In the ensuing pages, we again demonstrate why one must beware of those considered “expert” financial analysts. The title reflects our frustration with the “mainstream” outlets seemingly mandated to relentlessly propagandize a mythical, unobtainable “recovery.” However, one must be equally vigilant when following alternative media sources – particularly those that ignore what we view to be the single most important aspect of today’s “markets” – i.e., manipulative intervention per the incomparable Chris Powell of GATA.
To hear (such analysts) tell it, it’s all lousy sentiment and charts — as if that surreptitious trading by central banks might not be creating the lousy sentiment and charts.
Maybe technical analysts shouldn’t be scorned too much. They can’t want to believe in, or even know about, central bank intervention in markets because it would nullify their work – their whole careers – revealing that they have been interpreting mere holograms created precisely to deceive them. But the self-importance of these analysts is both ridiculous and insufferable.
In a time of comprehensive market interventions by central banks, technical analysis is no more useful than reading entrails or tea leaves.
–GATA.org, May 27, 2014
We agree whole-heartedly while certainly realizing a variety of opinions makes a market. That said, we have long emphasized the value of identifying the handful of “good, smart people” that tell it like it is. Richard Russell, – who along with Jim Sinclair – was my original alternative economic guru when I entered the PM realm in 2002, is one of the few such analysts savvy enough to roll with the punches; which is why you should listen very intently when he speaks, at the distinguished age of 90. Russell has had a 50-year career anchored in “Dow Theory,” a technical analysis technique that served him well for decades. However, in his later years, he has become increasingly vocal regarding the aforementioned “boogeyman” of manipulation as well, per his comments this morning.
I see signs of manipulation in gold through the action of “paper gold” on the COMEX. Occasionally we see huge masses of futures being dumped in a matter of minutes on the thinly-traded COMEX. All this in an effort to keep the price of gold down. Eventually, gold will reach its rightful level. So to coin a phrase, you can’t keep a good currency down.
–King World News, May 28, 2014
As for the aforementioned “mainstream madness,” none holds a candle to CNBC – as exemplified by the unshakeable Jim Cramer, per this clip staunchly supporting Bear Stearns, Lehman Brothers, and Goldman Sachs just weeks before the mid-2007 top. (Chart below is the XLF or financial sector ETF).
The “MSM” or Mainstream Media, appear in most cases to be far more interested in ratings than truth. Fortunately, the age-old strategy of financial and economic cheerleading is no longer working – as even media giants like Fox News and CNN are experiencing plunging ratings. The fact is “the 99%” – amidst a world of unprecedented underemployment, inflation and wealth inequality – no longer believes the propaganda of “recovery” – let alone, Fed “tapering,” Ukraine “de-escalation,” or “the weather” as an excuse for any and all economic ills.
As for CNBC, its ratings have fallen back to those of 1993 i.e., two years after it went on air. In other words, be very careful who you get your information from; as oftentimes, the “MSM” epitomizes the polar opposite of the aforementioned “good, smart people.” Furthermore, its coverage of precious metals in particular ranks at rock bottom; although encouragingly it is being forced – kicking and screaming – to acknowledge certain, unpleasant realities in the world’s most important market.
To wit, amidst yesterday’s egregious market manipulations – and not just precious metals, in prototypical COMEX option expiration form – I went to the gym during the final hour of NYSE trading. When there it’s impossible to avoid CNBC as it plays on one of the TV’s in front of the stair climbers. And thus, I could not divert my eyes from subtitles stating how “consumer credit is up, so at some point the consumer will make a significant contribution to GDP growth.” After all, the U.S. economy is supposedly driven 70% by consumer spending, right?
First off, let’s explore the comical “logic” of such a statement starting with the fact that if consumer credit is already up it should have already yielded the heralded spending increase. After all, as consumers clearly haven’t “de-leveraged” and personal savings rates are plumbing all-time lows, they have obviously spent what they borrowed already.
