To
profit from Sector Dead-Cat Bounces one must first determine which Sectors do
not Dead-Cat Bounce.
Gold and
Silver do not Dead-Cat Bounce because their inherent
quality as Monetary Metals, that is, as The Ultimate Stores and Measures of
Value, propels them upward. And insofar as they suffer significant declines,
those declines are typically caused by The Cartel* Takedowns described below.
For
those Sectors which are subject to Dead-Cat Bounces (most of them), there are
at least two ways to play “Sector” Dead-Cat Bounces. One can
initially go long to ride the bounce up (but must exit in time to avoid the
subsequent crash.)
Or one
can go short prior to the subsequent Dead-Cat Crash, ideally, at the top of
the bounce.
But the
key to success using this Strategy is to pick which Sectors may just Bounce
from lows, and which will likely Dead-Cat Bounce with the Bounce ending in a
Crash.
In
making this determination (and in addition to making traditional fundamental
and technical analyses, which we will not address here) consideration
of Certain “Deep” (i.e. poorly or non-reported) Macro-Market and
Macro-Economic Factors – that is to say, consideration of The Deep
Fundamentals -- is in order.
As the
Summer, 2009 begins, the Fundamentals for most, but
not all, Sectors are Abysmal (see Deepcaster latest
Alerts at www.deepcaster.com and click on
‘Alerts Cache’ for a fuller discussion of the Sectors for which
The Fundamentals are, and are not, Abysmal. Consideration of one Sector, the
Real Estate Sector, will allow us to lay out guidelines for profiting from
dead-cat bounces.
The
intermediate and long-term Fundamentals for commercial and residential Real
Estate, for example, are particularly abysmal. Indeed, those same
Fundamentals make the prospects for many other Sectors
Abysmal as well.
Consider:
1. 70% of U.S.
GDP is the American Taxpayer/Consumer and often, Mortgage Holder. But this
huge Sector has not been significantly helped by the ostensible Stimulus
Bill and Mega-Bank Bailouts. Unemployment is still rising and credit is still
tight and tightening for this huge Sector.
Until this Sector gets healthy, the
Residential, and Commercial Real Estate Sectors cannot get healthy. Pinched
Consumer Wallets mean Trouble for the Malls, Stores, and Mortgages for the
foreseeable future.
2. The Trillions of
Dollars of U.S. Taxpayers’ Borrowing incurred in recent years, and
especially in recent months, has entailed and continues to entail the
printing of Trillions of Dollars in Federal Reserve Notes by the private
for-profit Federal Reserve and the issuance of Trillions in U.S. Treasury
Securities. This Fiat Currency and Treasury Securities Gusher -- Monetary
Inflation - - virtually guarantees downstream Price Inflation. It also
virtually guarantees higher Interest Rates and thus a continued Real Estate,
as well as a general Economic Slump - - a fact which will become especially
apparent when the temporary Stimulus of the Stimulus Bill has dissipated, in
only a very few more months. We thus anticipate hyperinflation, and soon.
3. The
claim is often made that Real Estate is a “good inflation hedge”.
Well, whether or not that is true depends on the circumstances. And given
present circumstances, prospects for the Real Estate industry for the next
few years indicate that it will not be a good inflation hedge. That is
because Real Estate, or any other Asset class which has underutilized
capacity, is not a good inflation hedge.
Demand for residential, office,
retail, and industrial space is contracting, and will likely
continue contracting for a few years.
Thus Real Estate is not a good Inflation hedge at this
time.
4. We are already (as of early
July, 2009) seeing higher yields on U.S. Treasury Securities. And, given the
Fiat Currency and general Monetary deluge of recent years (and particularly
the past 12 months) yields over the intermediate and long term should
continue to rise. Short term is a different story.
But higher yields tend to increase the
minimal capitalization rate (“Cap rate”) that Property Buyers
will demand in order to invest.
(“Cap Rate” is a measure of the yield a commercial
property investor is getting on his property.)
Thus the Real Estate Profit Machine of Recent Years in several
advanced industrialized countries (and especially in the United States of America)
is likely halted for the next several years.
Our conclusion: Real Estate is a likely Dead-Cat Bounce Sector.
And even if it bounces, a Dead-End Crash is likely to Follow. Of course
timing is the key here.
Disclosure: Deepcaster has
already recommended a “directional” Real Estate Fund to his
subscribers, based on this analysis.
Two other considerations are essential (in addition to the
aforementioned ones) in order to profit from Dead Cat Bounces: one must
monitor The Interventionals and the Real Statistics
as opposed to the Bogus Official ones.
Indeed,
it is essential to consider the Real Statistics rather than Bogus Official
ones. That is because Key Statistics continue to be gimmicked by Official
Sources much to the detriment of American Citizens and Investors
Worldwide.
Indeed,
the True State of
the Economy is much worse than the Official Figures suggest.
As the
Real Numbers mentioned below demonstrate, our ongoing economic and financial
crisis is not merely a “normal” business cycle
Recession, but a System-Threatening Crisis. Indeed, we have entered
into a Depression. (see below)
It is
thus another Naïve and False Assumption that the Official Figures
accurately reflect the state of the Economy and Markets - - for example,
that the current Recession is merely a normal “business cycle”
phenomenon.
