Crude Reality – A Closer Look at the Almost Perfect Crime

Rob Kirby

Some time ago, GATA Secretary / Treasurer Chris Powell gave a speech titled, There are no markets anymore, just interventions. These sage words have stuck in my head. While Mr. Powell was specifically referencing manipulations in the precious metals markets, I am revisiting the concept as it relates to the crude oil market. The ongoing surreptitious “management’ of strategic commodity prices by the U.S. Government and its agents needs to be exposed for what it really is – UNFAIR TRADE and AN ABUSE OF PRIVILEGE. These practices have resulted in a litany of unsustainable, unfair and damaging outcomes in many markets with results that favor privileged insiders at the expense of the common good. I continue to be amazed at the lack of uptake by the media to these over-arching issues that impact the well being and daily lives of all citizens and media’s feeble attempts to explain the ‘unexplainable’ based on free market principles when markets are not free.

7 months ago I published a research paper which examined the root cause of last year’s crude oil price collapse, Oh Yes They Did!. With the passage of time, and a little bit more poking around, I came to the conclusion that there was a lot more mileage in the original material than first reported.

With a show of hands, how many of you out there really know how the U.S. Strategic Petroleum Reserve [SPR] is filled anyway? Because I did not see many hands, compliments of the Congressional Research Centre [pg. 3 of pdf doc.], I present you all with this little refresher:

Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a repetition of the economic dislocation caused by the 1973-74 Arab oil embargo. The program is managed by the Department of Energy (DOE). Physically, the SPR comprises five underground storage facilities, hollowed out from naturally occurring salt domes in Texas and Louisiana. The SPR, with a capacity of 727 million barrels, currently holds roughly 692 million barrels.

In mid-November 2001, President Bush ordered fill of the SPR to its current capacity of roughly 700 million barrels, principally through oil acquired as royalty-in-kind (RIK) for production from federal offshore leases. This level will be attained during FY2005. However, the Bush Administration has been periodically criticized for continuing to fill the SPR with RIK crude as crude prices have continued to rise and be volatile……

From this document supplied by the U.S. Congress, we can see that oil in the SPR is, by definition, referred to as royalty-in-kind [RIK] crude.

I’d like to draw everyone’s attention to the fact that the United States Department of Energy admits, in the notes on page 48 of their 2008 financial report, that they “swapped” RIK crude for ‘other’ [to be delivered] crude oil [i].

A swap of this nature requires the REMOVAL of physical crude from the SPR through pipelines.

source: U.S. Dep’t of Energy

Interestingly, the U.S. government chose not to publicly disclose that they were involved in crude oil swaps – because their intention was to stall manically rising prices, creating a temporary “physical glut” in the market place – and to DRIVE CRUDE OIL PRICES DOWN. Their actions were only recorded “buried” in foot notes of the Department of Energy’s Annual Report where, I’m certain, they assumed no one would ever look.

This was done under the cover of [ii] and [iii] making public announcements that they were no longer filling the reserve [net add which had been occurring continually since 1999] and were in fact providing SPR crude to refiners in the aftermath of Hurricane Gustav.

Here’s the intended resulting oil price collapse:

Remember folks, the result of this action produced several effects;

1] A “localized’ glut of crude oil in the Cushing, Oklahoma region – which produced the tell-tale signature evidence of a lack of physical crude storage facilities.

2] The shortage of physical crude storage facilities reverberated back through the supply chain creating the well documented spike in Very Large Crude Carrier [VLCC] super-tanker rates in an otherwise moribund shipping market – as attested by the “then battered” Baltic Dry Index.

3] It was this same criminal interference in the crude oil market which produced the anomalous “flipping” of the historic price premium which the higher grade West Texas Intermediate [WTI] enjoyed over Brent [North Sea] Crude – a price inversion which remains to this day.

