential?
6. What are the prospects for interventions affecting the assets value?
7. Finally, Deepcaster makes use of fundamental, technical and interventional analysis techniques. These techniques are sometimes trumped by the other principles and criteria described in this section.
III. HIGH-YIELD PORTFOLIO
On Dividends And The Power Of Compounding
Several Years ago the renowned and very successful mutual fund manager, Jeremy Grantham stated that the outlook for the appreciation of small cap stocks for the foreseeable future was a negative 1.6% per year. And his outlook for large and medium cap stocks was not significantly better. Market Developments have proved Grantham correct.
If one had followed Grantham’s implicit advice, one would have been “out” of Equities-in-General since then. Can any rational person reasonably believe that one’s wealth is protected and enhanced by capital appreciation prospects of a negative 1.6% per year for equities? This is especially true today when the Realistic prospects for Equities are no better (and arguably are worse) and given that Real Inflation is 8.48% annualized. Therefore, if one must invest in equities, and the Fortress Assets Portfolio does include a select number, one should dramatically favor, in one’s evaluations, equities that pay a significant dividend (preferably 10% or more, per year). That way, one has the benefit of the power of compounding. [Obviously the high-dividend equities must have value according to other Deepcaster criteria, as well.]
Let us consider how powerful compounding can be. To determine the effect of compounding, bankers use a rule called “the rule of 72s.” This rule allows one to determine the length of time it takes for any amount increasing by a certain percent per year to double. For our 10% dividend yielding example, 72 divided by 10 is 7.2; which is to say a $50 stock that pays 10% per year will return an additional $50 in just 7.2 years, even if the stock price itself does not appreciate one thin dime.
Indeed, it is essential to address the challenge of Inflation by looking at the Real Numbers. Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s, before systematic Data Distortion and Interventions began in earnest.
Consider for example, the Numbers in Early November, 2010:
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported October 15, 2010
1.14% 8.48% (annualized September, 2010 Rate)
U.S. Unemployment reported October 8, 2010
9.6% 22.5%
U.S. GDP Annual Growth/Decline reported October 29, 2010
3.11% -1.44%
U.S. M3 reported October 17, 2010 (Month of September, Y.O.Y.)
No Official Report -3.71%
Bottom line: be skeptical of buying equities that don’t pay a dividend which, coupled with their prospects for price Appreciation, exceeds Real Inflation. While there are many other considerations to take into account when buying equities (and while we do, for other reasons, recommend purchase of certain equities that do not have a dividend) whether or not a Security pays a significant dividend is an extremely important consideration in Portfolio Selection in these increasingly perilous times, since Equities-in-general have gone nowhere for the past decade (and have lost 30% or more when adjusted for inflation), and are in a Bear Market, and most highly rated Bonds and CD’s provide niggardly or negative returns after adjusting for Real Inflation.
Thus, making Significant Profit without Great Risk and in spite of Real U.S. Consumer Price Inflation (in November, 2010, for example, at 8.48% per Shadowstats.com) which robs Purchasing Power, is a Daunting Challenge.
But it is possible if one is willing to take reasonable risks.
One Potentially Profitable Solution to this Challenge is selecting High-Yield Securities which typically should also have substantial Price Appreciation Potential, such that their prospective Total Return Substantially exceeds Real Inflation.
Deepcaster has identified several High-Yielders in his HIGH YIELD PORTFOLIO launched in the Summer, 2010. The Recent Yields of our five Inaugural Selections were 15.6%, 26%, 18.5%, 8% and 10.6%, when added to the Portfolio.
Wealth Protection - - Beyond the Portfolio
On the other hand, Fortress Assets in the context of today’s world and the probable future, inherently have built-in risk insulation - - not absolute immunity from risk, but insulation from risk. Moreover, the benefit of these Deepcaster Fortress Assets is that individuals with fairly moderate amounts of wealth can directly obtain them. Someone wishing to protect his wealth should not rely on Fortress Assets alone. Certain legal/structural entities provide additional wealth protection and risk insulation. They include forming one’s own corporation or limited liability company, family limited partnerships, charitable remainder trusts, off shore trusts, and others. Fortress Assets should be used in conjunction with these other legal structural techniques and entities, as determined by you and your personal financial advisor or lawyer.
And Finally, One Must Consider Market Manipulation and Its Consequences
Richard Russell, Dean of Newsletter Writers, commented a few years ago that
"One of the great mysteries of the markets is shown below (this one fooled the great majority of pros). If business is as good as is claimed, how is it that interest rates have remained so low, and bonds have held up so well? Below we see the 30-year Treasury bond going back one year. The bond bottomed in May 2004, climbed into the September period, and has been going sideways ever since. As of today, the yield on the long Treasury bond is only 4.85%, and the long bond is higher than it was six months ago."
"Has foreign buying held up the bonds? Is it liquidity that is floating the bonds up? Is the Fed manipulating the bond market? Is the bond market simply looking ahead and saying “I don’t see any big pick-up in business and I don’t see any inflation ahead…” I’m thinking we can see quite a bit of manipulation ahead. After all with a group able to buy a thousand or five thousand S&P futures in the space of one minute, manipulation has never been easier.”
Deepcaster, along with Richard Russell, is seeing much evidence of market manipulation in many sectors. Thus we always try to account for actual and prospective manipulation in all our Portfolios selections but we would note that manipulation is not always tantamount to market control. Moreover, no manipulative scheme to artificially set the price for a desired, tangible asset can last forever. Selling of physical gold into the market is required to suppress the gold price. But Central Bankers have limited amounts of physical gold that they can cause to be sold into the market. Once a market can be successfully manipulated no longer, the ensuing correction is often swift, brutal, and violent.
