Is A Possible New Mega-Sting/Ultimate Public De-Capitalization Coming??

John T. Masterson

By simply connecting today's dots, as well as recalling the recent dots of 2008/9, the careful observer can now start to see unfolding the outline of a possible new, gargantuan worldwide financial sting, in a playbook reminiscent of Mark Twain's adage that "history doesn't repeat itself, but it rhymes." Like any well-planned scenario (i.e., "conspiracy", if we dare to be "politically incorrect"!), this potential sting can operate in stages, like a 3-act Greek Tragedy, though the acts of this new play will overlap somewhat. What are the current market indicators/dots suggestive of such a scenario? They include:

The entirely surprising resiliency of the long-term US Treasury bond market, despite clear-cut evidence of large-scale, rigged bids made with newly-printed Fed cash, made through the good graces of the Fed's Wall Street shills (i.e., "investment banks"), thereby, for now at least, defying the expectations of many pundits who insist that Treasury bond prices will crash hard,

The dumping of many of these new "bonds" onto the balance sheets of the shills, these bonds being "purchased" by said "banks" at approximately 0% TARP fund financing cost, thus creating an exceptionally large, internal U.S. carry trade between the Fed and its shills, by which method the shills "earn" a spread/coupon of 4.5% on the bonds over their 0% cost of financing, despite taking no current risk,

The endgame (the most important act, if it ends up being implemented!) - the recent demand by the shills that settlement of Euro-denominated Credit Default Swaps (CDS's) on U.S. Treasuries be made in gold, not Euros, and certainly not in dollars (as detailed by Janet Tavakoli, in her article "Warning of a Gold Super Spike". Wouldn't it be SO "wonderful" (for whom!?) if CDS speculators could get paid in gold for buying un-reserved "insurance" (CDS's) which would then skyrocket in value if the U.S. Treasury is pushed into default or even just closer to apparent default! What a massive incentive to speculate and push for private gain at the expense of public pain, indeed!

Taking all of these significant factoids together, how would/could this multi-act play unfold? Well, steps (1) and (2) above are already in motion, while the planned endgame (3) is not yet in place. So, if request (3) is acceded to by central bank authorities/sovereign governments, how could the play outlined above reach its conclusion?

Consider the following gameplan:

The "banks" do the counterintuitive thing in an inflationary world, and load up (courtesy of newly-issued "dollars" from the Fed) for maybe up to a year longer on still more long-term U.S. Treasuries, and indeed, combine that step with buying Call LEAPS or other Call-like derivatives on long-term Treasuries, thereby eventually generating a huge rally in such Treasuries (and a much more huge percentage gain on the Calls), during which time long-term Treasury rates drop to 3% or lower (a similar outcome to contrarian Gary Shilling's correctly predicted Treasury bond rally that occurred in late 2008, but this time occurring again for a much more artificial market-manipulative reason, not a valid deflationary one).

Concurrently with (A), once request (3) is acceded to, the "banks" load up on CDS's on US Treasuries, redeemable in gold(!).

As the Treasuries and Treasury Call derivatives are peaking in "value" (and interest rates bottoming at 3% or under), the "banks" unload these "securities" onto conveniently rustled-up retail investors and their surrogates (including mutual funds, ETF's, insurance company annuities and a variety of other managed accounts), bag the bond rally's mega-gain, and recycle the profits "earned", partly into the gold-redeemed Treasury CDS's and partly into physical gold, creating a major, but not final, rally in gold.

The bankster Mafia then makes its final killing against retail investors, retail funds and "sovereign" governments by demanding gold payment/bailout on their gold-redeemable CDS's. "Sovereign" governments accede to this request, afraid that another round of 2008-style bank insolvency/meltdowns will occur if they do not comply, and thus agree to pony up a massive percentage of the world's above-ground gold supply to these "banks" as "fair payment" for their (i.e., the governments', in particular, the U.S. government's) perceived insolvency. Gold prices respond with Janet Tavakoli's predicted super spike. Treasuries finally crash, since "governments" have just agreed to liabilities of a magnitude at least 100 times larger than that of the AIG bailout (a similar, though much smaller, experimental caper to test the feasibility of robbing "sovereign" governments on a Mega-scale). A new $20-trillion caper sure beats the $200 billion dollar AIG one! The U.S. Treasury then nationalizes all 401k's, 403b's, IRAs, SEPs, etc, and places their aggregate value on its balance sheet so as to forestall the U.S. Govt.'s complete shutdown. Armies of paupers start roaming the streets.

The banksters/Fedsters own the world (in a "Reich" of 1000 years duration, or so they fancy), and "sovereign" republican governments implode, except for a few "emergency lights" left on for the use of skeleton crews of bankster-installed government-employed paper signers and yes men. We enter a new dark age. He who has the gold rules! Banksters über alles!

So how can retail investors protect themselves? Maybe by listening to the old "Corleone" adage "keep your friends close and your enemies closer", and therefore mimicking at least some of the banksters' steps. This viewpoint may lead to the following possible self-protective retail investor steps:

Buy long-term Treasury bonds, or better yet, 2-year Call LEAPS on such a bond fund (for ex.: the TLT fund), or still better, 2-year Put LEAPS on a leveraged inverse long-term Treasury bond fund (for ex: the TBT fund: here, the tracking error, due to the daily resetting of leverage, causes falloff in value even faster in a T-bond rally than the claimed 2 times inverse rate, and thus the Put LEAPS on TBT may rise faster than the Call LEAPS mentioned above).

Buy gold. Better yet, buy silver, in large quantities, since it trails the rise of gold time-wise, but rises multiples of the percentage rise in gold near the end of a gold super spike. Be SURE that your supplier is solvent and gives fast delivery (Important! Market disruptions possible!).

SELL, SELL, SELL (pronto!) ALL securities bought in (1) as long-term Treasury rates drop to 3% or lower (i.e., as Treasuries peak). Buy still more silver with the proceeds.

Sit back, relax, live low-key and under your means, and consider retiring to suburban Amarillo, Omaha or Indianapolis, in a big food production region (but always make sure that you secure your metals carefully)! Stay healthy! Live long!

John T. Masterson jtmasterson1951@yahoo.com