Conclusions:

The Foreigners Are Learning

The rigging of markets benefits insiders and strains international relations. The significance of this issue is now becoming clearly evident as we are just beginning to see the empirical manifestations of these unfair dealings:

China warns banks on OTC hedge defaults -report

Sat Aug 29, 2009 9:47am IST

BEIJING, Aug 29 (Reuters) – Chinese state-owned enterprises (SOEs) may unilaterally terminate derivative contracts with six foreign banks that provide over-the-counter commodity hedging services, a leading financial magazine said.

China’s SOE regulator, the State-owned Assets Supervision and Administration Commission (SASAC), had told the financial institutions that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying.

It did not name the banks or the firms in question, but said Keith Noyes, an official with the International Swaps and Derivatives Association, had confirmed he was aware of the letter to the banks. He declined to comment further to Caijing.

It also cited a SASAC official as saying that almost every SOE involved in foreign exchange or trade had some exposure to derivatives such as crude oil, non-ferrous metals, agricultural commodities, iron ore and coal, although only 31 SOEs were licensed to do so.

Nobody at SASAC was immediately available to comment on Saturday.

SASAC took over the job of overseeing SOEs’ derivatives trading from the securities regulator in February after several Chinese firms reported huge losses from derivatives, and quickly tightened the rules, ordering firms to quit risky contracts and report their positions on a quarterly basis.

In January, Air China (601111.SS: Quote, Profile, Research) (0753.HK: Quote, Profile, Research), Shanghai Airlines (600591.SS: Quote, Profile, Research) and China Eastern (600115.SS: Quote, Profile, Research) reported book losses of almost $2 billion on aviation fuel hedging contracts, the official Xinhua news agency said at the time.

China is but one example whose voice, as America’s largest creditor, cannot be ignored. Their recognition of ponzi-paper markets has led to their repudiation of the market rigging game. The unspoken, yet imminent, extension of this logic is ultimately the repudiation of U.S. Dollar hegemony, as all strategic commodities currently settle in U.S. Dollars. A failure on this level would have catastrophic implications with America being unable to conduct international trade. Additionally, unilateral termination of losing derivatives positions could precipitate a seismic paper avalanche that could overwhelm the global banking system.

Additional tell-tale signs of possible, systemic financial dislocations will be covered in the next few days in a special subscriber’s report analyzing Barrick Gold’s apparent capitulation and announced intention to cover all existing gold hedges [in the next 12 months] still on their books.

In closing, I re-present this to you in greater detail now because – when the article was first published 7 months ago – there were some that said, “the oil price collapse may have been caused by a release of crude from the SPR”.

Ladies and gentlemen, the notion that the oil price collapse “may have been caused” by a secretive release of crude from the SPR is as debatable as the notion that the sun “may have risen yesterday”.

For the record, both are indisputable, documented, historic facts.

Invest wisely and understand who and what you’re dealing with and remember, there’s no such thing as the perfect crime.

130 Days to HyperInflation

Yes, that is right. You have a little more than 130 DAYS before MOPE (management of perspective economics) falls into the abyss of loss of confidence in the US dollar.
 
The event will be the birth of hyperinflation in the US and elsewhere to the horror of the spin media. Crude has been trying to explain this to the public, but so far they have not gotten a clue. Crude strength is being called a hedge against the dollar as fundamental energy analysts are hard pressed to explain a rise from $30 into the $70s with NO pick up in US economic activity and NO massive draw down on supplies. The oil price is an example of the arcane and exoteric mechanism of hyperinflation soon to take gold to $1224, $1650 and then on to Alf and Armstrong’s numbers. This phenomenon is something that the murderous Children of the Corn that run the hedge funds will not accept until it happens.
 
Happen it will.
 
130 days is no time at all. Are you prepared?

Jim Sinclair

Fall of the West

Fall of the West

Neville Bennett

Is the West in long time decline relative to the rest of the world? I believe it is, and will indicate some sources bearing that out. It is not a new question for me as in my youth I enjoyed reading Toynbee, Spengler and others.

Many of my generation received a broad liberal education at a state grammar school. Science was very strong at my school, where many friends later became engineers, but we were all taught to love literature, art, music (you had to play an instrument), history and 5 years of at least two languages. At school we debated the rise and fall of Rome, plus the British and other Empires.