In sum,
Investors and citizens-at-large are misled by Official Statistics which have
been gimmicked, as shadowstats.com demonstrates. All of the following
Genuine Numbers are calculated by shadowstats.com, which calculates them
according to traditional methods used in the 1980s, and early 1990s, before The
Political Adjustments currently being utilized began.
Consider
the following Real Numbers from shadowstats:
U.S. Consumer Price Inflation (CPI) actually averaged
about 11% annualized for much of 2008, rather than the 5% to 6%
figures which have been reported as Official Statistics. Thus, the
consumer must cope with diminished purchasing power in addition to the threat
or reality of job loss and wage depression.
Though
Official Figures show CPI dropping to 0% in early 2009, the June 17, 2009 Shadowstats report revealed that CPI was still about 6%
annualized.
U.S.
Unemployment has (according to Official Numbers) been
ranging from 4% to 6% from 1995 to 2007, spiking “only” to about
just under 7% in late 2008 and 8% in early 2009. In fact, Real U.S.
Unemployment is (for June, 2009) about 20.6% and is still increasing.
(shadowstats.com July 2, 2009 Report) Contrary to the Official 9.51% Number Shadowstats describes the real Unemployment Situation in
its July 2, 2009 report as follows.
“Instead of the headline jobs loss of 467,000, consistent
application of seasonal factor bias (CSFB) – would have shown a
more-severe monthly jobs loss of about 513,000. This pattern has generated an
upside headline-number bias of 1,210,000…
…ongoing indications of deteriorating U.S.
employment/unemployment conditions in June, with a worse-than-expected
467,000 drop in June payrolls, but a narrower-than-expected rise in unemployment
to 9.5%. (The Official Numbers – ed.) Net of the Concurrent
Seasonal Factor Bias (discussed below) and net of distortions built into the
reporting by the birth-Death Model (discussed below), the June jobs loss
likely exceed 700,000.”
Shadowstats summarizes the Employment
Reality by stating that the “Payroll Employment Growth Overstatement
Could Top 2.5 Million Per Year with Birth-Death Modeling”.
Thus the
U.S.
consumer (70% of U.S. GDP, we reiterate) is increasingly unemployed,
under-employed, and indebted.
As well,
the Delusion of Economic Growth claimed by Official Statistics is just
that - - a Delusion. Real GDP growth has been negative since
2004. Indeed, 2009 GDP “growth” is a negative 5% per
the June 25, 2009 report. (shadowstats.com) Thus the consumer is faced
with a deteriorating economy, as well as diminishing job prospects and
purchasing power.
Knowing
such Real Numbers facilitated Deepcaster’s
recommending “Opportunities in the Impending Perfect Storm” - -
the title of his early September, 2008 (pre-Crash) Article warning of the
impending Crash (available in the ‘Articles by Deepcaster’
Cache at www.deepcaster.com) and his making five
short (and subsequently quite profitable) recommendations to subscribers at
about that time.
Indeed,
the aforementioned numbers virtually ensure that the current Bear Market
Rally, is just that, a Bear Market Rally. We
have much lower to go before we bottom. See Deepcaster
latest Letter and Alert at www.deepcaster.com.
And
regarding The Interventionals, The private
for-profit U.S. Federal Reserve is the Main Culprit behind our current
crises. See our January 2008 letter “Market Intervention, Data
Manipulations, Increasing Risks, the Cartel End Game & Latest
Forecast” in “Latest Letters” Cache and our July 3, 2008
“Profit from Fed-Catalyzed Crisis” in the “Articles by Deepcaster” Cache at www.deepcaster.com.
Indeed,
there is compelling evidence that a Fed-led Cartel* of key Central Banks and
their agents, allies and favored financial institutions is regularly involved
in Overt and Covert Manipulation of a Variety of Markets (and
especially the Precious Metals, Equities, and Strategic Commodities Markets)
and Key Statistics.
Regarding
the suppression of Gold and Silver prices, the Motivation is clear. The
Cartel takes down their prices periodically to prevent
their being even more widely recognized as the ultimate Stores and
measures of Value, which would further delegitimize The Cartel’s
Treasury securities and Fiat Currencies.
*We encourage those who doubt the scope and power of Intervention by a
Fed-led Cartel of Key Central Bankers and favored financial institutions to
read Deepcaster’s December, 2008 Letter
containing a summary overview of Overt and Covert Intervention
entitled “A Strategy for Profiting from the Cartel’s Dark
Interventions & Evolving Techniques” and Deepcaster’s July, 2008 Letter entitled “Market Intervention, Data
Manipulation - - Increasing Risks, The Cartel End Game, and Latest
Forecast” at www.deepcaster.com.
Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org 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.”
Thus,
Monitoring the Interventionals is the final
consideration essential to estimating approximate Tops and Bottoms of
Dead-Cat Bounces.
Best
regards,
Deepcaster LLC
Deepcaster.com
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