Alerts: 12/December 2017

ALERT

Week Ending December 29, 2017

Mega-Mover Forecast BUY RECO Next Week

Deepcaster is not publishing this Christmas week.

But we are preparing the first of our anticipated several Mega-Mover Forecast Buy Recommendations for publication Next Week.

Best regards,

Deepcaster
December 28, 2017


ALERT

Week Ending December 22, 2017

Profiting for Bubble Troubles; Forecasts: Equities; US$/€, U.S. T-Notes, T-Bonds, & Interest Rates; Crude Oil & Copper

Several Key Sectors are in Record large Bubble Territory.

Deepcaster examines One Bubble Sector each week until mid-January and indicates how Investors may Profit and Protect Wealth when they Burst.

Our First is on the verge and we expect it to Crash any day now!

See our Forecasts!

Forecasts

U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates

The $US has recently spiked up a bit to bounce around 94 basis USDX mainly on the  prospects from Passage of the Tax Cut Bill.

But Given the passage of that Bill (and that a Government Shutdown was avoided for four weeks), it is clear to Deepcaster that the Bubble-implications of $1.5 to $2 Trillion Deficit spending required to fund it have not been digested yet.

Consider: That Deficit would Require the issuance of $1.5 to $2 Trillion in U.S. Government Securities which will devalue the $US and those bonds which are denominated in $US.

That will almost certainly cause Private Investors who already hold U.S. Treasuries to sell them ASAP before the Market fully Devalues them.

Result: Interest Rates wil Shoot Up dramatically, Negatively Affecting other Sectors (see upcoming Alerts).

Thus, prospects for the U.S. Economy “continue to Darken” (J. Williams, shadowstats.com) and are “Highly Uncertain” (Janet Yellen 12/13/2017).

Thus, the underlying Stagnant Economic Reality indicates a Much Weaker $US Mid- and Long-Term. Further, The Fed is strengthening into Recession—Bad News for the Economy.

Nonetheless, short-term, the Specter of Increasing Real Inflation (from, e.g., more deficit spending to “fund” the prospective U.S. Tax cuts) had recently caused U.S. 10-Year Bond Yields to rise up to 2.5%ish and eventually will rise more as inflation becomes more apparent.

Couple that likelihood with the IMF’s Serious Warning last April that over 20% of U.S. Corporations are at risk of Default if Rates Rise even Modestly (because they are over-leveraged), and you see why SocGen has predicted “This doesn’t end well.” Deepcaster agrees that this world-wide over-leveraging is perhaps the Greatest Threat to the Economy and Markets.

Thus, we expect Yields will continue their rising trends (because of Real Inflation) to be interrupted intermittently by one or more Equities Crash Legs because, inter alia, “interest coverage for the smallest 50% of companies is near record lows” (SocGen). Indeed!

Stagflation here we come, as we have warned.

The “Stag” Aspect of Stagflation results from the Economy which is NOT recovering (see previously published Shadowstats.com Charts).

As indicated above, of the several Triggers for a Crash out there, THE BIG TRIGGER coming soon is when the U.S. Congress and Investing Public fully realize The Tax Reform Plan is NOT Revenue Neutral and that the Government will have to go deeper into Debt. Then the $US and U.S. T-Bonds both Crash! (likely a very late December or January Event.) And this is one reason Bullish Sentiment is starting to wane.

As well, The Great Credit Default Crisis (which we earlier described in detail) is beginning NOW (albeit in early days), just not widely acknowledged, yet, except now by SocGen.

Consider, the Bubble Character of the International Economy is reflected in the Balance Sheets of the Big 3—The Fed, European Central Bank and Bank of Japan, all have $4 Trillion plus Balance Sheets—impossible to substantially unwind without Crashing the Economy. And businesses and individuals are carrying record levels of Debt. Collectively, all the aforementioned Debts are The unavoidable Big Kahuna.

Central Banks’ Assets are now 40% of World GDP.

And consider the Bubbles, China’s housing and Wealth Management Bubbles are The Biggest Ones, but not the only Dangerous Ones.

Also Dangerous is the U.S. Sovereign ($20 Trillion plus) plus the Business and Personal Debt Bubble—Debts that can never be fully repaid without devaluing the Currency.

Yes, the $US is headed for a Crash below 90 basis USDX in the next very few months if not sooner, and eventually the Chinese Yuan too, but not so much ultimately because it is increasingly backed by Physical Gold.

For a more detailed overview, see Deepcaster’s recent Letters.

Equities

Finally, the Prospective Fundamental (mainly negative) “Supports the Charts and we expect an Equities Crash Leg to begin some time in the next four weeks! Clearly, Equities are still manifesting the Blow Off Top technically we forecast weeks ago.

And The Fed just projected three Rate Hikes in 2018 rather than four—Result: $US down slightly but they are tightening into a Recession!

One other Indication that Equities are Topping, and there are others.

  • Several Hindenburg Omens are on the clock.
  • There is a Bearish Divergence between the NYSE Cumulative/Advance Decline line and the Dow
  • Breadth is not following the indices which have thus far been held up by the Mega-Caps
  • And now, a Bearish Wedge is completing!

In sum, Equities are Topping and a Crash Leg could begin any day or week or, per John Williams, “the outlook for U.S. Economic and Financial Activity Continues to Darken.”

We just wait for (a) Trigger/s. The first could be the Government funding battle with a January 19 deadline.

 

Overview

All the conditions for the Blow-Off Top we forecast are Now here. Most probable Scenario—(as we earlier forecast) one last Gasp up (just occurred), then the First Crash Leg likely in the next very few weeks, and quite possibly in the next very few days, if one of our Mega-Movers is robustly activated.

This Scenario, and soon to start accelerating, collapse of the Credit Markets will eventually create a domino effect in Equities Markets.  Fundamentals and Technicals indicate a Crash is Near. Equity Market “Internals” are weakened. Employment actually fell in September and October.

And while Equities are still bouncing above and creating new recent record highs, the levels of the highs are closer and closer together. But Bearish Divergences abound and Stocks are Overbought per Daily Stochastics. And we are now nearing a Fibonacci Cluster Turn Period between now and mid-January. Probable Tops: Dow 25,300ish; S&P 2,725ish.

The “Jaws of Death” is in its overthrow Termination Top Parabolic Overthrow Mode and the Dow’s interim downside Target is 15,500 and Ultimate Downside Target 5000!

Consider (in our August Letter) the 7 Factors supporting our Claim that Equities are at a B.O.T. All the foregoing is why we conclude that Equities, at all-time highs, are frankly quivering on that Brink of their first Crash Leg. All they await is a Trigger of which there are Many out there.

See our Detailed Analysis in our October and November Letters.

Gold and Silver

U.S. Government stated intentions to move the U.S. Embassy to Jerusalem, the prospects of increasing U.S. National Debt and the North Korean Threat (now with Anthrax delivery!), all contributed to the Precious Metals pop up recently.

However, more recently, the Euphoria over the anticipation that a Tax Bill really will get done plus Bitcoin demand, had enabled The Cartel to take down Precious Metals Prices—Gold to the mid-$1200s and Silver to below $16.

