When I went all in to the Precious Metals sector in May 2002, I knew very little of the nefarious forces attempting to control its ascent. It didn’t take long; and thankfully, I found Bill Murphy’s GATA website in short order; as well as Richard Russell, Jim Sinclair, and a handful of other “freedom fighters.” Back then, Russell empowered me by teaching the history of fiat currencies; emblazoning the term “INFLATE OR DIE” on my conscience. Sinclair’s knowledge of the gold market’s inner workings strengthened my resolve further, and Murphy’s commentary on the Cartel’s machinations inspired my revelation that the END GAME of fiat currency inflation was on the horizon. Each day, I read their commentaries hungrily – particularly on major PM “attack days”; and quickly, I parlayed such knowledge into not only an investment strategy, but a career and lifelong cause.
I long ago stopped reading Russell – although his big picture analysis remains spot-on; and only refer sporadically to Sinclair and Murphy’s work. Each of these great men continues to teach us about economics and Precious Metals; but in my mind, the Miles Franklin Blog does it better – and does so for FREE. David Schectman, Bill Holter, and I write tirelessly every day to empower you as to the REAL reasons “markets” move; the REAL state of the global economy; and the HISTORY supporting our predictions. Personally, I feel compelled to “comfort” PM holders during times like these – and by “these,” I mean this entire year of Cartel oppression; and thus, you can count on my commentaries through thick and thin.
On that note, I’ll address this morning’s PM “smack down” prior to the article’s principle topic. I already wrote of the government’s horrific failure to avoid shutdown four hours ago – just after 4 AM MST; but given what the Cartel has since done – making an utter MOCKERY of financial markets – I’ll add a few words now.
Clearly, TPTB were intent on preventing the “barometers of bad tidings” – i.e., gold and silver – from suggesting “alarm” on such an historic day. After all, it’s been 17 years since the government last shutdown; except in 1995, the economy was structurally healthy and the national debt “just” $5 trillion. The REAL economy has never been weaker; and thus, the furloughing of 800,000 government workers – despite their cumulative lack of productivity – will only reduce spending and investment further. Worse yet, the ramifications for a Treasury market already under immense pressure – and thus, unable to withstand even modest QE “tapering” – are incalculable; particularly as the U.S. dollar itself is notably sagging despite the so-called “recovery” the MSM incessantly speaks of.
By the way, I rarely speak of the “dollar index” itself; as frankly, I view the relationship between the dollar and the index’s largest component – the Euro – as immaterial compared to both currencies’ relationship to REAL ITEMS OF VALUE. However, if EVER a market was being blatantly supported at a KEY ROUND NUMBER, it’s the dollar index at 80. It plunged below that level during the Summer 2011 debt ceiling crisis; and since then, has been maniacally supported at 80 – as it is today, trading at 80.02 as I write. Given the U.S. is supposedly in a rip-roaring “recovery” – whilst Europe reports an all-time high unemployment rate, negative GDP, falling real estate prices, and non-existent lending activity – one would think the dollar would be raging. Heck, the Yen – the second largest component of the dollar index – is having its supply doubled by the Bank of Japan, amidst the backdrop of a moribund economy; and yet, the dollar index is still near a two-year low, whilst Treasury yields hover around two-year highs. What does that tell you of the global opinion of – and demand for – the “almighty dollar?”
Anyhow, for the 86th time in 96 days, the 2:15 AM algo arrived at the London PAPER opening to reverse Asia’s overnight gains. Subsequently, gold and silver sat right around their month-long “lines in the sand” at $1,330/oz. and $22/oz., respectively, until EXACTLY the 7:00 AM EST open of New York PAPER trading. At 8:00 AM EST, with utterly NOTHING going on in any other market; gold suddenly collapsed by $10/oz. in a ridiculous 30 seconds. Of course, this set up massive “stop-loss” selling at the 8:20 AM COMEX opening; and suddenly, gold and silver were down $40/oz. and $1.00/oz., respectively – amidst perhaps the most PM-bullish news imaginable!
Things have gotten so ridiculous since the Cartel went BERSERK in April; it calls into question whether the mining industry will even survive the carnage of prices so far below the cost of production. I have been very vocal in my view that PM production will fall an incredible 15%-25% in the next 2-3 years; and each day, more and more evidence supports my conclusion. Meanwhile, Chinese gold demand is on pace to DOUBLE this year alone, with further growth expected as global debt increases – particularly given yesterday’s news its government plans to significantly deregulate the gold import market. And thus, the total dislocation of some of the most reliable historic valuation metrics cannot be lost on the billions suffering from Central-bank fostered inflation. The chart alone tells it all; and with gold trading at $1,289/oz. as I write – with the “debt ceiling” likely to be increased to at least $18 trillion in the next two weeks – what do you think gold’s next big move will be?