West below 50% world GDP

“The Greater Depression (NBR 12 June ) has accelerated the decline of Western GDP of 60% to 64% of global GDP over 1995-2004. A British think-tank, CEBR, had earlier forecast 2015 as the date when the West’s GDP would go below 50% of world GDP, but the credit crunch and changes in foreign exchange has brought the date forward from 2015 to 2009. Defined as US, Canada and Europe, the West’s share of global GDP is predicted to decline further to 45% by 2012.

The report identifies an inventory-led recovery conforming to my bullish attitude to oil and metals (NBR May 29). They predict some bounce in 2009, but in 2010 recovery will be held back by fiscal retrenchment and the impact of structural deleveraging. They conclude, the West “has to get to grips with the fact that we are no longer dominant and cannot expect to have things our own way”. China’s recovery is having a marked effect on oil and commodities.

Oil as an indicator

Crude oil prices have increased by 120% since February, at a time when the IMF confirms a recession in the world economy. Normally, falling crude prices would be expected. Actually, the price is about $72 p.b. and the futures market is predicting $88. So the prices defy “demand destruction”, or the idea that price rises lower demand. BP’s statistical review has shown that for the first time in history, emerging market demand has outstripped the West’s. This is significant in our oil-based civilization.

Until now traders have tended to look at US conditions for oil market leads. Henceforth, Western demand can slump while overall consumption is rising. Perhaps this is one reason why oil prices are strong now. 2008 oil consumption fell in the US by 6.4%; in the BRICs consumption grew y-o-y by 3.3% in China, 4.8% in India, 5.3% in Brazil, and 3.1% in Russia.

The BRICs

The BRICs now muster 20% of global GDP, about the same as the USA. These are rapidly changing societies with a large propensity to consume oil and commodities. Presumably their oil demand will burgeon, as industrialization proceeds at pace. One tends to think of them as financially undeveloped, but they have at least one huge advantage: they save.

Collectively their currency reserves are half of the global total. A recent Telegraph article said G7’s reserves’ (excluding Japan) has only 6% of world reserves. This makes it a little odd that the US dominates the IMF, World Bank etc. How can that last?

The BRIC’s are holding their first formal summit this week in Yekaterinburg, Russia. Curious that it gets little reported because the BRICs could stop lending the West money and deepen the recession. Their agenda includes ways to reshape the financial system and perhaps produce a new reserve currency. The Brazilian President wants the BRICs “change the political and trade geography of the world”.

The Chinese premier arrived as I went to press. I imagine that China will be much less confrontational than Brazil and Russia. China holds the most US Treasuries and does not want to undermine the dollar. It merely wants to supplant the USA as the world’s biggest economy, as it may do in 20 years.

World Economic Forum

Readers may recall an earlier article in which I outlined the briefing for the upcoming Davos meeting. The article specifically questioned the western model of development, and adopted the spirit of Asian capitalism with stronger central direction, saving and heavy capital investment. The report went beyond extending current trends and explicitly discussed “critical uncertainties”, and “potential discontinuities”. It also stressed rapidly shifting geo-economic power. (NBR Jan 23). Changing demography is a factor: “western” populations are shrinking, but emerging country populations are not.

Philosophers: Oswald Spengler

Spengler insisted in the 1920’s, when he was extremely influential, that we were living in the winter time of the Faustian civilization. His description of the Faustian civilization is where the populace constantly strives for the unattainable—making the western man a proud but tragic figure, for while he strives and creates he secretly knows the actual goal will never be reached. His “unattainable” is materialism.

Spengler asserted that democracy is simply the political weapon of money, and the media is the means through which money operates a democratic political system. Politics becomes an unprincipled struggle for executive power. Instead of conversations between men, the press and the “electrical news-service keep the waking-consciousness of whole people and continents under a deafening drum-fire of theses, catchwords, standpoints, scenes, feelings, day by day and year by year.”