Though it has no Intrinsic Value, Bitcoin has, in the minds of the unwise, displaced Gold as the “Safe Haven” Asset. The foregoing all makes it easier for The Cartel to successfully implement Price Suppression. A few days ago, 4 Million Ounces of Gold were traded in a Ten Minute Period on the Comex leading to a Sell-Off. And just recently (after Gold had surged above its 500 DMA), someone (likely AKA Cartel) sold $2 Billion Notional in seconds, i.e., 15K Contracts in under 2 minutes! And down Gold went to the 50 DMA. (And our Negative Forecasts for Bitcoin are playing out—down nearly $5000 today alone.)

But, when one of THE BIG TRIGGERS is activated and/or China Devalues (whichever comes first) and/or the January 19 Budget deadline creates a crisis, watch them soar.

But it is critical to note that Support for these Precious Metals has repeatedly held in the mid to high $1200s for Gold and around $16 for Silver, despite repeated Cartel Takedowns!!

Thus, the Cartel has (and will periodically) beat back these Precious Metals prices as it has very recently on the North Korea relief Rally and better prospects for a Tax deal in Congress, but the Suppression will not last. Given North Korea, The Wildfires, Negative Economic and Market Realities, and the near-Gridlock in the U.S. Congress, the flight to the Safe Havens of Gold and Silver has been intensifying!

Indeed, we reiterate that just a few weeks ago, Gold has bounced up over $1300 again and Silver well over $17 again. The Great Launch we forecast has begun.

And, we reiterate, given the flow of Physical from West to East, The Cartel is fighting a losing game. Indeed, we still expect to see Gold at or over $1400 and Silver at or over $20 by end of February, and much higher after that. And the Gold Share indices are likely to double in the next four to six months.

Finally, considering the Historical Gold Seasonality Chart, January/February is the period in which the largest Moves up in Gold are likely!

Crude Oil & Copper

The recently Stronger $US was a main cause of WTI spiking down to $57.50ish and Copper below $3. A stronger $US had until recently helped dampen Crude and Copper Price Increases, as well as continuing Robust Production of these Commodities. But the following have kept WTI over $55

  1. The Arrests in Saudi Arabia and controversy over moving the U.S. Embassy to Jerusalem demonstrate the actual and potential Threats to the Oil Market.
  2. The increasing Political Instability in Venezuela is Threatening
  3. A “Risk On” appetite is returning to the Markets (but likely not to last long) and
  4. The OPEC production quotas not only holding but expected to be continued and the demand for Crude has increased and therefore, the Price. Thus, Higher Crude Prices (approaching the mid-$50s for WTI) recently also resulted from several Factors:
  • The IEA indicated Demand is rising faster than anticipated, and
  • Very Real Inflation Expectations, perhaps the most important Driver!
  • Anticipation of Greater Economic Growth resulting from the expected Tax Cut Also resulting in higher Near-Term Prices

But a few weeks ago, we saw a pullback to the mid-$50s because of a supply build, a Build which is expected to continue because the OPEC Deal is expected to hold through 2018 and the U.S. has record production capacity.

Indeed, Many Investors still buy the Economic Recovery Narrative (false in our view), but that view will weaken as the three Mega-Market Movers approach. Indeed, the weakening Sentiment has already begun among sophisticated Investors.

In sum, for the aforementioned and other reasons we lay out elsewhere in this Alert, Crude Oil (and Copper) are likely not destined to remain at these still relatively high price levels, i.e., mid- to high $50s (and around $3) for longer than a few weeks, at most, once they get there.

They too will crash again as Equities Crash (see Equities for forecast Timing) and will revive again only on the printing of Helicopter Money likely in early 2018, i.e., on an increasingly Devalued U.S. Dollar.

Thus, barring calamity, we think the high $50s per barrel is the near-term upside limit now for WTI. Indeed, WTI Crude well above $50 for any extended period makes Horizontal Fracking quite economic again, thus increasing supply in an already over-supplied Market.

Indeed, the U.S. could, in the next few months, produce at the 10 Million Barrel level which is over half of U.S. Consumption.

More likely, after the recent Spike Up, is a move down to the very low $40s or below $40 on the first Equities Crash Leg. Massive above-ground supplies and OPEC production cuts provide a de facto cap. It could begin any day or week.

Looking ahead, mid-term (e.g., 6-8 months out), Crude should first crash into the $30s when Equities Crash and Copper toward $2ish then also.

Then likely in Q1 of next year, as we get Money from Helicopters, reverse and move much higher (perhaps to $70ish) as we move into The Inflation Phase, via (we expect) Helicopter Money.

Eventually, both Crude and Copper are likely to Fall when the recent Mainstream Media Spin that the Economy is Recovering ends with a Bang when the Bond and Equities Crash Legs and (highly likely) concatenating Credit Default Event/s (probably Beginning in Energy or Agriculture) delegitimize that Spin.

Indeed, those prospective Credit Default Events—Mega-Move generating for sure—THE GREAT TRAP—will Trigger others (see our recent Buy Recommendations), spreading like a Virus. We reiterate Sovereign Nations, Businesses, and Individuals are much more highly levered than in 2008, thanks to Market-Destructive Fed, ECB and other Central Banks’ low and Negative Interest Rates Policies. Thus, the Effects of that impending Virus of Credit Defaults, will be much more painful than 2008-2009.

In sum, fundamentally, above-ground oversupply/overproduction of Crude is real, and the international Economic deceleration and increasing tensions with China intensifying, both Negative for Crude and Copper in the Mid- to Long-Run.

CAVEAT: In the long run (i.e., more than three years out), Crude is likely to spike up again, not merely because The Fed, et al, print money from helicopters, but also because the potential reserves/production from fracked wells has been wildly exaggerated. Fact: Fracked wells Depletion Rates are much higher than advertised, thus reserves are much lower than advertised.

Hyper-Stagflation is coming within the next couple of years.

Best regards,

Deepcaster
December 22, 2017


ALERT

Week Ending December 15, 2017

Great Signals Confluence Indicates Mega-Moves Soon; Forecasts: Equities; US$/€, U.S. T-Notes, T-Bonds, & Interest Rates; Crude Oil & Copper

A Great Confluence of Signals indicates High Probability of Major Moves in Key Sectors in the next very few weeks. See our Forecasts.

Forecasts

U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates

The $US has strengthened recently to bounce around 94 basis USDX as prospects for a Tax Cut appears to have improved. But very recently it weakened as The Fed forecast only three Rate Hikes in 2018 rather than four.

But it will temporarily pop up again if the Tax Bill becomes law and/or The Fed raises rates.

Prospects for the U.S. Economy “continue to Darken” (J. Williams, shadowstats.com) and are “Highly Uncertain” (Janet Yellen 12/13/2017).

Thus, the underlying Stagnant Economic Reality indicates a Much Weaker $US Mid- and Long-Term. Further, The Fed is strengthening into Recession—Bad News for Economy.

Nonetheless, short-term, the Specter of Increasing Real Inflation (from, e.g., more deficit spending to “fund” the prospective U.S. Tax cuts) had recently caused U.S. 10 Year Bond Yields to rise up to 2.4%ish and eventually will rise more as inflation becomes more apparent.

Couple that likelihood with the IMF’s Serious Warning last April that over 20% of U.S. Corporations are at risk of Default if Rates Rise even Modestly (because they are over-leveraged), and you see why Soc. Gen has predicted “This doesn’t end well.” Deepcaster agrees that this world-wide overleveraging is perhaps the Greatest Threat to the Economy and Markets.