Anyhow, today’s article was supposed to focus on the sorry state of the “dying economy”; but don’t worry, I’m back on track following the necessary “hand holding” resulting from this morning’s blitzkrieg attack. I can’t say I’m feeling my best – I sense a fever coming on; and possibly, it’s because I’m feeling like Haley Joel Osment’s character in the Sixth Sense; you know the boy who “saw dead people” that no one else could.
True, the average layperson sees the “dead economy” plain and clear. But then again, they are rarely asked for their opinions. Instead, the “evil troika” of Washington, Wall Street, and the MSM simply reports the “recovery” is strengthening – as they have for five years running –ignoring REAL economic data telling a different story. The same is the case nearly anywhere one looks overseas; particularly in hard-hit areas like the European PIIGS.
Today alone, whilst “diffusion indices” like the PMI Manufacturing Index depict “growth” (paradoxically, as its employment component declined), General Motors reported an 11% collapse in vehicle sales – and an associated inventory surge. Which do you believe, the HARD DATA or statistically questionable, potentially doctored surveys?
Meanwhile, corporate earnings warnings have risen to their highest level in 12 years – even at banks receiving unlimited government support; while “economic pessimism” hasn’t just risen, but surged to two-year highs. Last week, the nation’s largest PRIVATE employer – Walmart – admitted it too is seeing weak retail demand; while today, the largest PUBLIC employer – the government – is SHUTTING DOWN. Last week, “consumer sentiment” plunged to five-month lows – whilst food stamp participation continued to skyrocket; and yet, despite the Fed two weeks ago withholding tapering due to a weak economic environment, we’re bombarded DAY AFTER DAY with PROPAGANDA of a mythical “recovery.” Student loan defaults are headed “off the charts”; while even corporate titans like Merck are announcing layoffs – in this case, of 20% of its entire global workforce. Yet, day after day MSM lackeys like Reuters, Bloomberg, and CNBC tell us things are not only fine, but improving. Yes, the same CNBC who’s ratings have plunged to 20-year lows; to nearly the same level as when it went on air in 1991. Can you imagine the top stock market promoter having no viewership amidst a record high stock market? I certainly couldn’t; but then again, when retail participation has been replaced by government algorithms and Fed-supported bank proprietary desks, it makes such analysis much easier.
Finally, here’s a “real-time” depiction of the economic “recovery” in action. Last weekend, I flew to Las Vegas for the International Living conference. To start, I took Frontier Airlines – historically one of the better airlines I fly – from my Denver home. After enduring not one, but three pre-boarding announcements asking if anyone would like to upgrade to “extended room” seating for $20, I learned on board that “complimentary drinks” are no longer complimentary. Thus, unless you bought a “classic” (i.e., more expensive) ticket, you must pay $1.99 for a cup of coke, juice, or coffee.
Once in Vegas, it couldn’t be more apparent how the casinos are dealing with collapsing gaming revenues; and I do mean collapsing, as “the Strip” has seen a 14% year-over-year decline. You know, the kind of spending that defines current economic trends. And thus, as lines at all-you-can-eat buffets grow like bread lines in the 1930s – while penny slots take up more and more floor space – high-end amenities and attractions have seen some of the most outrageous price increases imaginable. How long can this last before even jaded Vegas travelers say no mas? I don’t know, but TRUST ME, its coming.
Many shows are sporting minimum ticket prices in the $80+ range, and high-end golf courses no longer offer water for the $300 cost of a measly 18 holes. Many conferences – like the one I attended – are being held in casinos way off the beaten path; but they, too, are experiencing declining revenue trends. And thus, for the first time EVER in my long travelling history, I was asked to pay $10 to work out in their below average gym. Cumulatively, these ugly trends depict a business model in crisis; and thus, despite endless traffic to see the world’s entertainment capital, such trips are being done on shoestring budgets. The majority of the nation’s population is struggling to make ends meet; and thus, when they travel, they do it as cheaply as possible.
Amidst such an economic environment – WORLWIDE – you can see why the Fed and other Central banks will continue PRINTING MONEY ad infinitum. Moreover, even the slightest increase in interest rates will make things exponentially worse; and thus – particularly if the government shutdown lasts any material amount of time, causing budget deficits and potentially bond yields to spike – the odds of “QE5” being announced before “tapering” appear higher than ever.
Consequently, I’d argue gold and silver have NEVER been more inexpensive in financial market history; and thus, if EVER there was a time to protect one’s assets from the inevitable HYPERINFLATION that ends all fiat currency regimes, it is NOW.