Thus, a Fortress Assets Portfolio should be quite helpful in insulating and increasing your wealth against developments yet to come.
A High Potential Speculator Portfolio can generate high potential Portfolio appreciation and/or income.
And a High Yield Portfolio can help you increase your Wealth at a rate greater than Real Inflation.
Best Regards,
Deepcaster LLC
Deepcaster.com
Wealth Preservation - Wealth Enhancement
Financial and Geopolitical Intelligence
Gravitas, Pietas, Virtus
If one were to view movement in the price of gold as a surrogate for anticipated inflation, for example, the issues begin to come into focus…
While stock prices do tend to rise in an inflationary environment — where revenues and profits are inflated — rising stock prices do not always stay ahead of inflation. On a constant-dollar or real, inflation-adjusted basis, stocks go through bull and bear markets, just as they do otherwise. If prices do not stay ahead of inflation, investors lose value in terms of the purchasing power of their assets. The equity markets may rally in the upcoming inflation, but the systemic implications and current gold behavior suggest that the circumstance will not give investors a positive real return…”
“Commentary Number 329: Inflation, Retail Sales, Trade Deficit and Debased Money”
John Williams’ Shadow Government Statistics, 10/15/10
Not since The Great Depression have there been such Formidable Challenges to those who wish to Profit and Protect their Wealth.
If it was not clear before 2008, the Fall, 2008 Markets Crash, Credit Freeze, and Financial Institutions Collapse made it clear, that we have entered into an Entirely New High Risk Era in the Economy and Markets.
Several Time-honored Investment Strategies and Techniques have been Entirely Discredited and Serious New Risks, including The Threats of another Market Meltdown and Hyperinflation resulting from increasingly Massive Quantitative Easing (Q.E.) abound.
For example, as we explain in greater Detail below, the formerly widely accepted “Rule” of “Buy and Hold” has not only been largely discredited – the Major Equities Markets are Trading about where they were a decade ago – but also have caused typical “Buy and Hold” Investors to Lose Money over that decade, at least 30%, when adjusted for Real Inflation (see below).
Facing these Challenges requires careful Attention to Goals and Strategies.
On the other hand, These Challenges Provide Great Opportunities for Profit, while at the same time Require Great Vigilance to Avoid Wealth Destruction.
Allocating one’s Investment and Risk Capital among three separate Portfolios as Deepcaster recommends, each employing a somewhat different Strategy, is an excellent way to Maximize Opportunities for Profit and Avoidance of Wealth Destruction.
A Primary Overall Strategy is first to seek “Beta” by Investing or Speculating to achieve Profit from Broad Market or Sector Trends (Beta), whether Uptrends or Downtrends. We seek Beta above all, because even the strongest individual Securities are often vulnerable to Equities Market Crashes. The Evidence indicates that Beta-Followers perform better than mere Alpha-Seekers.
Even so, we often seek Alpha (Appreciation of Individual Securities) as well in addition to Beta with specific Selections which we expect to Rise or Fall more than the Rise or Fall of the Beta of particular Sector.
As well, we are not at all hesitant about seeking Profits via Short Positions including via Exchange Traded Fund including leveraged ETFs. Why not Profit when Markets Fall as well as when they rise? There are several Good Reasons to do so, especially since, in recent years, Bearish trends have provided more of these Opportunities.
Finally, we tend to favor (predominately but not exclusively) Investments in Real Assets (such as Gold, Silver, Energy, and Agricultural products in relatively inelastic Demand) as opposed to Financial Assets (See our “Opportunities to Profitably Escape Paper “Wealth” into 2011” (10/07/10) in the ‘Articles by Deepcaster’ Cache).
The World of Financial Assets is increasingly fraught with Danger for Investors, as the Market Crash of the Fall, 2008, and the ongoing Mortgage Crises demonstrate.
Moreover, Major Central Banks Massive Printing of Fiat Currency increasingly heightens the Risk of Hyperinflation as well as Economic Stagnation. As many of our Articles (and increasing numbers of Investment Analysts) demonstrate, the Private For-Profit Fed is the lead Culprit of a Cartel* of Central Bankers and Agents and Allies is regularly engaged in Manipulation of a Wide Variety of Markets, and especially in attempted suppression of Gold and Silver Prices, because heightened Investor Interest in these Precious Metals tends to delegitimize the Central Bankers Treasury Securities and Fiat Currencies.
*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 December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘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. 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.
These Interventions Require that, to the extent possible, Investors and Speculators track The Interventionals, as well as the Fundamentals and Technicals.
Thus three Dynamic Portfolios – Fortress Assets, Speculative, and High-Yield, offer three related Strategies Essential to achieving the Goals of Profit and Protection.
I. A ‘FORTRESS ASSETS’ PORTFOLIO
The increasing Vulnerability of Wealth and the recent past and prospective failure of several traditional means of protecting it, coupled with the aforementioned risks, require development of Fortress Assets Portfolio.
This portfolio is based on several principles:
1) Acquire assets which are fundamentally strong at a technically propitious time, BUT, subject to ongoing consideration of the "Trump Card" of Cartel Market Intervention.
2) Focus on Acquiring Real Assets (primarily Gold, Silver, Energy and Agricultural Products or businesses focused on these) At The Right Time
Those Paper Assets which represent less Real Value than they nominally reflect in their Market Price, are increasingly risky. We have already described how those Paper Assets in many wallets, U.S. dollars, have been deteriorating mightily in Purchasing Power since 2002 – about 35%. Indeed the Vulnerability of Paper Assets was amply demonstrated in the Fall, 2008 Market Crash.
Thus, when investing in a paper/electronic security, it is important to carefully analyze what Real Asset, if any, the security actually represents and the contingencies to which that security is vulnerable.