Thus, we expect Yields will continue their rising trends (because of Real Inflation) to be interrupted intermittently by one or more Equities Crash Legs because inter alia, “interest coverage for the smallest 50% of companies is near record lows” (SocGen). Indeed!

Stagflation here we come, as we have warned.

The “Stag” Aspect of Stagflation results from the Economy which is NOT recovering (see Shadowstats.com Chart)

But of the several Triggers for a Crash out there, THE BIG TRIGGER is coming soon is when the U.S. Congress and Investing Public fully realize The Tax Reform Plan is NOT Revenue Neutral and that the Government will have to go deeper into Debt. Then the $US and U.S. T-Bonds both Crash! (likely a very late December or January Event.) And this is one reason Bullish Sentiment is starting to wane.

As well, The Great Credit Default Crisis (which we earlier described in detail) is beginning NOW (albeit in early days), just not widely acknowledged, yet, except now by SocGen.

Consider, the Bubble Character of the International Economy is reflected in the Balance Sheets of the Big 3—The Fed, European Central Bank and Bank of Japan, all have $4 Trillion plus Balance Sheets—impossible to substantially unwind without Crashing the Economy. And businesses and individuals are carrying record levels of Debt. Collectively, all the aforementioned Debts are The unavoidable Big Kahuna.

Central Banks’ Assets are now 40% of World GDP.

And consider the Bubbles, China’s housing and Wealth Management Bubbles are The Biggest Ones, but not the only Dangerous Ones.

Also Dangerous is the U.S. Sovereign ($20 Trillion plus) and Business Debt Bubble—Debts that can never be fully repaid without devaluing the Currency.

Yes, the $US is headed for a Crash below 90 basis USDX in the next very few months if not sooner, and eventually the Chinese Yuan too, but not so much ultimately because it is increasingly backed by Physical Gold.

For a more detailed overview, see Deepcaster’s recent Letters.

Equities

Clearly, Equities are still manifesting the Blow Off Top we forecast weeks ago. We expect this topping to continue until, at least, one or more of the following impending Mega-Market-Movers, moves the market.

Mega-Mover #1 – December 22, 2017
President Trump and both Houses must agree again on a Bill continuing Government Funding, at least temporarily. If no Agreement, the Government would shut down, Equities would Crash. And, if the Agreement occasions further conflict ( in any of a myriad of ways) then Equities are also likely to spike down. This would be Agreement #3 will be a harder deal to do than #2.

Mega-Mover #2 – (pre-Christmas) December, 2017
The Provisions of Tax Cut Bill, if there is one, could dramatically disappoint. (As we write, it appears the Tax Cuts would favor mainly Big Corporations!) If NO Bill, a Major Crash Follows. If some Bill passes, it will likely increase the National Debt by $1 to $2 Trillion and a temporary Equities Spike up is Possible. BUT the following Fundamentals, Technicals and timing still likely reign!

Mega-Mover #3 (pre-Christmas)
The Fed just projected three Rate Hikes in 2018 rather than four—Result: $US down slightly.

However the foregoing plays out, it does not change the fact that Equities are Topping

  • Several Hindenburg Omens are on the clock.
  • There is a Bearish Divergence between the NYSE Cumulative/Advance Decline line and the Dow
  • Breadth is not following the indices which have thus far been held up by the Mega-Caps

In sum, Equities are Topping and a Crash Leg could begin any day or week or, per John Williams, “the outlook for U.S. Economic and Financial Activity Continues to Darken.”

We just wait for (a) Trigger/s.

Indeed, the ongoing Melt-up will not last.

Note to Subscribers

Regarding the fact that some of our Equity Recommendations are “Underwater,” they are Underwater mainly because we put them on in anticipation of a Major Crash which has not yet occurred. Please also not, however, that we have forecast the most likely period for this Crash Leg is now through March, 2018. So we expect that by April/May 2018 many of those now underwater will not be then. Crashes typically move much more quickly than spikes up, so one must prepare in advance, and perhaps suffer being underwater.

Overview

All the conditions for the Blow-Off Top we forecast are Now here. Most probable Scenario—(as we earlier forecast) one last Gasp up (occurring NOW), then the First Crash Leg likely in the next very few weeks, and quite possibly in the next very few days, if one of our Mega-Movers is robustly activated.

This Scenario, and soon to start accelerating, collapse of the Credit Markets will eventually create a domino effect in Equities Markets.  Fundamentals and Technicals indicate a Crash is Near. Equity Market “Internals” are weakened. Employment actually fell in September and October.

And while Equities are still bouncing above and creating new recent record highs, the levels of the highs are closer and closer together. But Bearish Divergences abound and Stocks are Overbought per Daily Stochastics. And we are now nearing a Fibonacci Cluster Turn Period between now and mid-January.

The “Jaws of Death” is in its overthrow Termination Top Parabolic Overthrow Mode and the Dow’s interim downside Target is 15,500 and Ultimate Downside Target 5000!

Consider (in our August Letter) the 7 Factors supporting our Claim that Equities are at a B.O.T. All the foregoing is why we conclude that Equities, at all-time highs, are frankly quivering on that Brink of their first Crash Leg. All they await is a Trigger of which there are Many out there.

See our Detailed Analysis in our October and November Letters.

Gold and Silver

The Arrests in Saudi Arabia, the prospects of increasing U.S. National Debt and the North Korean Threat, all contributed to the Precious Metals pop up recently.

However, more recently, the Euphoria over the anticipation that a Tax Bill really will get done plus Bitcoin demand, had enabled The Cartel to take down Precious Metals Prices—Gold to the mid-$1200s and Silver to below $16.

Though it has no Intrinsic Value, Bitcoin has, in the minds of the unwise, displaced Gold as the “Safe Haven” Asset. The foregoing all makes it easier for The Cartel to successfully implement Price Suppression. A few days ago, 4 Million Ounces of Gold were traded in a ten Minute Period on the Comex leading to a Sell-Off. And just recently (after Gold had surged above its 500 DMA), someone (Likely AKA Cartel) sold $2 Billion Notional in seconds, i.e., 15K Contracts in under 2 minutes! And down Gold went to the 50 DMA.

But, when one of THE BIG TRIGGERS is activated and/or China Devalues (whichever comes first) and/or Tax Reform Fails, watch them soar back up.

But it is critical to note that Support for these Precious Metals has repeatedly held in the mid to high $1200s for Gold and around $16 for Silver, despite repeated Cartel Takedowns!!

Thus, the Cartel has (and will periodically) beat back these Precious Metals prices as it has very recently on the North Korea relief Rally and better prospects for a Tax deal in Congress, but the Suppression will not last. Given North Korea, The Hurricanes, Negative Economic and Market Realities, and the near-Gridlock in the U.S. Congress, the flight to the Safe Havens of Gold and Silver has been intensifying!

Indeed, we reiterate that just a few weeks ago, Gold has bounced up over $1300 again and Silver well over $17 again. The Great Launch we forecast has begun.

And, we reiterate, given the flow of Physical from West to East, The Cartel is fighting a losing game. Indeed, we still expect to see Gold at or over $1400 and Silver at or over $20 by end of January, and much higher after that. And the Gold Share indices are likely to double in the next four to six months.

