August 21, 2014
In last month's "Most Resolute Precious Metals Bulls," we wrote of how whether a certain technical analyst's prediction that a major PM attack was forthcoming, we wouldn't need the slightest bit of "resolve" to maintain our physical gold and silver savings - whichinsure us against the inevitable fiat crash, and don't become less "valuable" when attacked by naked shorting. Regarding his reasoning, we disagree completely; as in our view, markets have been so distorted by government intervention, short-term technical analysis has become utterly useless. Not to mention, during ultra-thin trading periods like the middle of August, amidst an environment of potentially catastrophic economic and geopolitical events. Given PM fundamentals have never been stronger and prices well below the industry's cost of production, we believe their risk/reward profile has never been more positive. And given the "palpable fear" TPTB are clearly demonstrating in the brazenness of said manipulations, it's difficult to believe their "day of reckoning" - for years, if not decades - of destructive behavior is rapidly approaching.
The signs of said fear are so numerous and broad it is difficult to highlight a single dominating factor. Economically, reading headlines of Caterpillar - the world's largest industrial equipment manufacturing company generating year-over-year sales declines for 20 straight quarters could not render the incessant "recovery" propaganda more laughable. Or, for that matter, this morning's worse than expected Eurozone PMI manufacturing report indicating the entire continent is amidst or nearly amidst, recession. However, as governments and Central bank funded institutions have purchased at least half the world's equities - and in many cases, sovereign bonds - with printed money over the past six years, we're supposed to believe "all's well." Better yet, we're told Central bankers are "in control" as they converge on Jackson Hole; when their policies, subjectively, could not reflect less "control" if they tried. And we're not just speaking of the post-2008 crisis environment, but the entire history of monetary planning failure. But don't worry, we're told as they'll do "whatever it takes" to make things right.
Geopolitically, one would have to go back to World War II to find a situation where so many nations were experiencing such dire outlooks. From the four corners of the planet, the inflation exported by the world's leading money printers is catalyzing historic expanding levels of social unrest - in many cases, accompanied by revolution draconian government action and even war. Even the U.S., with its "lesser" inflation due to its (dying) reserve currency status is dealing with such instability (see Ferguson, Missouri) as the cost of living continues to rise and real employment to fall, yielding a "dependency nation" where more than half the population relies on entitlements that themselves are borrowed via freshly printed money. It won't be long before global "QE to Infinity" is as ubiquitously understood as the inevitable failure of fiat currencies and the equally inevitable explosion of PM prices. And thus, we have little doubt that the recent, unfathomable market interventions are nearing an historically ugly end.
Regarding precious metals, even we have never seen anything like the blatant manipulations since April 2013's "alternative currencies destruction"; when, the day after a "closed door" meeting between Obama and the leading TBTF bank CEOs, gold and silver were attacked with the most vicious paper raids we can recall. Yesterday's post-"FOMC minutes" attacks are a perfect case in point; and by the way, the reason we put FOMC minutes in quotes is because frankly, we have serious doubts such "minutes" are even real. Now that FOMC minutes publication day has become a propaganda mechanism - and PM "key attack event" - it's entirely likely said "minutes" are fabricated to meet TPTB's daily manipulation needs. You know, like nudging rates up when the Fed fears they are signaling the "most damning proof yet of QE failure" (i.e., plunging rates amidst a so-called recovery) or pushing them down when equities are falling to quickly for their liking. And, in either case, slamming PM prices; and afterwards, justifying such attacks with a litany of pre-packaged propaganda.
Nothing could be further from the truth; and reading headlines like "many Fed officials said job gains might bring rate rise sooner," my head felt like it would explode. To wit, just three weeks ago, an extremely dovish FOMC policy statement highlighted a "significant underutilization of labor resources." Not to mention, the ensuing July NFP report was a giant disappointment.
Yes, bond yields temporarily rose two basis points - likely due to said manipulations - but an hour later, were back down to where they started - and as I write this morning, are lower than where they were before "minutes" publication. As for the dollar, it barely budged. However, when gold and silver were simultaneously attacked even the great ZH's perception can be manipulated - which is exactly why the Cartel exists. A friend last night spoke of the "rising dollar" - a comical thought, given it has been in a tight trading range for the past decade with the only material component of the "dollar index" basket, the Euro. Yes, with the ECB on the verge of announcing a major QE program, the "dollar index" has risen from 80 to 82, but against real items of value like food and energy - and PMs - both currencies have dramatically declined for decades.
That said, the recent "dollar strength" is ominously yielding the same "emerging markets" currency weakness that has precipitated expanded global inflation and unrest since the post-crisis money printing group commenced in 2008. The Yen, for example, appears on the verge of finally breaking support and collapsing - just in time for the end of Abenomics, and potentially, a BOJ "re-upping" that ultimately catalyzes hyperinflation. As for the Russian Ruble, no doubt Putin's "de-dollarization" efforts will accelerate as a result; as clearly, it is being tossed around like a rag doll due to Federal Reserve led market intervention.
When will such "fear" turn to panic? We don't know, but it can't be far away now. The signs are everywhere, and as Bill Holter wrote in yesterday's "Kill Switch?," it is indeed puzzling to see COMEX silver open interest not only dramatically above current "inventories," but at nearly an all-time high despite three-plus years of dramatic price declines and options expiration smashes.
Even more intriguing is the fact that mining shares are outperforming gold and silver for the first time since my highly-publicized exit from them in mid-2011, per the below chart depicting a well-defined, year-long "reverse head-and-shoulders" bottoming formation. Such action does not necessarily "mean" anything. However, given miners are the market's most suppressed sector, it certainly draws my attention. Not that I'd ever buy them, but I must say I'm intrigued by this formation. Perhaps, as Bill H. wrote earlier this week, "George Knows Do You."
Well, I guess that's enough "conspiracy theory" for a day; which I say as the Miles Franklin Blogtakes great care to avoid what isn't proven or highly logical. FACT and LOGIC are what have driven our analysis for the past decade-plus, and we don't intend on abandoning them now. Hopefully, you too will perform your due diligence in like fashion; as if you do, we know you will draw the same conclusion. That is there's a reason TPTB are demonstrating such "palpable fear" in their words and actions - which mathematically can't be far from morphing into full blown crisis and an historic precious metals surge