But it is critical to time one’s investment in Real Assets correctly. This means the timing must not only take account of Fundamental and Technical analysis, but also of interventional analysis. Investing in Real Assets in the headwind of an ongoing or pending Cartel Intervention is often futile, or worse.
Bottom line: to maximize the chances of protecting wealth and Profiting, a substantial portion of one’s portfolio must be in Real Assets, or Paper Assets that genuinely represent Real Assets. Consider that hundreds of billions of dollars of Ostensible Assets could, and did, simply vanish in the tech-wreck of the year 2000 and again the Fall, 2008 Crash. One reasonable inference from this loss is that the Real Value in those Paper/Digital Securities was not there to begin with; otherwise it would not have vanished so quickly. The Real Assets behind all that paper (to the extent there were any Real Assets behind that Paper) simply were not valuable enough to justify the sky-high prices, so in the spring of 2000 the NASDAQ began a fall, which would end only when 60% of the ostensible pre-crash value would disappear. A Similar Scenario occurred in the Fall, 2008 Market Crash with devastating Results. Thus one goal of the Fortress Assets Portfolio is to prevent such a Wipeout from devastating our subscribers.
Conclusion: One must invest in Assets which have inherent, or strong and durable contextual, value, at the time at which that value has just begun to be recognized by the market. And the Market Intervenors must not be in the way.
3) Perform a Basic “Reality Evaluation” On Current Paper Assets
For example, consider a typical equity on the NASDAQ which pays no dividend, or a negligible one, and sells for a typical price-earnings ratio of about twenty (20). What this means is that the company has to have 20 years of earnings at the current level to generate the value equivalent to one share of its stock. One must ask whether the placement of one’s wealth in such a stock could ever be justified by the (hoped for) ever-increasing appreciation of that stock, and that the changes of that happening are high enough to make that purchase a good one. Remember, we are considering a stock (typical on the NASDAQ) that has miniscule or no dividends, and which reflects a price earnings ratio higher than the entire equities market immediately prior to the 1929 crash.
And when one considers the (generally declining) Purchasing Power of the U.S. Dollar or other Fiat Currencies into which those Assets can be converted, one realizes the chances of achieving Real Profit or even Wealth Protection are miniscule.
Bottom line: the only way that such a stock purchase could be seen to be sensible is if one can legitimately project that there is a high probability that the price will continue to appreciate and, that this appreciation, taken together with any yield, will Achieve a Total Return well in excess of present and Prospective Inflation.
4) Prepare for Increasing Uncertainty and Volatility
In the summer of 2005 and again at the end of 2006, market volatility as reflected in the VIX (a volatility index) was at record lows. But the Fall, 2008 Crash sent it to record highs. And the Spring and Summer and early Fall Rallies, 2010 sent it down again. Low VIX levels are unlikely to continue given the lousy Fundamentals, including high unemployment, a propped-up Mortgage and Banking System, and increasing, and unpayable, Sovereign Debts.
5) The Fortress Assets Portfolio Must Continually Change
For the aforementioned reasons, Deepcaster Fortress Assets Portfolio must be a nimble, “Flying Fortress” with both offensive and defensive capability. Relatively timeless stores of value (with the exceptions noted below) are increasingly rare. Moreover, with only a few exceptions, many traditionally legitimate stores of value (e.g. U.S. Government Securities) are increasingly vulnerable.
Consider “Dr. Copper.” Among the commodities, the cognoscenti call copper “Dr. Copper” because its price is so sensitive to real or perceived economic health. Through the end of 2004 and continuing into 2005, Dr. Copper was in a substantial price up-trend due to many factors (i.e., the perceived improvement of the U.S. and global economies especially including the increasing demand of China and India, for this important industrial metal). Thus, through the summer of 2005 one would see copper in many sensibly constructed portfolios. But the Fall, 2008 Crash caused it to plunge. And it has rallied again since March, 2009.
Bottom line: the Fortress Assets Portfolio is designed to be dynamic, flexible, and aggressive - - both offensive and defensive. The appropriate metaphor for a Fortress Assets Portfolio therefore is not that of a Defensive Fortress on the ground with great earthen works. Instead, the more appropriate historical metaphor would be the B29, the “Flying Fortress” of World War II. The B29 was flexible and aggressive, with both offensive and defensive capabilities. It could be directed against a number of military targets to enhance the United States’ military position, but it was also well defended with many machine gun turrets.
The foregoing principles provide the macro-perspective in which Deepcaster makes its selections. Deepcaster also makes use of the traditional and non-traditional techniques outlined here.
Afterword: The Fundamental Overhanging Threat: Addressing the Increasing Systemic Risks and the Fundamental Flaws of Most Portfolios
An essential consideration in creating the Fortress Assets Portfolio is the fundamental and increasing Systemic Risks that severely threaten many Asset Values. To briefly recapitulate, a major component of those risks are the massive, unprecedented levels of Sovereign and consumer debt, relatively low level of personal savings and business capital investment, the consequent trend of the declining value of the dollar, and persistent unemployment, among many others.
Record high, and still increasing budget, current account, and trade deficits in several Major Nations, and some $600 Trillion Notional Value of dollars of “private” OTC (i.e. not exchange traded) Derivatives threaten our entire financial and economic system. The integrity of these derivatives depends inter alia on the strength of their counterparties. And the derivative based failures of Orange County, California, Long Term Capital Management, Bear Stearns, Lehman Brothers and AIG just in the last two decades shows how fragile counterparty strength can be. It is not too much of an oversimplification to say the USA and many Nations of the Eurozone are increasingly living on money borrowed from other countries plus Fiat Currency created out of thin Air, and thus are at risk from “private” OTC derivatives. Indeed, the risks to the international economy and financial system are still enormous.