Finally, considering the Historical Gold Seasonality Chart, January/February is the period in which the largest Moves up in Gold are likely!

Crude Oil & Copper

The recently Stronger $US was a main cause of WTI spiking down to $57.50ish and copper below $3. A stronger $US had until recently helped dampen Crude and Copper Price Increases, as well as continuing Robust Production of these Commodities. But the following have kept WTI over $55

  1. The Arrests in Saudi Arabia demonstrate the actual and potential Threats to the Oil Market.
  2. The increasing Political Instability in Venezuela is Threatening
  3. A “Risk On” appetite is returning to the Markets (but likely not to last long) and
  4. The OPEC production quotas not only holding but expected to be continued and the demand for Crude has increased and therefore, the Price. Thus, Higher Crude Prices (approaching the mid-$50s for WTI) recently also resulted from several Factors:
  • The IEA indicated Demand is rising faster than anticipated, and
  • Very Real Inflation Expectations, perhaps the most important Driver!
  • Anticipation of Greater Economic Growth resulting from the expected Tax Cut Also resulting in higher Near-Term Prices

But a few weeks ago, we saw a pullback to the mid-$50s because of a supply build, a Build which is expected to continue because the OPEC Deal is expected to hold through 2018 and the U.S. has record production capacity.

Indeed, Many Investors still buy the Economic Recovery Narrative (false in our view), but that view will weaken as the three Mega-Market Movers approach. Indeed, the weakening Sentiment has already begun among sophisticated Investors.

In sum, for the aforementioned and other reasons we lay out elsewhere in this Alert, Crude Oil (and Copper) are likely not destined to remain at these still relatively high price levels, i.e., mid- to high $50s (and around $3) for longer than a few weeks, at most, once they get there.

They too will crash again as Equities Crash (se Equities for forecast Timing) and will revive again only on the printing of Helicopter Money likely in early 2018, i.e., on an increasingly Devalued U.S. Dollar.

Thus, barring calamity, we think the high $50s per barrel is the near-term upside limit now for WTI. Indeed, WTI Crude well above $50 for any extended period makes Horizontal Fracking quite economic again, thus increasing supply in an already over-supplied Market.

Indeed, the U.S. could, in the next few months, produce at the 10 Million Barrel level which is over half of U.S. Consumption.

More likely, after the recent Spike Up, is a move down to the very low $40s or below $40 on the first Equities Crash Leg. Massive above-ground supplies and OPEC production cuts provide a de facto cap. It could begin any day or week.

Looking ahead, mid-term (e.g., 6-8 months out), Crude should first crash into the $30s when Equities Crash and Copper toward $2ish then also.

Then likely in Q1 of next year, as we get Money from Helicopters, reverse and move much higher (perhaps to $70ish) as we move into The Inflation Phase, via (we expect) Helicopter Money.

Eventually, both Crude and Copper are likely to Fall when the recent Mainstream Media Spin that the Economy is Recovering ends with a Bang when the Bond and Equities Crash Legs and (highly likely) concatenating Credit Default Event/s (probably Beginning in Energy or Agriculture) delegitimize that Spin.

Indeed, those prospective Credit Default Events—Mega-Move generating for sure—THE GREAT TRAP—will Trigger others (see our recent Buy Recommendations), spreading like a Virus. We reiterate Sovereign Nations, Businesses, and Individuals are much more highly levered than in 2008, thanks to Market-Destructive Fed, ECB and other Central Banks’ low and Negative Interest Rates Policies. Thus, the Effects of that impending Virus of Credit Defaults, will be much more painful than 2008-2009.

In sum, fundamentally, above-ground oversupply/overproduction of Crude is real, and the international Economic deceleration and increasing tensions with China intensifying, both Negative for Crude and Copper in the Mid- to Long-Run.

Hyper-Stagflation is coming within the next couple of years.

Best regards,

Deepcaster
December 14, 2017


ALERT

Week Ending December 8, 2017

Reject Tulip Bait & Profit; Forecasts: Equities; US$/€, U.S. T-Notes, T-Bonds, & Interest Rates; Crude Oil & Copper

Some unwise Investors are leaping at the Tulip Bait, but Wiser Ones are buying the Very Depressed Assets in a Related Sector.

What an Opportunity!

Forecasts

U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates

Some believers in 21st Century Tulips (Bitcoin and other Cryptocurrencies) think the Cryptos should be considered as Money. But this Tulip does not meet the First and Most important Criterion for being Money. —Its Extreme Volatility proves it is NOT a Store of Value.

Thus, the Cryptos are the Tulip Mania of the 21st Century.

That said, “Tulip” is headed toward $20,000. It could even go at $25,000 or $40,000, or as one purblind Investment “Adviser” opined—$1 Million. No matter. When a crash hits another Major Sector, watch how fact Bitcoin declines, because there is no intrinsic Value there and no “backing” of a Central Bank or similar entity. When Investors get Margin Calls in other Sectors and try to get $US or Euros, or whatever from the Crypto provider, look out below for the Cryptos.

And as to the Vaunted claim of the Security of Cryptos, one Crypto Site has already had Millions stolen from it.

But the Good News is that the Real Monetary Assets (the Precious Metals) are Now Depressed mainly because of the rush into Bitcoin and thus are a Buying Opportunity. See Gold and Silver Below. (?)

But the Bitcoin Surge does provide a Key EWS (Early Warning System). Consider what Bitcoin’s Surge says about the Fiat Currencies, e.g., the $US and Euro. It says they are weak as water, with very little there there. Thus the Bitcoin EWS is telling us there is Trouble ahead, because all the Major Central Banks have “printed” far too much Fiat, with no backing!

We expect, in the next few weeks, after some of the Cryptos get listed, to give you a way to short it.

The recent release of The Fed Minutes indicating that a December Rate Hike was not a certainty caused the $US to crash below 93 basis USDX and U.S. T-Notes to move lower along with it.

And the $US is still bouncing around 94.

Explanation: The Fed must know the underlying Economic Reality is much weaker than the Public (Bogus) BLS Statistics indicate.

Moreover, the underlying Stagnant Economic Reality indicates a Much Weaker $US Mid- and Long-Term.

Nonetheless, short-term, the Specter of Increasing Real Inflation (from, e.g., more deficit spending to “fund” the prospective U.S. Tax cuts) had recently caused U.S. 10 Year Bond Yields to rise up to 2.4%ish and eventually more as inflation becomes more apparent.

Couple that likelihood with the IMF’s Serious Warning last April that over 20% of U.S. Corporations are at risk of Default if Rates Rise even Modestly (because they are over-leveraged), and you see why Soc. Gen has predicted “This doesn’t end well.” Deepcaster agrees that this widespread overleveraging is perhaps the Greatest Threat to the Economy and Markets.

Thus, we expect Yields will continue their rising trends (because of Real Inflation) to be interrupted intermittently by one or more Equities Crash Legs because inter alia, “interest coverage for the smallest 50% of companies is near record lows” (SocGen). Indeed!

Stagflation here we come, as we have warned.

