by Andy Hoffman, Miles Franklin:
The signs of extreme financial strain are everywhere – as one by one, economies, markets, corporation, and individuals lose the unwinnable war with “Economic Mother Nature” and the “unstoppable tsunami of reality.” Yes, “last to go” markets like the “Dow Jones Propaganda Average”; the Shanghai stock exchange; and of course, paper gold and silver, are still under TPTB’s “control” – and quite obviously, will be the last markets to succumb, due to unprecedented levels of manipulation. However, even they are showing signs of a slow, but sure loss of interventionist control – with the Dow having spun its wheels for the past year; the Shanghai Exchange down 35% from June’s bubble highs; and gold and silver clearly amidst a year-long basing process – supported by record physical demand, vanishing above-ground inventories, and the weakest production outlook in decades.
Regarding the latter, I look forward to the earnings reports of Barrick, Newmont, and Agnico Eagle today; followed by Goldcorp and Yamana tomorrow – to see if they can continue to pretend their “resources” are still viable at current prices, and their production outlooks intact.
nd-of-year earnings reports – assuming the Cartel isn’t defeated by then, of course. However, if they are alreadybeing forced by their accountants to throw up the white flag, it’s going to be quite the scary month for the industry as a whole, particularly “lower-tier” miners with lesser financial resources and less robust assets.
As for other “signs” that history’s largest Ponzi scheme is imploding before our very eyes, take note of the rapidly expanding list of corporate scandals – from Volkswagen’s “Diesel-Gate,” which I continue to believe will have a catastrophic economic impact on the German economy; to the ongoing saga at Valeant Pharmaceuticals – which some believe is a modern-day Enron; to yesterday’s disclosure that IBM, whose hubristic fall from grace is one for the ages, is being investigated by the SEC for potential accounting fraud. And by the way, for those that believe the labor market is “recovering,” keep in mind that IBM still has a whopping 380,000 employees – many of whom are clearly at risk of maintaining such status.
Actually, something else that caught my attention yesterday is the breakdown of several key “bubble symbols” – which all of a sudden, are looking less and less like “anomalies,” and more and more liketrends. Such as the breakdown of last week’s hyper-prentious Ferrari IPO, crashing below its IPO price within days of going public. Or “market darlings” like Tesla and Netflix falling out of grace; the Dow Jones Transportation Average plunging despitefalling energy costs; and, most ominously, the Russell 2000 Index – comprising the riskiest, most speculative stocks, many of which have no earnings – dramatically under performing its large capitalization peers. In any environment, these are extremely dangerous signs; but in history’s most manipulated – i.e., supported– stock markets, they are particularly terrifying. In my view, signalling a rapid erosion of not only the underlying economic environment, but TPTB’s seemingly “iron clad” market control.
Then again, when the U.S. government is forced to deplete the Strategic Oil Reserve to fund an eleventh hour increase in the national “debt ceiling” – let alone, when it appears to be on theverge of Middle Eastern war – it should be painfully clear to anyone with an open mind how desperate things have become. Or, for that matter, when the percentage of 25 year olds living with their parents jumps from 25% in 1999 to 50% today; or the percentage of households utilizing printing press funded government entitlements crosses above 50%, as it did last year; or the U.S. Labor Participation Rate falls to a 38-year low – as what’s left of the long ago gutted U.S. manufacturing sentiment vanishes into the ether…
“Andy, the reason I’m writing is you recently talked about Caterpillar having down quarters for the last eight years or so. I live in Columbus, Indiana, home to Cummins Engine Company – Caterpillar’s main competitor. A couple of quarters ago they said they were doing great. Well, guess what? They just announced a layoff of 2,000 professional employees by the year’s end.”
Of course, the United States is one of dozens – make thathundreds – of nations amidst debilitating recessions, in the context of the most suffocating levels of industrial, corporate, and government overcapacity in history; the worst financial condition in decades – if not centuries; and expanding social unrest, and geopolitical tensions becoming the norm, rather than the exception. The average commodity is at or near multi-decade lows, and the average currency at or near all-time lows, with “leading” Western nations exporting inflation (via maniacal Central bank money printing) at an unprecedented rate. And given that history’s broadest, most destructive Ponzi scheme – i.e., the fiat currency regime enveloping all nations – is in its cancerous terminal phase, money printing will rise as parabolically in the coming months and years as the U.S. national debt. To wit, August’s “surprise” 5% Chinese Yuan devaluation – which I predicted beforehand, in bothApril and on the very eve of its announcement – was but a “shot across the bow” in the “final currency war,” in which all Central banks are forced to devalue with hyper-inflationary monetary policy, or risk instantaneous economic collapse.
I mean, what would you do if faced with a similar predicament? Let alone, if you had caused it in the first place. Either you can allow “Economic Mother Nature” to do now what she’s going to do anyway, or attempt to “kick the can” as far as possible – in the process, making the situation far worse, and sentencing more and more future generations to death by debt serfdom and draconian government. Human nature says you will always opt for the latter, particularly when your personal safety is at risk.
Which, in financial terms, is exactly the conundrum Central banks face today – i.e, another “Fed Day,” when the FOMC unveils its latest, comically pathetic “word cloud” regarding yet another extension of zero interest rates. In this case, holding the potential for a far more dovish interpretation than “expected,” given the unmitigated collapse of U.S. economic data, commodity prices, and even the 10-year Treasury yield – which clearly, is anticipating an imminent QE4 announcement. Much less – in the spirit of the aforementioned “final currency war” – just a week past the PBOC’s “surprise” rate cut, the ECB hinting at a further QE expansion at its upcoming December meeting, and the Bank of Japan’s possibly doing the same at its own meeting two days from now. In other words, what I wrote in Monday’s “the peak of monetary lunacy? You ain’t seen nothing yet!” couldn’t be more apropos.
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