So far as the U.S. is concerned, when one considers this phenomenon of very high debt and a declining dollar trend, coupled with mass immigration and increasing outsourcing driving down wage rates and sending good manufacturing jobs overseas, the U.S., at best, will, in the foreseeable future, experience a stagnating economy with increasing price inflation. Thus, we reiterate that it is highly probable that the U.S. is headed into a period of serious stagflation as are several Major Nations in the Eurozone, and even in the Emerging Markets Countries. Many portfolios are not constructed to cope with these prospects.
Systemic unraveling and/or spasmodic market setbacks (which are now increasingly likely) as a result of these factors are quite likely. Consider Argentina just a few years ago. Although in most respects not a Third World Country, it nonetheless defaulted on its obligations and devalued its currency. It can happen anywhere.
II. HIGH POTENTIAL SPECULATIVE PORTFOLIO
The goal of a Fortress Assets Portfolio is to select assets which have relatively low downside risk and significant capital appreciation and/or income potential.
The goal of a High Potential Speculator Portfolio (DHPS) is to achieve relatively higher, or very substantial, returns while recognizing that potentially higher returns entail higher risks.
Nonetheless, in selecting a Speculative Portfolio one must employ many of the same selection criteria and techniques. Thus selections for both portfolios are considered from fundamental, technical and interventional perspectives.
Equity Selection Criteria - - Traditional, Non-Traditional and More
Such a Portfolio should take account of the following traditional and non-traditional selection criteria.
1. Is the asset undervalued in relation to its inherent value, or prospective contextual value?
2. Are overall markets, geopolitical and governmental conditions favorable?
An asset can have excellent inherent fundamental or prospective contextual value, but the governmental or geopolitical conditions may not be right to realize that value. In other words, a rising market tide tends to float most equities and other Assets, as a falling market tide tends to depress them.
3. Is the Asset undervalued?
4. How does the interest rate and inflation environment affect the asset?
5. Has the market just begun to recognize the assets appreciation potential?
6. What are the prospects for interventions affecting the assets value?
7. Finally, Deepcaster makes use of fundamental, technical and interventional analysis techniques. These techniques are sometimes trumped by the other principles and criteria described in this section.
III. HIGH-YIELD PORTFOLIO
On Dividends And The Power Of Compounding
Several Years ago the renowned and very successful mutual fund manager, Jeremy Grantham stated that the outlook for the appreciation of small cap stocks for the foreseeable future was a negative 1.6% per year. And his outlook for large and medium cap stocks was not significantly better. Market Developments have proved Grantham correct.
If one had followed Grantham’s implicit advice, one would have been “out” of Equities-in-General since then. Can any rational person reasonably believe that one’s wealth is protected and enhanced by capital appreciation prospects of a negative 1.6% per year for equities? This is especially true today when the Realistic prospects for Equities are no better (and arguably are worse) and given that Real Inflation is 8.48% annualized. Therefore, if one must invest in equities, and the Fortress Assets Portfolio does include a select number, one should dramatically favor, in one’s evaluations, equities that pay a significant dividend (preferably 10% or more, per year). That way, one has the benefit of the power of compounding. [Obviously the high-dividend equities must have value according to other Deepcaster criteria, as well.]
Let us consider how powerful compounding can be. To determine the effect of compounding, bankers use a rule called “the rule of 72s.” This rule allows one to determine the length of time it takes for any amount increasing by a certain percent per year to double. For our 10% dividend yielding example, 72 divided by 10 is 7.2; which is to say a $50 stock that pays 10% per year will return an additional $50 in just 7.2 years, even if the stock price itself does not appreciate one thin dime.
Indeed, it is essential to address the challenge of Inflation by looking at the Real Numbers. Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s, before systematic Data Distortion and Interventions began in earnest.
Consider for example, the Numbers in Early November, 2010:
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported October 15, 2010
1.14% 8.48% (annualized September, 2010 Rate)
U.S. Unemployment reported October 8, 2010
9.6% 22.5%
U.S. GDP Annual Growth/Decline reported October 29, 2010
3.11% -1.44%
U.S. M3 reported October 17, 2010 (Month of September, Y.O.Y.)
No Official Report -3.71%
Bottom line: be skeptical of buying equities that don’t pay a dividend which, coupled with their prospects for price Appreciation, exceeds Real Inflation. While there are many other considerations to take into account when buying equities (and while we do, for other reasons, recommend purchase of certain equities that do not have a dividend) whether or not a Security pays a significant dividend is an extremely important consideration in Portfolio Selection in these increasingly perilous times, since Equities-in-general have gone nowhere for the past decade (and have lost 30% or more when adjusted for inflation), and are in a Bear Market, and most highly rated Bonds and CD’s provide niggardly or negative returns after adjusting for Real Inflation.
Thus, making Significant Profit without Great Risk and in spite of Real U.S. Consumer Price Inflation (in November, 2010, for example, at 8.48% per Shadowstats.com) which robs Purchasing Power, is a Daunting Challenge.
But it is possible if one is willing to take reasonable risks.
One Potentially Profitable Solution to this Challenge is selecting High-Yield Securities which typically should also have substantial Price Appreciation Potential, such that their prospective Total Return Substantially exceeds Real Inflation.
Deepcaster has identified several High-Yielders in his HIGH YIELD PORTFOLIO launched in the Summer, 2010. The Recent Yields of our five Inaugural Selections were 15.6%, 26%, 18.5%, 8% and 10.6%, when added to the Portfolio.