The “Stag” Aspect of Stagflation results from the Economy which is NOT recovering (see Shadowstats.com Chart) Specifically…

Regarding the Economic Health of the U.S., the Velocity of Money declined again as of August 30, 2017 (see St.Louis Fed) 1.431 to 1.427. Overall, declining since 1997 when it was at 2.210. New money is being hoarded, and does the economy no good.

Another Signal we are in a deepening Recession and the Markets have been artificially elevated by Cheap Central Bank QE etc.

The $US has strengthened until very recently because Passage of a Budget Deal by the U.S. Senate enhanced Prospects for a U.S. Tax Cut and Tax Reform and the Growth that is supposed to follow. Indeed, this Sentiment (along with Earnings) has been a Narcotic pushing Key Markets even higher into Bubble Territory.

But of the several Triggers for a Crash out there, THE BIG TRIGGER is coming soon is when the U.S. Congress and Investing Public realize The Tax Reform Plan is NOT Revenue Neutral and that the Government will have to go deeper into Debt. Then the $US and U.S. T-Bonds both Crash! (likely a late December or January Event.) And this is one reason Bullish Sentiment is starting to wane. Indeed, Tax “Reform” is not yet a done deal.

As well, The Great Credit Default Crisis (which we earlier described in detail) is here NOW (albeit in early days), just not widely acknowledged, yet, except now by SocGen.

Consider, the Bubble Character of the International Economy is reflected in the Balance Sheets of the Big 3—The Fed, European Central Bank and Bank of Japan, all have $4 Trillion plus Balance Sheets—impossible to substantially unwind without Crashing the Economy. And businesses and individuals are carrying record levels of Debt. Collectively, all the aforementioned Debts are The unavoidable Big Kahuna.

Central Banks’ Assets are now 40% of World GDP.

And consider the Bubbles, China’s housing and Wealth Management Bubbles are The Biggest Ones, but not the only Dangerous Ones.

Also Dangerous is the U.S. Sovereign ($20 Trillion plus) and Business Debt Bubble—Debts that can never be fully repaid without devaluing the Currency.

Yes, the $US is headed for a Crash below 90 basis USDX in the next very few months if not sooner, and eventually the Chinese Yuan too, but not so much ultimately because it is increasingly backed by Physical Gold.

For a more detailed overview, see Deepcaster’s recent Letters.

Equities

Clearly, Equities are still manifesting the Blow Off Top we forecast weeks ago. We expect this topping to continue until, at least, the following impending Mega-Market-Movers, moves the market.

Mega-Mover #1 – December 22, 2017

President Trump and both Houses must agree again on a Bill continuing Government Funding, at least temporarily. If no Agreement, the Government would shut down, Equities would Crash. And, if the Agreement occasions further conflict ( in any of a myriad of ways) then Equities are also likely to spike down. This would be Agreement #3 will be a harder deal to do than #2.

Mega-Mover #2 – December 12, 2017

The outcome of Roy Moore/Doug Jones Senate Race in Alabama. If Moore wins, no Mega Move likely. If Jones wins, Mega Move highly likely because the Republican Majority in the Senate would be further reduced to 51/49 increasing likelihood of a Stalemate.

Mega-Mover #3 – (pre-Christmas) December, 2017

The Provisions of Tax Cut Bill, if there is one, could dramatically disappoint. (As we write, it appears the Tax Cuts would favor mainly Big Corporations!) If NO Bill, a Major Crash Follows. If some Bill passes, it will likely increase the National Debt by $1 to $2 Trillion and a temporary Equities Spike up is Possible. BUT the following Fundamentals, Technicals and timing still likely reign!

Mega-Mover #4 (pre-Christmas)

Fed raises rates, causes Dollar up / Precious Metals down.

However the foregoing plays out, it does not change the fact that Equities are Topping

  • Several Hindenburg Omens are on the clock.
  • There is a Bearish Divergence between the NYSE Cumulative/Advance Decline line and the Dow
  • Breadth is not following the indices which have thus far been held up by the Mega-Caps

In sum, Equities are Topping and a Crash Leg could begin any day or week or, per John Williams, “the outlook for U.S. Economic and Financial Activity Continues to Darken.”

We just wait for (a) Trigger/s.

Indeed, the ongoing Melt-up will not last.

We reiterate a friend of Deepcaster’s comments on the Schiller P/E Ratio hitting 31.14 in early October,

“It is now a bit higher than just before the 1929 Crash…all inflation adjusted, based on 10 year trailing GAAP earnings. What are people thinking?

“Why would anyone buy stocks at this level? …and knowing the tax cut may fail? Real earnings are just returning to the 2007 levels. See S&P 500 Earnings and Shiller P/E.  

“Even the simple S&P 500 PE ratio is 25.45 with a 16   100 year average. That takes the 10 year trailing GAAP earnings out if it, and is just looking at current earnings…but is it still madness. See MultPL.

“Buying some more gold tomorrow.

“Seems no one can read, nor count.”

Yes, indeed “Madness” as Deepcaster’s Alert several weeks ago warned, we are at a Blow-Off Top!!

Consider, e.g., Amazon with essentially no Earnings and a Triple Digit P.E. Ratio! Not a value investment, especially not with European (and possibly American) Regulators looking to de-monopolize it.

Overview

All the conditions for the Blow-Off Top we forecast are Now here. Most probable Scenario—(as we earlier forecast) one last Gasp up (occurring NOW), then the First Crash Leg likely in the next very few weeks, and quite possibly in the next very few days, if one of our Mega-Movers is robustly activated.

This Scenario, and soon to start accelerating, collapse of the Credit Markets will eventually create a domino effect in Equities Markets.  Fundamentals and Technicals indicate a Crash is Near. Equity Market “Internals” are weakened. Employment actually fell in September and October.

And while Equities are still bouncing above and creating new recent record highs, the levels of the highs are closer and closer together. But Bearish Divergences abound and Stocks are Overbought per Daily Stochastics. And we are now in a Fibonacci Cluster Turn Period.

The “Jaws of Death” is in its overthrow Termination Top Parabolic Overthrow Mode and the Dow’s interim downside Target is 15,500 and Ultimate Downside Target 5000!

Consider (in our August Letter) the 7 Factors supporting our Claim that Equities are at a B.O.T. All the foregoing is why we conclude that Equities, at all-time highs, are frankly quivering on that Brink of their first Crash Leg. All they await is a Trigger of which there are Many out there.

See our Detailed Analysis in our October and November Letters.

Gold and Silver

The Arrests in Saudi Arabia, the prospects of increasing U.S. National Debt and the North Korean Threat, all contributed to the Precious Metals pop up recently.

However, the Euphoria over the anticipation that a Tax Bill really will get done plus Bitcoin demand, had enabled The Cartel to take down Precious Metals Prices—Gold to the mid-$1200s and Silver to below $16.

Thus, The Cartel is still hard at Work on Price Suppression. A few days ago, 4 Million Ounces of Gold were traded in a ten Minute Period on the Comex leading to a Sell-Off. And just recently (after Gold had surged above its 500 DMA), someone (Likely AKA Cartel) sold $2 Billion Notional in seconds, i.e., 15K Contracts in under 2 minutes! And down Gold went to the 50 DMA.

But, when one of THE BIG TRIGGERS is activated and/or China Devalues (whichever comes first) and/or Tax Reform Fails, watch them soar back up.

