Taper Tantrum Opportunities: Deepcaster

 

DEEPCASTER LLC

www.deepcaster.com

DEEPCASTER FORTRESS ASSETS LETTER

DEEPCASTER HIGH POTENTIAL SPECULATOR

Wealth Preservation Wealth Enhancement

“The first panacea for a mismanaged nation is inflation of the currency: the second is war. Both bring temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.”

– Ernest Hemingway

A Tapering Trend any time soon is most unlikely, but Market “Tantrums” emanating from Speculation about Tapers Advent provide Significant Opportunities for the Prepared.

 

Even if The Fed does begin a bit of Tapering in December, or March, or whenever, (unlikely) it is not likely to last (unless other Central Banks simultaneously increase liquidity to continue to prop up the fragile International Economy). Considering Why reveals Opportunities.

 

—Recall that every time in the last few months Tapering was treated in the Main Stream Media as if it were a Probability, Major Emerging Markets Equities swooned. The Developed World is The Major Market for the Emerging Market Economies. If Developed World Economies slow or contract so do those of the Emerging Economies.

 

Thus if Taper is implemented and therefore Stimulus is reduced, Economic Activity is reduced, for the following reasons:

 

—Since the Primary Effect of Fed Bond Buying is to Maintain low interest rates (Fed Demand for Treasuries and MBS keeps their values artificially high and thus their interest rates artificially low) Tapering would mean rising interest rates (which will happen anyway eventually) and Rising Interest Rates would devastate the Stock Markets World Wide, and …

 

—Corporate Earnings (which QE has kept artificially high by lowering borrowing costs) would be devastated because rising rates would increase borrowing costs on corporate debt.

 

—Any Housing Market recovery would be aborted by rising Mortgage rates.

 

—With Margin Debt at record levels, over-leveraged players would go into The Tank.

 

Opportunities flow from the aforementioned.

 

—Expect Markets to rally as “no Tapering this Month” Decisions are announced.

 

—In the unlikely event a Tapering is announced and Markets consequently Dip, buy the Dips, a halt to Tapering (and at some point/s even an increase in QE!) is likely to be announced soon thereafter. (This suggestion applies for the very short term only, since a Major Market Crash is likely to launch some time in 2014).

 

—And do not bet that a Continuation of QE (i.e., no Tapering) will help the Real Economy (Japan’s QE has lasted for decades and that QE has not revived the Japanese Economy). QE merely artificially boasts Asset Prices, which is why Carl Icahn is correct when he says corporate earnings are a “mirage.”

 

—Continuing QE is aimed mainly at propping up the Mega-Banks, but also is destroying the US$ as the World’s Reserve Currency.

 

A “No Tapering This Month” Decision some week soon may well be the Catalyst which launches Gold and Silver up, finally, into their Great Rally. Be prepared.

 

Best regards,

 

Deepcaster

December 13, 2013

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