Wealth Protection - - Beyond the Portfolio
On the other hand, Fortress Assets in the context of today’s world and the probable future, inherently have built-in risk insulation - - not absolute immunity from risk, but insulation from risk. Moreover, the benefit of these Deepcaster Fortress Assets is that individuals with fairly moderate amounts of wealth can directly obtain them. Someone wishing to protect his wealth should not rely on Fortress Assets alone. Certain legal/structural entities provide additional wealth protection and risk insulation. They include forming one’s own corporation or limited liability company, family limited partnerships, charitable remainder trusts, off shore trusts, and others. Fortress Assets should be used in conjunction with these other legal structural techniques and entities, as determined by you and your personal financial advisor or lawyer.
And Finally, One Must Consider Market Manipulation and Its Consequences
Richard Russell, Dean of Newsletter Writers, commented a few years ago that
"One of the great mysteries of the markets is shown below (this one fooled the great majority of pros). If business is as good as is claimed, how is it that interest rates have remained so low, and bonds have held up so well? Below we see the 30-year Treasury bond going back one year. The bond bottomed in May 2004, climbed into the September period, and has been going sideways ever since. As of today, the yield on the long Treasury bond is only 4.85%, and the long bond is higher than it was six months ago."
"Has foreign buying held up the bonds? Is it liquidity that is floating the bonds up? Is the Fed manipulating the bond market? Is the bond market simply looking ahead and saying “I don’t see any big pick-up in business and I don’t see any inflation ahead…” I’m thinking we can see quite a bit of manipulation ahead. After all with a group able to buy a thousand or five thousand S&P futures in the space of one minute, manipulation has never been easier.”
Deepcaster, along with Richard Russell, is seeing much evidence of market manipulation in many sectors. Thus we always try to account for actual and prospective manipulation in all our Portfolios selections but we would note that manipulation is not always tantamount to market control. Moreover, no manipulative scheme to artificially set the price for a desired, tangible asset can last forever. Selling of physical gold into the market is required to suppress the gold price. But Central Bankers have limited amounts of physical gold that they can cause to be sold into the market. Once a market can be successfully manipulated no longer, the ensuing correction is often swift, brutal, and violent.
Thus, a Fortress Assets Portfolio should be quite helpful in insulating and increasing your wealth against developments yet to come.
A High Potential Speculator Portfolio can generate high potential Portfolio appreciation and/or income.
And a High Yield Portfolio can help you increase your Wealth at a rate greater than Real Inflation.
Best Regards,
Deepcaster LLC
Deepcaster.com
Wealth Preservation - Wealth Enhancement
Financial and Geopolitical Intelligence
Gravitas, Pietas, Virtus
Monday, November 1, 2010
Profit in Silver
Above we see the last two month’s price action for silver. I recommended that subscribers switch from gold contracts (on the Comex) to silver contracts on Sept. 17. Since that time, silver is up 18%. Over the same period, gold advanced by 6%.
Sunday, October 17, 2010
Orosur MIning moves into profit as <b>gold price</b> spikes and costs <b>...</b>
Full Orosur Mining profile here Orosur Mining Inc. is a gold producer and exploration company focused on identifying and developing gold projects in Latin America. The Company is a fully integrated mining company, possessing the skills necessary to explore and develop its discoveries. The Company operates the only producing gold mine in Uruguay (San Gregorio), and has assembled an exploration portfolio of high quality assets in Uruguay,Chile and Argentina.
Cash costs at the San Gregorio mine in Uruguay are falling South America focused gold miner Orosur Mining (LON:OMI, TSX-V:OMI) moved decisively into profit during the first quarter of the financial year thanks to a sharp rise in the value of the precious metal.
The company, which has operations in Uruguay and Chile, posted net income of US$3.5 million for the three months to August 31 compared with a loss of US$2.16 million a year earlier.
Cash costs from its only gold producing asset – the San Gregorio open pit in Uruguay – fell to US$839 an ounce from US$880, while production was steady at 12,937 ounces.
The average price the company received for its gold production jumped to US$1,216 an ounce from US$912.
Orosur has almost US$11 million of cash – up from US$8.7 million a year ago – which means it has the funds to finance its current exploration programme.
Production costs will tumble significantly once the company brings into production the Arenal Deeps project, adjacent to San Gregorio.
The Arenal Deeps feasibility study, carried out by Amec, is a conservative assessment of the cash costs (US$545 per ounce) and the gold payable (135,000 ounces in total) and doesn’t take account of the silver that will be mined.
However the real excitement is provided by the Chilean properties acquired as part of the Fortune Valley deal.
Chief among them is the Pantanillo project that comprises 11,750 of hectares optioned from Anglo-American.
It is located in the Maricunga Belt, an area rich in gold which is home to 60 million ounces of the metal.
First phase drilling has defined a maiden JORC resource of 1.05 million ounces at Pantanillo Norte, a small part of the total exploration area, and a second phase aims to build on this early impressive progress.
“Right now we have targeted the oxidized and mixed portion of the deposit and have confirmed (a resource of) 1 million.
“(Former owners) Kinross and Anglo were heading for two or three, so we will keep going and our objective of the next drilling campaign is to evaluate the deeper sulphide mineralisation which we believe is a significant exploration target” Ignacio Salazar, the company’s chief financial officer, said in a recent interview with Proactive Investors.
A scoping study on Pantanillo began in June and will be completed by the end of the year.
“The study will look at the project and what we want to get from Pantanillo - whether we will concentrate on the oxide, or go for something bigger,” Salazar said.
A programme due to get underway by the end of the year will look also at other areas on the Pantanillo property.
Orosur has another Chilean project, Anillo, which is next to Yamana’s El Penon gold-silver mine, which produces 400,000 gold equivalent ounces a year.
Outside that, the group is investigating potential high grade porphyry targets at Incahausi in Chile. Meanwhile, earlier this month the exploration “resulted in positive drill intercepts at Vaca Muerta in Uruguay.