But it is critical to note that Support for these Precious Metals has repeatedly held in the mid to high $1200s for Gold and around $16 for Silver, despite repeated Cartel Takedowns!!

Thus, the Cartel has (and will periodically) beat back these Precious Metals prices as it has very recently on the North Korea relief Rally and better prospects for a Tax deal in Congress, but the Suppression will not last. Given North Korea, The Hurricanes, Negative Economic and Market Realities, and the near-Gridlock in the U.S. Congress, the flight to the Safe Havens of Gold and Silver has been intensifying!

Indeed, we reiterate that just a few weeks ago, Gold has bounced up over $1300 again and Silver well over $17 again. The Great Launch we forecast has begun.

And, we reiterate, given the flow of Physical from West to East, The Cartel is fighting a losing game. Indeed, we still expect to see Gold at or over $1400 and Silver at or over $20 by end of January, and much higher after that. And the Gold Share indices are likely to double in the next four to six months.

Why? Consider our overview on the 7 Factors re the B.O.T. listed in our August Letter and most recent (week ending October 13) Alert.

And Consider The Reality:

As of right now, Gold beats the Dow excluding dividends and fees, for the last 57 years.

  DOW GOLD Difference  
October 2017 21,785 1,349
Year: 1960 600 37
Multiple 36.31 36.45 (0.14) -0.39% More than the DOW since 1960. 8.7% Less in July 10th
(A) (B) (A)-(B)
1,343 Price Return on Gold is equal to DOW

But this stealing of wealth via debt, i.e., via devaluing the currency, is precisely the basis of long-term case for Gold and Silver…and why Gold can appreciate about equal to the Dow in US$ terms and Silver potentially even more.

DOW companies are extraordinary creators of wealth. It’s just that the U.S. Treasury destroys wealth by monetizing debt, at about the same rate….because not one in 10,000 people understands what is going on.

Moreover, Margin Debt is at Record Highs and The Margin Debt chart is just official “margin debt” via brokers.  The big money people can borrow in Japan at zero rates and use the money to buy stocks in the U.S.

That type of financing won’t even be on the chart!

It thus appears that Increases in margin buying are occurring because interest rates are falling again…as Yellen is signaling no rate increase, and a slowing in demand for loans.

Stock Margin Debt Signal Reaches 5 Alarm Level. Margin debt is at an all-time high of 2.86% of GDP.  It was 2.63% of GDP prior to the crash in 2008.

A clear “Melt-up” to try to extract the last bit of the bull run…prior to the crash.

Crude Oil & Copper

This week’s Stronger $US was the main cause of WTI spiking down to $57.50ish and copper below $3. A stronger $US had until recently helped dampen Crude and Copper Price Increases, as well as continuing Robust Production of these Commodities. But the following have kept WTI over $55

  1. The Arrests in Saudi Arabia demonstrate the actual and potential Threats to the Oil Market.
  2. The increasing Political Instability in Venezuela is Threatening
  3. A “Risk On” appetite is returning to the Markets (but likely not to last long) and
  4. The OPEC production quotas not only holding but expected to be continued and the demand for Crude has increased and therefore, the Price. Thus, Higher Crude Prices (approaching the mid-$50s for WTI) recently also resulted from several Factors:
  • The IEA indicated Demand is rising faster than anticipated, and
  • Very Real Inflation Expectations, perhaps the most important Driver!
  • Anticipation of Greater Economic Growth resulting from the expected Tax Cut Also resulting in higher Near-Term Prices

But a few weeks ago, we saw a pullback to the mid-$50s because of a supply build.

Indeed, Many Investors still buy the Economic Recovery Narrative (false in our view), but that view will weaken as the three Mega-Market Movers approach. Indeed, the weakening Sentiment has already begun among sophisticated Investors.

In sum, for the aforementioned and other reasons we lay out elsewhere in this Alert, Crude Oil (and Copper) are likely not destined to remain at these still relatively high price levels, i.e., mid- to high $50s (and around $3) for longer than a few weeks, at most, once they get there.

They too will crash again as Equities Crash and will revive again only on the printing of Helicopter Money likely at the end of 2017 or in early 2018, i.e., on an increasingly Devalued U.S. Dollar.

Thus, barring calamity, we think the high $50s per barrel is the near-term upside limit now for WTI. Indeed, WTI Crude well above $50 for any extended period makes Horizontal Fracking quite economic again, thus increasing supply in an already over-supplied Market.

Indeed, the U.S. could, in the next few months, produce at the 10 Million Barrel level which is over half of U.S. Consumption.

More likely, after the recent Spike Up, is a move down to the very low $40s or below $40 on the first Equities Crash Leg. Massive above-ground supplies and OPEC production cuts provide a de facto cap. It could begin any day or week.

Looking ahead, mid-term (e.g., 6-8 months out), Crude should first crash into the $30s when Equities Crash and Copper toward $2ish then also.

Then at the end of this year or in Q1 of the next, as we get Money from Helicopters, reverse and move much higher (perhaps to $70ish) as we move into The Inflation Phase, via (we expect) Helicopter Money.

Eventually, both Crude and Copper are likely to Fall when the recent Mainstream Media Spin that the Economy is Recovering ends with a Bang when the Bond and Equities Crash Legs and (highly likely) concatenating Credit Default Event/s (probably Beginning in Energy or Agriculture) delegitimize that Spin.

Indeed, those prospective Credit Default Events—Mega-Move generating for sure—THE GREAT TRAP—will Trigger others (see our recent Buy Recommendation), spreading like a Virus. We reiterate Sovereign Nations, Businesses, and Individuals are much more highly levered than in 2008, thanks to Market-Destructive Fed, ECB and other Central Banks’ low and Negative Interest Rates Policies. Thus, the Effects of that impending Virus of Credit Defaults, will be much more painful than 2008-2009.

In sum, fundamentally, above-ground oversupply/overproduction of Crude is real, and the international Economic deceleration and increasing tensions with China intensifying, both Negative for Crude and Copper in the Mid- to Long-Run.

Hyper-Stagflation is coming within the next couple of years.

Best regards,

Deepcaster
December 8, 2017


ALERT

Week Ending December 1, 2017

Three Market Mega-Movers Impending!; Forecasts: Equities; US$/€, U.S. T-Notes, T-Bonds, & Interest Rates; Crude Oil & Copper

Three Market Mega Movers are coming in the Next few days.

Deepcaster identifies the dates and Sec tors likely to Mega-move in his Forecasts.

Forecasts

U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates

The recent release of The Fed Minutes indicating that a December Rate Hike was not a certainty caused the $US to crash below 93 basis USDX and U.S> T-Notes to move lower along with it.

Explanation: The Fed must know the underlying Economic Reality is much weaker than the Public (Bogus) BLS Statistics indicate.

Moreover, the underlying Stagnant Economic Reality indicates a Much Weaker $US Mid- and Long-Term.

Nonetheless, short-term, the Specter of Increasing Real Inflation (from, e.g., more deficit spending to “fund” the prospective U.S. Tax cuts) had recently caused U.S. 10 Year Bond Yields to rise up to 2.4%ish and eventually more as inflation becomes more apparent.

Couple that likelihood with the IMF’s Serious Warning last April that over 20% of U.S. Corporations are at risk of Default if Rates Rise even Modestly (because they are over-leveraged), and you see why Soc. Gen has predicted “This doesn’t end well.” Deepcaster agrees that this widespread overleveraging is perhaps the Greatest Threat to the Economy and Markets.