As it turns out said explosion of “consumer credit” – to all-time highs – has coincided with consumer spending collapsing. In fact, simple observation shows such credit has been 98% attributed to (undischargable) student debt and (in many cases, sub-prime) auto loans. Regarding the former, we now sit at the incredible level of $1.2 trillion – compared to just $0.2 trillion a decade ago. Nearly all of it is “guaranteed” by the government; and as default rates skyrocket, post-graduate real earnings hit all-time lows and the real unemployment rate its lowest since the Great Depression, the government is actually easing student lending standards – while simultaneously, increasing interest rates. Oh, and by the way, enormous percentages of student loans are being used not to pay for education but instead, day to day expenses that will never be recouped.
As for auto loans, I don’t think it’s possible to describe how exponentially the level of “distress” in this increasingly subprime lending class – recently to pre-2008 crisis levels – is expanding. At this point, even CNBC would have difficulty describing the auto industry as “growing” given record channel stuffing, recalls, and loan defaults.
Rounding out the “hour of power,” the CNBC talking head proceeded to say inflation is currently a non-factor; however, if food and energy prices were to meaningfully rise (IF????) it would ultimately be “deflationary,” as it would cause consumer spending to decline. Frankly, such logic is akin to saying it would be beneficial to become terminally ill, as you would get more time off from work. Putting an exclamation point on the lunacy, CNBC went to a commercial break with the words “INFLATION ALERT” flashing across the screen – atop pictures of fruit stands and meat packing plants – whilst a 10-year Treasury yield of 2.51% scrolled across the bottom.
Which brings us to the key takeaway of the day the Yuan plunging to a 19-month low this morning (which will have horrific, global trade ramifications); the accelerating train wreck that is the French political and economic environment, the derivatives bubble reaching record heights, a former Bundesbank Vice Chairman advising the purchase of gold and silver; the explosion of manufacturing deception in an age of unrelenting food price inflation, such as shrinkage and substitution; and last but not least, the potential for having no 2022 winter Olympics because they are too expensive to host!
And that is that as we spoke of in May 7th’s “2.6% – Nuff’ Said’ and May 8th’s “Most Damning Proof Yet of QE Failure,” the entire world is betting that the first quarter’s flat GDP print (likely to be revised to negative tomorrow morning) was not due to “the weather” but instead, a collapsing economy that will inevitably catalyze the Fed to overtly institute “QE to Infinity.” To wit, while the entire MSM world parroted the “party line” that a “recovering” economy would prompt an end to QE and rising rates, we loudly forecast the opposite scenario. And thus, we present Exhibit A i.e., this morning’s utter collapse of Treasury yields – ominously with global crude oil prices near multi-month highs. Yes, just two weeks after the aforementioned, ten-month “line in the sand” at 2.60% was breached on the benchmark 10-year bond, 2.50% has potentially been permanently broken as well; that is until the inevitable hyperinflation down the road. No specific “news” accounted for it – other than the usual unrelenting litany of secondary “horrible headlines”; but instead, no doubt, a rapidly rising fear that next week’s likely ECB “emergency actions” will be employed in the “Land of Recovery” as well. In fact, not only has 2.50% been breached this morning but 2.45% as well; which is why the Cartel monsters are attacking paper PMs so viciously (what a shock, at exactly the 10:00 AM EST “key attack time #1”) – creating, in James Turk’s words, “The worst sentiment in gold in my 45 years of business.” Gee, I wonder if that will turn out to be a “contrary indicator.”
And one last word before preparing for tomorrow’s article regarding the widest disconnect between reality and “markets” in financial history. And that is Steve St. Angelo’s most recent analysis of silver mining costs – depicting a “break-even” level of more than $24/oz. compared to the current ridiculous level of $19/oz. amidst record physical demand and plunging supply.
And by the way, when we say “break-even,” we are just referring to operating earnings; as $42/oz. would have been required to offset $1.7 billion of write-offs (which at current prices will continue in 2014); and well above the $30/oz. was required to sustain the industry in coming years by not only enabling the replacement of reserves, but– increase them to meet surging worldwide demand.
Thus, we can only plead with you to understand the single most important asset in your personal “due diligence toolbox”; i.e., the ability to turn off the “mainstream madness” that can deceive you – in lieu of the “good, smart people” who seek to protect you.
Great article as always. You have stated repeatedly that we will see inflation for things we need and deflation for things we want because we can no longer afford them. So, as moronic as this statement by CNBC sounds, as food and energy prices start to rise rapidly the rest of the economy will fall apart because the average family simply won’t be able to afford anything but the necessities.