“In summary, operations are well on track, exploration has been delivering both in Uruguay and Chile, and financing in the medium term can be covered with cash flow from operations and debt due to the strong gold price and the result of the cost savings efforts,” chief executive David Fowler told investors today.
“Looking forward, drilling will continue in Vaca Muerta, Pantanillo and Anillo and other targets during the fiscal year and the board will within the next month review and decide on Arenal Deeps."
Register here to be notified of future Orosur Mining articles.
The junior gold miner hit a new 12-month high on London’s AIM market today. The stock has now doubled in value since the start of September. Orosur has been transformed over the past year, and these latest drill results provide further evidence of its expansion in South America.
Orusur Mining's Uruguay gold production is the cash machine to finance development of the Arenal Deeps and Pantanillo projects. Even after the spectacular performance of late, the stock is trading below the level it was a year ago – yet the company’s prospects have changed beyond recognition.
Engineer AMEC has begun work on a feasibility study that should be complete by the end of September at the latest. Fowler confirms that ‘development of this resource is expected to progressively reduce cash costs and extend mine life’.
Stratex shares have advanced over 40% in recent weeks, and this new farm-out deal with an international mining major is likely to stir up further interest in the AIM-listed gold junior. An AngloGold subsidiary has invested US$500,00o into Stratex and it can earn up to 70% of the Afar project in Ethiopia and Djibouti.
We look at the rapid progress being made by the company at Tulu Kapi, in Ethiopia, which has the capacity to become a world class gold project.
When the movers and shakers of mining and finance meet under one roof it can mean just one thing: the FINEX 2010 conference is about to get into full swing. Here we preview the event, which takes place on October 27 and 28 at the Geological Society, Burlington House, Piccadilly, and pick out some of the highlights.
The gold explorer has been trading strongly as interest surrounding its new Saudi Arabian venture hots up. Unveiling plans for a £625,000 cash call, managing director Jeffrey Rayner also gave a particularly bullish assessment of the company's prospects.
As you will see from our coverage earlier, Pan African is offloading a fringe asset in Ghana. Here we look at the company's transformation from promising junior to cash generating gold producer, which has seen it step up in class.
Cluff Gold's transformation from junior explorer to profitable, cash generating gold producer was underlined by a strong set of interim results today. The update also revealed the company's founder, Algy Cluff, is to relinquish the role of CEO and cede day-to-day control of the business to COO Peter Spivey.
Trading in Solomon Gold (LON:SOLG) reached fever pitch on London’s AIM market after the group revealed its Fauro Island Project has the potential to be a world class deposit.
Solomon Gold topped the London Stock Exchange leaderboard today, with its shares still up 62% at midday after the company announced that assay results from sampling on its wholly owned Fauro Island project indicated a world class gold deposit.
With established expertise in Turkey, and a rapidly growing awareness of both precious and base metals potential in Saudi Arabia, Kefi Minerals are well placed to go places.
The 2010 drilling programme is designed to expand on Olcha's maiden JORC resource and initial results demonstrate the project's significant potential. According to Davy's resource analyst Job Langbroek, the latest grades ‘comfortably achieve commercial status’.
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Saturday, October 16, 2010
Network Marketing Silver and Gold Coins for Fun and Profit
Do you have a penchant for coins? Would you like to own and operate your own profitable silver and gold coin business? If you answered 'yes' to one or both of these questions, you may have what it takes to develop a business of Network Marketing Silver and Gold Coins for Fun and Profit.
Gold and silver coins can sometimes be difficult to market on your own and you may not get the best price for your products. Also, it's a hassle to try and follow the market every day. But, network marketing gold and silver coins will provide you with high quality leads, tips on what the market is doing and a proven method for marketing your coins for the best available price.
Not only can you make a significant impact on your income by Network Marketing Silver and Gold Coins - you can also build up a residual income that keeps giving when you're relaxing. You'll also be able to develop a work force that works for you when you're not working. All of this takes only a minimal amount of knowledge of network marketing.
Experts will help you set up your business and you can spend as much or as little time building it as you can or want to. Use high quality leads to find buyers for your coins or sellers that have what you want at a great price. Pay-Per-Click experts on staff at silver and gold coin network marketing sites will find the exact quantity of leads that you need for your business.
You'll also have access to proven educational videos that are easy to understand and can provide you with all the information you need to begin a business - and profit from it. It's one of the tools you'll need to make your business successful, the same way a home builder needs hammer and nails or a doctor needs a stethoscope. With the tools available to you as a network marketer, you'll have all it takes to build a successful and efficient business.
When you join a Network Marketing system for Silver and Gold Coins, you should receive your own website which includes videos, enrollment, credit card processing and a "shopping cart." There should also be a management system that comes complete with email marketing campaigns to draw buyers and sellers (and new representatives) to your site.
Your new customers - and staff of representatives - will be able to complete transactions right on site. No need to enact a merchant services account so that you can process purchases at your site. Orders are processed immediately - and you get paid immediately. What entrepreneur looking for a business that's fun and profitable wouldn't jump at this opportunity?
If you're a numismatic either a beginner or an experienced pro, and want to capitalize on your love of coins and intense desire to make money and provide a better than average life for yourself and your family, you owe it to yourself to look into Network Marketing Silver and Gold Coins for Fun and Profit.
Richard Duke is a marketing entrepreneur and blogs at http://www.collectorscoinchest.info
For your source of collectable coins go to http://www.collectorscoinchest.com.
Friday, October 15, 2010
8 Reasons Why the Gold Price Will Continue to Rise - And How to Profit From It
Technically - indicators point to a continuation in the inexorable rise of precious metals. Technical indicators are signaling a buy in gold and silver. Gold started the year at $880 and, as I write, is now standing at $960, a rise of 9% and we are just into August - and this should be the quiet season. Admittedly its been volatile at times but the gold price will continue to rise.