Thus, we expect Yields will continue their rising trends (because of Real Inflation) to be interrupted intermittently by one or more Equities Crash Legs because inter alia, “interest coverage for the smallest 50% of companies is near record lows” (SocGen). Indeed!

Stagflation here we come, as we have warned.

The “Stag” Aspect of Stagflation results from the Economy which is NOT recovering (see Shadowstats.com Chart) Specifically…

Regarding the Economic Health of the U.S., the Velocity of Money declined again as of August 30, 2017 (see St.Louis Fed) 1.431 to 1.427. Overall, declining since 1997 when it was at 2.210. New money is being hoarded, and does the economy no good.

Another Signal we are in a deepening Recession and the Markets have been artificially elevated by Cheap Central Bank QE etc.

The $US has strengthened until very recently because Passage of a Budget Deal by the U.S. Senate enhanced Prospects for a U.S. Tax Cut and Tax Reform and the Growth that is supposed to follow. Indeed, this Sentiment (along with Earnings) has been a Narcotic pushing Key Markets even higher into Bubble Territory.

But of the several Triggers for a Crash out there, THE BIG TRIGGER is coming soon is when the U.S. Congress and Investing Public realize The Tax Reform Plan is NOT Revenue Neutral and that the Government will have to go deeper into Debt. Then the $US and U.S. T-Bonds both Crash! (likely a December or January Event.) And this is one reason Bullish Sentiment is starting to wane. Indeed, Tax “Reform” may not even pass the Senate in the form currently being proposed.

As well, The Great Credit Default Crisis (which we earlier described in detail) is here NOW (albeit in early days), just not widely acknowledged, yet, except now by SocGen.

Consider, the Bubble Character of the International Economy is reflected in the Balance Sheets of the Big 3—The Fed, European Central Bank and Bank of Japan, all have $4 Trillion plus Balance Sheets—impossible to substantially unwind without Crashing the Economy. And businesses and individuals are carrying record levels of Debt. Collectively, all the aforementioned Debts are The unavoidable Big Kahuna.

Central Banks’ Assets are now 40% of World GDP.

And consider the Bubbles, China’s housing and Wealth Management Bubbles are The Biggest Ones, but not the only Dangerous Ones.

Also Dangerous is the U.S. Sovereign ($20 Trillion plus) and Business Debt Bubble—Debts that can never be fully repaid without devaluing the Currency.

Yes, the $US is headed for a Crash below 90 basis USDX in the next very few months if not sooner, and eventually the Chinese Yuan too, but not so much ultimately because it is increasingly backed by Physical Gold.

For a more detailed overview, see Deepcaster’s recent Letters.

Equities

Clearly, Equities are still manifesting the Blow Off Top we forecast weeks ago. We expect this topping to continue until, at least, the following impending Mega-Market-Movers.

Mega-Mover #1 – December 8, 2017

President Trump and both Houses must agree on a Bill continuing Government Funding, at least temporarily. If no Agreement, the Government would shut down, Equities would Crash. And, if the Agreement occasions further conflict ( in any of a myriad of ways) then Equities are also likely to spike down.

Mega-Mover #2 – December 12, 2017

The outcome of Roy Moore/Doug Jones Senate Race in Alabama. If Moore wins, no Mega Move likely. If Jones wins, Mega Move highly likely because the Republican Majority in the Senate would be further reduced to 51/49 increasing likelihood of a Stalemate.

Mega-Mover #3 – (pre-Christmas) December, 2017

The Provisions of Tax Cut Bill, if there is one, could dramatically disappoint. (As we write, it appears the Tax Cuts would favor mainly Big Corporations!) If NO Bill, a Major Crash Follows. If some Bill passes, it will likely increase the National Debt by $1 to $2 Trillion and a temporary Equities Spike up is Possible. BUT the following Fundamentals, Technicals and timing still likely reign!

However the foregoing plays out, it does not change the fact that Equities are Topping

  • Several Hindenburg Omens are on the clock.
  • There is a Bearish Divergence between the NYSE Cumulative/Advance Decline line and the Dow
  • Breadth is not following the indices which have thus far been held up by the Mega-Caps

In sum, Equities are Topping and a Crash Leg could begin any day or week or, per John Williams, “the outlook for U.S. Economic and Financial Activity Continues to Darken.”

We just wait for (a) Trigger/s.

Indeed, the ongoing Melt-up will not last.

We reiterate a friend of Deepcaster’s comments on the Schiller P/E Ratio hitting 31.14 in early October,

“It is now a bit higher than just before the 1929 Crash…all inflation adjusted, based on 10 year trailing GAAP earnings. What are people thinking?

“Why would anyone buy stocks at this level? …and knowing the tax cut may fail? Real earnings are just returning to the 2007 levels. See S&P 500 Earnings and Shiller P/E.   

“Even the simple S&P 500 PE ratio is 25.45 with a 16   100 year average. That takes the 10 year trailing GAAP earnings out if it, and is just looking at current earnings…but is it still madness. See MultPL.

“Buying some more gold tomorrow.

“Seems no one can read, nor count.”

Yes, indeed “Madness” as Deepcaster’s Alert several weeks ago warned, we are at a Blow-Off Top!!

Consider, e.g., Amazon with essentially no Earnings and a Triple Digit P.E. Ratio! Not a value investment, especially not with European (and possibly American) Regulators looking to de-monopolize it.

Overview

All the conditions for the Blow-Off Top we forecast are Now here. Most probable Scenario—(as we earlier forecast) one last Gasp up (occurring NOW), then the First Crash Leg likely in the next very few weeks, and quite possibly in the next very few days, if one of our Mega-Movers is robustly activated.

This Scenario, and soon to start accelerating, collapse of the Credit Markets will eventually create a domino effect in Equities Markets.  Fundamentals and Technicals indicate a Crash is Near. Equity Market “Internals” are weakened. Employment actually fell in September and October.

And while Equities are still bouncing above and creating new recent record highs, the levels of the highs are closer and closer together. But Bearish Divergences abound and Stocks are Overbought per Daily Stochastics. And we are now in a Fibonacci Cluster Turn Period.

The “Jaws of Death” is in its overthrow Termination Top Parabolic Overthrow Mode and the Dow’s interim downside Target is 15,500 and Ultimate Downside Target 5000!

Consider (in our August Letter) the 7 Factors supporting our Claim that Equities are at a B.O.T. All the foregoing is why we conclude that Equities, at all-time highs, are frankly quivering on that Brink of their first Crash Leg. All they await is a Trigger of which there are Many out there.

See our Detailed Analysis in our October and November Letters.

Gold and Silver

The Arrests in Saudi Arabia, the prospects of increasing U.S. National Debt and the North Korean Threat, all contributed to the Precious Metals pop up recently.

But, The Cartel is still hard at Work on Price Suppression. A few days ago, 4 Million Ounces of Gold were traded in a ten Minute Period on the Comex leading to a Sell-Off. And just recently (after Gold had surged above its 500 DMA), someone (Likely AKA Cartel) sold $2 Billion Notional in seconds, i.e., 15K Contracts in under 2 minutes! And down Gold went to the 50 DMA.

