“The future price tag of printing six trillion dollars’ worth of checks comes in the form of inflation and devaluation of currencies either relative to each other, or to commodities in less limitless supply such as oil or gold.
Zero-bound interest rates, QE maneuvering, and ‘essentially costless’ check writing destroy business models and stunt investment decisions which offer increasingly lower ROIs and ROEs.”
Bill Gross, Founder & Co-CIO, PIMCO, 1/3/2013
For several years, Notable Independent Commentators, including Deepcaster, have warned that the Elite Central Banks’ Orgy of Fiat Currency Printing, a la QE etc, would result in Price Inflation.
So it is no surprise to us that The Bond King, Bill Gross of PIMCO, with about $2 Trillion under Management, would finally warn, in his January, 2013 letter to Investors, of Impending Price Inflation in Key Commodities.
Of course, General Price Inflation is already here, if one looks at the Real Numbers (e.g., U.S. CPI at 9.8% per shadowstats.com) as opposed to the Bogus Official Ones.
Going forward, this Mega Bank-generated Price Inflation provides considerable Profit Opportunities, but only in certain kinds of Commodities, and especially in one Sector Bill Gross does not specifically mention. (See Notes 1, 2, 3 and 4)
In sum, Policies actually being Implemented by the Power-Banker Elite virtually ensure a continuation of Fiat-Currency Depreciating Policies, and thus Price Inflation in Certain Commodities Sectors, as well as Increasing Risk of Systemic Destabilizing à la 2008-2009.
Yet consider also that the “Regulators” continue to accede to the Mega Banks wishes.
“Basel Committee’s revised LCR prompts relief and concerns
The Basel Committee on Banking Supervision’s decision to give global banks an additional four years to meet liquidity requirements was aimed at ensuring that the change wouldn’t discourage lending to the real economy. Some banks have already benefited from the revised liquidity coverage ratio, with their share prices increasing. GFMA welcomed the Basel panel’s decision to allow mortgage-backed securities and equities to be included in banks’ liquidity buffers.
Basel panel’s allowance of MBS in buffers faces scrutiny
The Basel Committee on Banking Supervision’s decision to let banks include equities and residential mortgage-backed securities in Basel III liquidity buffers is gaining plaudits and criticism. Bankers welcome the revision, but experts say it is unlikely to significantly lift a slack securitization market. The change also presents challenges for regulators
Significantly, Many Mortgage Backed Securities are still Toxic if Mark-to-Market Standards are applied, which they are no longer required to be.
So, de facto, the Banks may “count” Toxic Securities as part of their Liquidating Buffer.
Worse yet, the Regulators have, once again, administered a mere slap on the wrist to Major Banks which engaged in unacceptable practices. For example
Banks settle mortgage-related legal disputes
Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and other major banks agreed to pay a total of $20 billion to settle two legal disputes related to the mortgage crisis. BofA agreed to pay Fannie Mae $11.6 billion. In a separate dispute, 10 lenders agreed to pay more than $8.5 billion over foreclosure practices.”
sifma SmartBrief, 1/8/2013
Hardly a deterrent going forward.
In effect, this policy allows Risk to continue to Threaten Systemic Stability and its wealth of Individual Investors.
Making matters worse for Systemic Stability and Investors alike, is the Mega-Bankers’ Cartel (see Note 5) ongoing Manipulation, not just of Precious Metals but of a Wide Variety of Markets.
While Deepcaster, GATA and others have been complaining about such Manipulation for years, the Situation has become so threatening to Systemic Stability that even the Most Reputable and successful Investment Managers such as PIMCO’s CEO, Mohammed El-Erian, are complaining about the Risks inherent in such intervention as well.
“The investment recommendations made by many financial commentators are now dominated by cross-asset class relative valuation rather than the fundamentals of the investment itself….
“This is an understandable approach as unusual central bank activism has artificially elevated certain asset prices. Yet the dominance of this increasingly popular advice comes with potential risks that need to be well understood and well managed.
“Several asset classes now have highly manipulated prices due to experimental central bank activities, both actual and signalled. The more this happens, the more investors come under pressure to migrate to higher risk investments in search of returns….
“Just a few weeks ago the Federal Reserve announced it is targeting a further $1 trillion in asset purchases in 2013, representing a third of its existing balance sheet. Other central banks — particularly the Bank of England, the Bank of Japan, and the European Central Bank — are also expected to expand their balance sheets again in the months ahead….
“There is a limit to how far central banks can divorce prices from fundamentals….at some point, and it is hard to tell when exactly, the private sector will increasingly refuse to engage in situations deemed excessively artificial and overly rigged….
“Have no doubt: Central banks are both referees and players in today’s markets. With 2013 starting with so many liquidity-induced deviations, investors would be well advised to take greater care when pursuing opportunities that rely mainly on the ‘central bank put.’” (emphasis added)
“Beware the ‘Central Bank Put’”, Mohamed El-Erian, ft.com, 01/07/13
Chief Executive and co-Chief Investment Officer of PIMCO
El-Erian is Spot-On correct about the Risks Associated with Investment in “Highly Manipulated Asset Classes, which is why Deepcaster’s portfolio Recommendations aim both to Minimize Risk from and to Profit from, these and others.
But it also makes certain Real Assets even more attractive going forward.
Thus the Big Smart Money is responding accordingly, moving Money into Gold and certain other commodities (See Notes 1, 2, 3 and 4).
For example, notwithstanding ongoing Cartel (Note 5) Precious Metals Price Suppression and in response to Japanese Prime Minister Abe’s pledge to spur Inflation, Japanese Pension Funds ($3.36 Trillion in Assets!) plan to double their Gold Holdings in the next two years according to Bloomberg Business Week.
A word to the wise: Go for the Gold.
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