Philosopher: Arnold Toynbee

Toynbee wrote magnificent Annual reports during the 1930’s are which I often set as required reading for graduate students. I had the joy once of meeting him. He dropped into Hong Kong University and asked if he could help. I took him to a tutorial, where unforgettably he raged against the state but lauded the polis (city).

Toynbee predicted the decline of the west. All civilizations are surrounded by peripheral countries of greater resources. Once the periphery absorbs the civilizations superior technology, especially military technology, it conquers.

Conclusion

Two centuries of western dominance has passed. The emerging world has caught up in terms of development. The West still has cutting-edge technology and military power, but it is being challenged on every front.

Derivatives Monster – Real Economic Data – Investment Strategy

OPPORTUNITIES & THREATS IN DERIVATIVES SHOCKER

 “With Key Mega-Financial Institutions around the World claiming in 2008 that they risked collapse if they were not bailed out, one must ask which ones benefited from the $13 Trillion plus Increase in Gross Market Value of their OTC Derivatives in the six months between June, 2008 and December, 2008 when the Equities Markets were crashing? A logical Conclusion: Key Central Bankers and Favored Financial Institutions of The Fed-led Cartel*, quite possibly including the shareholders of the private for-profit U.S. Federal Reserve”

Deepcaster, May 29, 2009

For investors, both Opportunities and Threats reveal themselves in the recently reported stunning drop ($90 Trillion+) in Total Notional Value of OTC Derivatives Contracts Outstanding worldwide and an equally stunning rise ($13 Trillion+) in Actual Gross Market Value of OTC Derivatives Contracts Outstanding, in just the last 6 months of 2008. (See Chart Below)

Source: Bank for International Settlements

The Total Notional Value of OTC Derivatives Outstanding dropped from some $683 Trillion as of June, 2008 to $592 Trillion as of December, 2008, according to the Bank for International Settlements (BIS – the Central Banker’s Bank – see www.bis.org, Path: Statistics > Derivatives > Table 19) (Ed Note: A Rough “Cocktail Party” Definition of “Notional Value” is “Unrealized Potential Maximum Value.”)

This first drop in Notional Amount of OTC Derivatives Outstanding in years, mainly reflects the massive deleveraging which occurred during the Fall, 2008 Market Crash.

Perhaps even more stunning was the drop in Notional Amounts of OTC Gold Contracts outstanding from $649 Billion in June, 2008 to $395 Billion as of December, 2008. Yet the change in Gross Market Values of the OTC Gold Contracts outstanding during that period was minimal – a drop from $68 Billion to $65 Billion. We comment on what that portends for Gold below.

In order to determine and evaluate the Opportunities and Threats created by the aforementioned drop in Notional Value of OTC Derivatives outstanding coupled with a dramatic increase of $13 Trillion in Gross Market Values we must first consider a few facts.

To put the Derivatives Monster in perspective, consider that the value of all publicly (exchange-traded) Equities now existing in markets world-wide is “only” about $31 Trillion.

That $31 Trillion is only just over 5% of the still remaining nearly $600 Trillion in Notional OTC Private (i.e. Dark) Derivatives Contracts outstanding. The implications are stunning:

1. If the unwinding of a “mere” $91 Trillion in Derivatives contracts (to bring the Total down to $592 Trillion from $683 Trillion) reflected the Magnitude of the pain that the Fall, 2008 Crash caused, then imagine the Pain which awaits if and when (and probably when) any substantial Portion of the $592 Trillion remaining get unwound.
2. But a substantial portion will likely have to be unwound given that various ongoing Crises have yet to be resolved, and, in many cases are worsening e.g.: Consider:
   1. The U.S. Treasury/Fed etc have already committed some $12.8 Trillion (by one reckoning) for Bailouts, Loans, Stimulus packages and Guarantees, much of it borrowed from, or guaranteed by, U.S. Taxpayers. Yet, clearly, the Toxic Derivatives problem has a long way to go before being solved.
   2. The Fed has moved over $577 billion of U.S. Treasuries onto its Balance Sheet in the short time since it publicly admitted it was monetizing the Debt. (One wonders how many hundreds of Billions in Treasuries were moved (and where!?) before that public admission.)
   3. The Chinese are switching from a U.S. Dollar basis to a Yuan basis domestically.
   4. The Chinese have authorized certain non-Chinese Banks to sell Yuan – based government Bonds.
   5. Foreign Creditors own over half the U.S. Dollar based government and Agency bonds leaving the fate of the U.S. Economy and Security in the hands of foreigners and primarily the Chinese government.
   6. The United Arab Emirates are spearheading plans to launch an Asset-backed (likely with Gold and Crude Oil) Currency, the Dinar.
   7. Germany has reportedly demanded return of all Gold held in custodial Accounts in the U.S.
   8. The Chinese have increased their Gold reserves from 400 Tonnes to over 1,000 Tonnes in the past five years.
   9. The default rate on U.S. Option ARMS recently rose to 35%. There are still some $300 Billion of these loans still outstanding.
   10. The interest Rates on about one Million Pick N Pay loans will reset in the next two years.
3. Clearly, given the foregoing, acquiring Gold and Silver as Safe Haven Assets is the Prudent Course. However, Gold and Silver are subject to price Manipulation by the Fed-led Cartel* of Central Bankers and Favored Financial Institutions as we explain below. But we also explain that there is a Strategy to Profit from these Interventions while acquiring an increasing core Position in these Precious Metals.
4. A substantial portion of the aforementioned $592 Trillion in OTC Derivatives is available to The Fed-led Cartel* to continue to overtly and covertly manipulate the Precious Metals, Strategic Commodities, and Equities Markets.*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 http://www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at http://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 http://www.deepcaster.com have been facilitated by attention to these “Interventionals.”
5. And Market Manipulation is an Enterprise with Great Profit Potential. Consider specifically, as of June 2008 the Gross Market Value of all Derivatives Outstanding was $20,353 billion (see chart below). By December 2008, that $20 trillion has risen to $33,889 billion, a rise of over $13 trillion in Actual Gross Market Value of OTC Derivatives. Clearly, some of the Derivatives that were liquidated in the drop from the notional value $683 to $592 trillion resulted in (or, at least, were accompanied by) a very considerable increase in market value (otherwise known as “profits” – whether realized or unrealized) for the Mega Financial Institutions holding them.These remarkable developments reflected in the BIS Gross Market Value of OTC Derivatives figures (below) for period June 2008 through December 2008 prompt certain questions.
   1. First question: which financial institutions in the world experienced an increase in $13 trillions of market value in their OTC Derivatives Positions in the last six months of 2008 while the Equities Market were crashing?
   2. Why do we not see anyone publicizing this information (Tongue-in-cheek-intended) much less the private for-profit U.S. Federal Reserve, which has declined to respond to inquires from Members of Congress about the specific amounts of, or parties to, their transactions and holdings.
   3. Can we not logically conclude that some Mega-financial entities profited immensely from the market takedowns of the Fall 2008 – specifically profiting in the amount of $13 Trillion in increase Gross Market Value of derivatives owned?Consider too that the aforementioned figures were generated by the Ultimate Official Source. They come from the Bank of Central Banks itself, The Bank Of International Settlements, Switzerland, housed in the Tower of Basel.

      Indeed we encourage readers to consider the figures themselves, by visiting http://www.bis.org > statistics > derivatives > Table 19, “Amounts outstanding of over-the-counter (OTC) derivatives by risk category and instrument.” Of course, not all “official” statistics are accurate as we demonstrate below. Indeed, some are intentionally misleading.

      But an increase of $13 trillion in gross market value of Derivatives held by major Financial Institutions, is testimony to the Resources and Power of The Fed-led Cartel*. See Deepcaster’s article “Coping with the Superpower-Cartel Threat!” (1/30/09) at http://www.deepcaster.com.

6. Moreover, 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.

Making matters worse, 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 and the threat or reality of job loss.