Earlier, a recently stronger $US plus positive Sentiment about the prospects for Tax Cuts and Tax Reform, has helped The Cartel take Gold and Silver down a bit yet again this week. But, when one of THE BIG TRIGGERS is activated and/or China Devalues (whichever comes first) and/or Tax Reform Fails, watch them soar back up.

But it is critical to note that Support for these Precious Metals has repeatedly held in the mid to high $1200s for Gold and mid to high $16s for Silver, despite repeated Cartel Takedowns!!

However, as we warned early last week, last Friday, we had a Cartel-generated Precious Metals “Stuffing” with Gold held at around $1290 and Silver around $17.

Superficially, that Price Suppression was hard to see, until one realizes the $US was dramatically taken down which, but for The Cartel’s Price Suppression, should have caused Gold and Silver to launch up!

Thus, the Cartel has (and will periodically) beat back these Precious Metals prices as it has very recently on the North Korea relief Rally and better prospects for a Tax deal in Congress, but the Suppression will not last. Given North Korea, The Hurricanes, Negative Economic and Market Realities, and the near-Gridlock in the U.S. Congress, the flight to the Safe Havens of Gold and Silver has been intensifying!

Indeed, we reiterate that just a few weeks ago, Gold has bounced up over $1300 again and Silver well over $17 again. The Great Launch we forecast has begun.

And, we reiterate, given the flow of Physical from West to East, The Cartel is fighting a losing game. Indeed, we still expect to see Gold at or over $1400 and Silver at or over $20 by December/January, and much higher after that. And the Gold Share indices are likely to double in the next four to six months.

Why? Consider our overview on the 7 Factors re the B.O.T. listed in our August Letter and most recent (week ending October 13) Alert.

And Consider The Reality:

As of right now, Gold beats the Dow excluding dividends and fees, for the last 57 years.

  DOW GOLD Difference  
October 2017 21,785 1,349
Year: 1960 600 37
Multiple 36.31 36.45 (0.14) -0.39% More than the DOW since 1960. 8.7% Less in July 10th
(A) (B) (A)-(B)
1,343 Price Return on Gold is equal to DOW

But this stealing of wealth via debt, i.e., via devaluing the currency, is precisely the long-term case for Gold and Silver…and why Gold can appreciate about equal to the Dow in US$ terms and Silver potentially even more.

DOW companies are extraordinary creators of wealth. It’s just that the U.S. Treasury destroys wealth by monetizing debt, at about the same rate…because not one in 10,000 people understands what is going on.

Moreover, Margin Debt is at Record Highs and The Margin Debt chart is just official “margin debt” via brokers.  The big money people can borrow in Japan at zero rates and use the money to buy stocks in the U.S.

That type of financing won’t even be on the chart!

It thus appears that Increases in margin buying are occurring because interest rates are falling again…as Yellen is signaling no rate increase, and a slowing in demand for loans.

Stock Margin Debt Signal Reaches 5 Alarm Level. Margin debt is at an all-time high of 2.86% of GDP.  It was 2.63% of GDP prior to the crash in 2008.

A clear “Melt-up” to try to extract the last bit of the bull run…prior to the crash.

Crude Oil & Copper

Last week’s Takedown of the $US was the main cause of WTI spiking up to $59.

A stronger $US had until recently helped dampen Crude and Copper Price Increases, as well as continuing Robust Production of these Commodities. But the following have kept WTI over $55

  1. The Arrests in Saudi Arabia demonstrate the actual and potential Threats to the Oil Market.
  2. The increasing Political Instability in Venezuela is Threatening
  3. A “Risk On” appetite is returning to the Markets (but likely not to last long) and
  4. The OPEC production quotas not only holding but expected to be continued and the demand for Crude has increased and therefore, the Price. Thus, Higher Crude Prices (approaching the mid-$50s for WTI) recently also resulted from several Factors:
  • The IEA indicated Demand is rising faster than anticipated, and
  • Very Real Inflation Expectations, perhaps the most important Driver!
  • Anticipation of Greater Economic Growth resulting from the expected Tax Cut Also resulting in higher Near-Term Prices

But just recently we saw a pullback to the mid-$50s because of a supply build.

Indeed, Many Investors still buy the Economic Recovery Narrative (false in our view), but that view will weaken as the three Mega-Market Movers approach. Indeed, the weakening Sentiment has already begun among sophisticated Investors.

In sum, for the aforementioned and other reasons we lay out elsewhere in this Alert, Crude Oil (and Copper) are likely not destined to remain at these still relatively high price levels, i.e., mid- to high $50s (and around $3) for longer than a few weeks, at most, once they get there.

They too will crash again as Equities Crash and will revive again only on the printing of Helicopter Money likely at the end of 2017 or in early 2018, i.e., on an increasingly Devalued U.S. Dollar.

Thus, barring calamity, we think the high $50s per barrel is the near-term upside limit now for WTI. Indeed, WTI Crude well above $50 for any extended period makes Horizontal Fracking quite economic again, thus increasing supply in an already over-supplied Market.

Indeed, the U.S. could, in the next few months, produce at the 10 Million Barrel level which is over half of U.S. Consumption.

More likely, after the recent Spike Up, is a move down to the very low $40s or below $40 on the first Equities Crash Leg. Massive above-ground supplies and OPEC production cuts provide a de facto cap. It could begin any day or week.

Looking ahead, mid-term (e.g., 6-8 months out), Crude should first crash into the $30s when Equities Crash and Copper toward $2ish then also.

Then at the end of this year or early next, as we get Money from Helicopters, reverse and move much higher (perhaps to $70ish) as we move into The Inflation Phase, via (we expect) Helicopter Money.

Eventually, both Crude and Copper are likely to Fall when the recent Mainstream Media Spin that the Economy is Recovering ends with a Bang when the Bond and Equities Crash Legs and (highly likely) concatenating Credit Default Event/s (probably Beginning in Energy or Agriculture) delegitimize that Spin.

Indeed, those prospective Credit Default Events—Mega-Move generating for sure—THE GREAT TRAP—will Trigger others (see our recent Buy Recommendation), spreading like a Virus. We reiterate Sovereign Nations, Businesses, and Individuals are much more highly levered than in 2008, thanks to Market-Destructive Fed, ECB and other Central Banks’ low and Negative Interest Rates Policies. Thus, the Effects of that impending Virus of Credit Defaults, will be much more painful than 2008-2009.

In sum, fundamentally, above-ground oversupply/overproduction of Crude is real, and the international Economic deceleration and increasing tensions with China intensifying, both Negative for Crude and Copper in the Mid- to Long-Run.

Hyper-Stagflation is coming within the next couple of years.

Best regards,

Deepcaster
November 28, 2017


For November Alerts, see Alerts: 11/November 2017
For October Alerts, see Alerts: 10/October 2017
For September Alerts, see Alerts: 09/September 2017
For August Alerts, see Alerts: 08/August 2017
For July Alerts, see Alerts: 07/July 2017
For June Alerts, see Alerts: 06/June 2017
For May Alerts, see Alerts: 05/May 2017
For April Alerts, see Alerts: 04/April 2017
For March Alerts, see Alerts: 03/March 2017
For February Alerts, see Alerts: 02/February 2017
For January Alerts, see Alerts: 01/January 2017