Historically - gold is the asset to hold in times of uncertainty and that is what we are experiencing right now . Uncertainty is another reason Why The Gold Price Will Continue To Rise . Recent comments on the economy have been optimistic but these 'green shoot' claims are predominantly fueled by government organizations, banks and generally vested interests. How confident should that make us feel? The Bank of England have, in effect, contradicted the government claims by putting another £50 billion sterling into the economy. This indicates the present level of quantitative easing (QA) is not yet effective.
Emotionally - the smaller investor is more fearful of risk, and responds to the drip-drip effect of hearing and reading day-in and day-out that gold is the asset to rely on to protect their wealth. The markets may appear to be booming again but they're possibly just suffering from a bubble hangover. This could be a secondary bubble ready to pop. The resulting fear is a primary reason Why The Gold Price Will Continue To Rise
Financially - As the dollar wavers, gold continues to creep up. Nothing too dramatic. Just a steady rise. Interest rates continue to remain historically low. The message that inflation could soar, currencies collapse, and gold reemerge as the new global currency is promoting a rising tide of demand for bullion.
Productively with Price Suppression- Many well respected gold pundits have long been convinced the gold price has been suppressed. But, despite that the price still rises. How high would it be already if no suppression scheme existed? How does this effect production of gold? Suppression of price reduces production which ultimately results in a shortage of the metal. Demand exceeds supply - and , the price goes up.
Strategically - despite the market momentum driven by large investment banks and hedge funds, the smaller, longer term investors are losing their appetite for risk and are beginning to see gold ETFS and shares as the better option. Gold shares have been sluggish recently, but once gold passes the US$1000 level again and sticks, investors will gain the confidence to buy into the mining shares again. The ease of electronic trading makes it very convenient to buy bullion or share ETFs - easier than gold and silver bullion, and strategically placed for leverage on the increase in the gold price.
Creatively - creative accounting may well also influence the ultimate gold price rise. There are rumours circulating that the commodity exchanges allow gold futures contracts to be settled in shares of the gold exchange funds. (ETFs) rather than in bullion. If there is ever a question mark concerning the amount of metal held by the ETFs in relation to the gold traded, the price will soar.
Politically - China has indicated its intention to increase gold reserves. Their 2 trillion dollar holding, which they already fear will be devalued, gives them the financial strength to move into stockpiling of real assets, and the acquisition of commodity based strategic assets, including gold as the ultimate US Dollar hedge.
Conclusion - the price of gold is like a river backing up behind the dam wall. When the streams of technical and historical indicators, financial pressure, supply shortage, creative accounting, price suppression and fear are running independently, their individual volume will have limited effect, but when they all converge into one flowing river, the panic will begin to build, and gold will start its stratospheric ascent. The combination of these factors is Why The Gold Price Will Continue To Rise While you still have the opportunity buy now.
p.s. Same arguments apply to silver
Anna P. Best was based in Singapore for many years where she developed her interest in precious metals. Until recently, Gold has not been an area the average investor would consider, but that has changed and suddenly there are so many opportunities out there to profit from gold and silver. Anna enjoys sharing her knowledge with other enthusiasts. She has prepared a complimentary report packed with facts which you can download at the Link to Gold Report.
Thursday, October 14, 2010
The Burgeoning Silver Market - Simple Finds to Make a Profit
It's no doubt that the economy is an ever evolving cycle. When the market and overall economy is shaken, obvious areas are performing at near record trends. Some such examples include precious metals and the oil industries. Silver, Gold, and Platinum have seen some incredible upward movement in the last three years or so as a result of the current market condition. In particular, silver has been doing quite well and is an attraction investment for the entry-level market watchers who have very little money to invest. Knowing how and where one can take advantage of the increasing silver prices, folks need to do some research to make a profit.
Additionally, we won't be seeing the best money making opportunities in such vendors like coin stores and antique dealers as they sell their precious metals well over market value. But vendors much like these have implemented a failsafe way of taking advantage of this hot market segment. Here are a couple such ideas used by those vendors where we can scavenge for lost treasures and money making opportunities.
One such hot bed of silver searching real estate is the online markets. Auction sites like Ebay for example have all the right areas to search for silver bullion and rare antiques. Consumers like me target specific items and capitalize on bad spelling errors on the listings or misplaced listings in a totally irrelevant category. It's with this advantage, I've been capable of getting nearly a 200% return on my investment. In one such instance, I've even tripled my income in a months time by focusing on those little quirks. And so, a prime area to look for the bargains, much like an online virtual garage sale.
Again touching on the whole garage sale/flea market idea, that is yet another popular area of research. Many people have tons of stuff to sell, most commonly done over the weekends of course. Thrifty shoppers like you and I have huge opportunities to look for not only scrap silver or gold bullion but for potentially rare antiques and art. Who of us haven't flipped on the "Antiques Roadshow" and heard a story of a guest finding a rare painting in the attic or at a garage sale. It happens all the time. Garage sale people want to sell their belongings, not so much to make money, but to clear their garages. And best of all, we can negotiate the price on a lot of these goods, the incentives are there and they are ready, willing, and able to.
And finally another hot spot for finding the right deals are the online ad sites. This includes popular websites like Craigslist and Usfreeads, ad sites have the ability to bring the traffic to you. In turn, you would not have to look for the willing parties. I have a buddy that has a couple posts on these websites advertising the search for unwanted gold jewelry. He gets a huge amount of feedback, and therefore rakes in the customers using these free ad websites. He would then have his gold melted at the local refinery and reap the profits made by a simple free ad. Internet business is the highway to the future, so it would make natural sense to take advantage of its attributes to find prospective sellers and buyers.