Though Official Figures show CPI dropping to 0% in early 2009, the Real early 2009 numbers reveal that CPI was still about 7% annualized.

U.S. Unemployment has (according to Official Numbers) been ranging 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 in 2009 now about 20% and is still increasing. (shadowstats.com) Thus the 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, in early 2009 GDP “growth” is a negative 5%. (shadowstats.com) Thus the consumer is faced with a deteriorating economy, as well as diminishing job prospects and purchasing power.

As well, the 2008 U.S, Federal Deficit, rather than being about $1 trillion as reported officially, is over $5 trillion if one includes Social Security and Medicare. And, if downstream-unfunded U.S. obligations are included, the U.S. National Debt is about $66 trillion and rising!

Knowing these 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 Cache at www.deepcaster.com) and his making five short (and subsequently quite profitable) recommendations to subscribers at about that time.

A Strategy for Profit and Protection

Normally, (that is to say, in a Genuine Free Market situation) the go-to “Safe Haven” Assets in times of Financial Crisis would be the Precious Monetary Metals Gold and Silver, as well as other assets such as Strategic Commodities.

We say “normally” because nearly every time yet another Financial Market Crisis has come prominently into the public eye in recent years The Cartel* of Central Bankers has successfully taken down the price of what would normally be The Safe Haven Assets – - the Precious Monetary Metals. A prime example occurred during the much-publicized demise of Bear Stearns in March, 2008, which was accompanied by a vicious Takedown of Gold and Silver. In a non-manipulated Market, given the fact that Bear Stearns reflected great and increasing weaknesses in the Financial System, Gold and Silver should have skyrocketed. But instead they were dramatically taken down.

Yet, the late 2008 – early 2009 Crises appear to be different. Gold launched from the mid $700s/oz. to around $900/oz. during September, 2008, fell back to the low $700s and then launched again toward $900 in December, 2008 and has actually exceeded $900 several times in 2009.

So the question now, near the beginning of June, 2009, is it different this time around? Have Gold and Silver finally thrust off the shackles of Cartel Intervention? Or will The Cartel be able once again to cap and take down the prices of these Precious Monetary Metals and Strategic Commodities? Deepcaster has very recently addressed this question in a Forecast he issued for the likely fate of Gold, Silver, Crude Oil & the U.S. Dollar in the Alerts Cache at www.deepcaster.com.

One thing is certain: The Cartel will certainly attempt again to take down Gold, Silver and Crude Oil at the earliest opportunity because the Strategic Commodities and Precious Monetary Metals are Competitors as Stores and Measures of Value with the Central Bankers’ Treasury Securities and Fiat Currencies.

Yet there is a Strategy which accommodates Cartel Interventional attempts and at the same time provides excellent Profit Opportunities, whether the Cartel Interventional attempts are successful or not.

A major premise of The Strategy is that one can certainly remain a Hard Assets Partisan (as Deepcaster is) while at the same time insulating oneself somewhat from future Takedowns. The following points provide an outline of The Strategy (particularly as applied to the Gold and Silver Markets) and are designed to help avoid Portfolio unpleasantness, or even possible financial ruin, in the future, as well as to profit along the way:

1. Recognize that The Cartel is still Potent, as difficult as that may be psychologically for Deepcaster and other Hard Asset Partisans to acknowledge. The Cartel is still the Biggest Player in many markets and, if the timing and market context are propitious, the Biggest Player makes Market Price. In addition, The Cartel has the advantage of de facto controlling the structure and regulation of various marketplaces and that is a tremendous advantage; just as the Hunt Brothers years ago discovered much to their dismay and misfortune, when they tried to corner the Silver Market.
2. Accumulate Hard Assets near the Interim Bottoms of Cartel- engineered Takedowns.
3. In order to know when one is likely near the bottom of a Cartel-generated takedown, it is essential to take account of the Interventionals as well as the Technicals and Fundamentals. Paying attention to the Interventionals facilitated Deepcaster recommending five short equities positions as of early September (just before the Fall Crash) all of which we subsequentially recommended be liquidated profitably.
4. For example, regarding Gold & Silver, near such Interim Bottoms, accumulate a combination of the Physical Commodity (Deepcaster prefers “low premium to melt” bullion coins) and well-managed Juniors with large reserves. (Deepcaster provides a list of such Junior Candidates in our December 20, 2007 Alert “A Strategy for Profiting from Cartel Intervention” available in the Alerts Cache at www.deepcaster.com.) The “Physical” and “Juniors” are for holding for the long-term as a Core Position.
5. Then, to the extent one wishes to speculate on the next “long” move, one should buy the major producers or long-term call options on them. These latter positions are for ultimate liquidation at the next Interim Top and are not for holding for the long-term.
6. However, there will be a time when The Cartel price capping is ineffective and Gold & Silver make record moves upward. The benefit of this Strategy is that one will likely be long in one’s speculative positions when this happens.
7. Near the next Interim Top, liquidate the long options and majors. Again, in order to know when we are close to the next Interim Top, it is essential to monitor the Interventionals, as well as Fundamentals and Technicals.
8. Near that Top, sell short or buy puts on Majors. We re-emphasize the Majors as preferred vehicles for trading positions because such positions are more liquid and tend to be quite responsive to Cartel moves.
9. Near the next Interim Bottom, cover your shorts and liquidate your puts and go long again to begin the process all over again. We emphasize that it is essential to consider the Interventionals as well as the Fundamentals and Technicals in order to determine the approximate Interim Tops and Bottoms.
10. Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of The Cartel. It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets and/or Retirement Accounts only to have those assets effectively de-valued by Cartel Takedowns and other Cartel actions. This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them. In order to help prevent this and similar outrages, we recommend taking three steps:
    1. Become involved in the movement to Audit and then abolish the private-for-profit U.S. Federal Reserve as Deepcaster, former Presidential candidate Rep. Ron Paul, and legendary investor Jim Rogers, all have advocated. The ‘Audit The Fed’ Bill is H.R. 1207 (and has over 180 co-sponsors); and The Abolish The Fed Bill is H.R. 2755.
    2. Join the Gold AntiTrust Action Committee, which works to eliminate the manipulation of the Gold and Silver markets (www.gata.org). GATA is a non-profit organization, which makes a great contribution by gathering evidence regarding the suppression of prices of Gold, Silver and other commodities.
    3. Work to defeat The Cartel ‘End Game.’ Deepcaster has laid out the evidence regarding the Ominous Cartel “End Game.” Clearly The Cartel is sacrificing the U.S. Dollar to prop up Favored International Financial Institutions and to maintain its power. But this sacrifice cannot continue forever. See Deepcaster’s July 2008 Letter in the ‘Latest Letter’ Archives at http://www.deepcaster.com.

If this aforementioned Strategy is employed effectively, it can result both in an increasing Core Position in Gold and Silver, and in considerable profit along the way.

Additional insights and details regarding this Strategy, which are essential to profiting from The Cartel’s Policies, are laid out in Deepcaster’s article of 3/06/09 entitled “Investor Advantage: Revisiting The Cartel’s ‘End Game’.”

Protection and profit required Proactivity and attention to the Interventionals, Fundamentals and Technicals, not “Buy and Hold.” “Buy and Hold” rarely succeeds anymore as current market conditions attest.

Indeed, the Key Point of the Strategy for Protection and Profit is careful attention not only to the Fundamentals and Technicals but also to the Interventionals. These Overt and Covert Cartel-generated Interventions have the power to move markets as those who study the matter can attest.

Thus, the Key to Profit and Protection is a Strategy: Successful Investors must become Long-Term Position Traders, with their trading choices informed by the Interventionals, as well as the Fundamentals and Technicals. Moreover engaging in the Actions suggested above can help prevent The Cartel’s obtaining Superpower status, and aid in achieving wealth protection and profits as well.

Deepcaster

May 29, 2009

DEEPCASTER LLC