I hope I have provided some clever tips to help you get started and to know what areas to avoid. Silver has no where to go but up, with countries like China whom constantly use the most silver in the world, supply would only shorten. Within a short time period, we might just see the record highs first posted in the early 1980's. So why not start making some wise silver investing, it's great supplemental income, and again requires very little capital to get started.
Great tips to make lots of money trading pennystocks, for more information, please feel free to visit: http://kookoox10-pennystocks.blogspot.com
Shaun Davidson-Automotive and Finance Consultant-2008
Crude Oil Falls on Profit Taking, <b>Gold</b> Moves Higher Despite Dollar Rally
Commodities – Energy Crude Oil Falls on Profit Taking Crude Oil (WTI) - $81.61 // $0.60 // 0.73% Commentary: Crude oil fell Monday, shedding $0.45, or 0.54% after getting as high as $83.50 early in the session. As we indicated yesterday, this week’s trade will likely be influenced by the push-and-pull of a constructive economic landscape versus profit taking considerations after a huge run. With crude now testing the top of a 12-month range, traders are opting to take profits rather than buy at these relatively high levels and hope for a breakout. The correlation between crude oil and U.S. equities has been rising in recent weeks and this trend will likely continue. A 20-day correlation coefficient of 0.79 is the strongest relationship between crude and equities in a month. Many market watchers will be closely analyzing the Federal Open Market Committee’s latest minutes set to be released on Tuesday. Perhaps we will see indication of the Fed’s next moves, including any potential for more quantitative easing. Financial markets typically respond positively to easing and respond negatively to tightening or even lack of action (if easing is priced in). Technical Outlook: Prices are showing a well-defined Bearish Engulfing candlestick pattern following a test of resistance at Augusts’ swing high ($82.97), hinting that a move lower is ahead. A break below initial support at $81.20 – the 23.6% Fibonacci retracement of the latest upswing – exposes the 38.2% and 50% levels at $79.21 and $77.60, respectively. 
Commodities – Metals Gold Moves Higher Despite Dollar Rally Gold - $1349.35 // $4.70 // 0.35% Commentary: Illustrating just how powerful the upward momentum in gold is, the metal rallied $7.31, or 0.54%, on Monday, hitting yet another record despite a rise in the U.S. Dollar. While momentum has a lot to do with the latest move in gold, we have also seen that gold has often moved higher regardless of day to day fluctuations in the Dollar or any other asset for that matter. Traders are more focused on the long-term, and gold traders see a very bleak future given all the sovereign debt issues that are plaguing governments around the world. Gold is seen as the “anti-fiat currency.” Technical Outlook: In a similar fashion to oil, gold prices have formed a Bearish Engulfing candlestick pattern following a test of resistance at the top of a rising channel outlining price action since the beginning of the year, hinting a downward reversal is ahead. A break past initial rising trend line support – now at $1335.13 – exposes a longer term trend line set from July’s swing bottom (now at $1296.72). Silver - $23.19 // $0.19 // 0.43% Commentary: Silver moved slightly higher on Monday, adding $0.04, or 0.17%. Every time it looks like silver may be getting way ahead of itself and a correction seems imminent, the metal rallies some more. No one knows when the top will be; the only certainty is that there will be a significant pullback at some point. That doesn’t mean money can’t be made on this run, because this has been and may continue to be an extremely profitable move for traders. Stay long, but maintain an exit strategy for when the inevitable turn happens. Technical Outlook: Prices have stalled below the $24.00 figure, seemingly negating a Bearish Engulfing candlestick pattern but failing to resume their climb. Negative RSI divergence hints at losses ahead. Initial support lines up at $22.50, with a break below that clearing the way for a move below the $22.00 figure to challenge $21.80. 
For real time news and analysis, please visit http://www.dailyfx.com/real_time_news To receive future articles by email, please contact Ilya at ispivak@dailyfx.com
Commodities – Metals Gold Moves Higher Despite Dollar Rally Gold - $1349.35 // $4.70 // 0.35% Commentary: Illustrating just how powerful the upward momentum in gold is, the metal rallied $7.31, or 0.54%, on Monday, hitting yet another record despite a rise in the U.S. Dollar. While momentum has a lot to do with the latest move in gold, we have also seen that gold has often moved higher regardless of day to day fluctuations in the Dollar or any other asset for that matter. Traders are more focused on the long-term, and gold traders see a very bleak future given all the sovereign debt issues that are plaguing governments around the world. Gold is seen as the “anti-fiat currency.” Technical Outlook: In a similar fashion to oil, gold prices have formed a Bearish Engulfing candlestick pattern following a test of resistance at the top of a rising channel outlining price action since the beginning of the year, hinting a downward reversal is ahead. A break past initial rising trend line support – now at $1335.13 – exposes a longer term trend line set from July’s swing bottom (now at $1296.72). Silver - $23.19 // $0.19 // 0.43% Commentary: Silver moved slightly higher on Monday, adding $0.04, or 0.17%. Every time it looks like silver may be getting way ahead of itself and a correction seems imminent, the metal rallies some more. No one knows when the top will be; the only certainty is that there will be a significant pullback at some point. That doesn’t mean money can’t be made on this run, because this has been and may continue to be an extremely profitable move for traders. Stay long, but maintain an exit strategy for when the inevitable turn happens. Technical Outlook: Prices have stalled below the $24.00 figure, seemingly negating a Bearish Engulfing candlestick pattern but failing to resume their climb. Negative RSI divergence hints at losses ahead. Initial support lines up at $22.50, with a break below that clearing the way for a move below the $22.00 figure to challenge $21.80. For real time news and analysis, please visit http://www.dailyfx.com/real_time_news To receive future articles by email, please contact Ilya at ispivak@dailyfx.com
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