October 16, 2014 ~ Andy Hoffman
Watching America's "manipulation organizations" desperately attempt to repeal the rapidly approaching "reality tsunami," all we can think of - with tremendous fear and consternation - is what the "other side" will look like. With global economic activity and financial conditions far worse than the 2008 bottom - even before "the big one" commenced - we can only pray the "worst-case scenario" doesn't occur, which even the status quo embracing MSM realizes is possible.
Of course, this time around, the global geopolitical situation is far more unstable, with America a pariah whilst the rising "Eastern bloc" recruits allies faster than ISIS. Thus, the odds of WAR increase with each passing day, as exemplified by Russian Prime Minister Medvedev yesterday claiming a restoration of U.S.-Russian relations is "impossible," and President Putin today making an even stronger more ominous statement in "we hope our partners realize the futility of attempts to blackmail Russia, and remember what consequences discord between major nuclear powers could bring for strategic stability." Throw in the expanding panic, justified or otherwise, of a potential Ebola epidemic and its clear TPTB's best laid plans are undeniably "coming apart at the seams."
Yes, the "best laid plans" - as exemplified by Draghi's infamous "whatever it takes" speech" of July 2012, which simply bought the collapsing European monetary union two years, whilst exponentially worsening its economic and financial condition for the benefit of the "1%," at the expense of all else. Frankly, we can't scream any louder that the Euro will be abandoned, either via secession or expulsion - and watching this morning's carnage, our expectations have never been more validated.
Yes, the PIIGS contagion is back with a vengeance. With nearly all Western yields plunging toward zero, PIIGS sovereign yields are exploding higher - on average, by more than 10% in the past two days. Yes, 10% in two days! To wit, Greece alone has seen its benchmark 10-year yield surge from 6.7% to 8.9% - and watching the utter implosion of European equities, it doesn't take rocket science to guess what investors are anticipating.
As for commodities, the all-out crash we warned of last month is accelerating, 2008-style with WTI oil about to breach $80/bbl., and base metals in utter freefall, such as "Dr. Copper," which this morning sliced through $3.00 like a knife through hot butter. Regarding the former, don't be fooled by pathetic propaganda such as CNBC's outright lies this morning in stating that Saudi Arabia could afford to cut prices because its cost of production is so low. As we wrote inyesterday's "Crashing Oil Prices Portend Unspeakable Horrors," the heavily socialist OPEC nations have massive spending budgets - in Saudi Arabia's case, breaking even at nearly $100/bbl.; and for Iran, nearly $140/bbl. And yes, CNBC, the "average breakeven cost" of U.S. energy producers may be roughly $75/bbl., but the marginal cost of production is dramatically higher - as nearly all incremental production emanates from rapidly depleting, heavily leveraged shale oil projects. Then you have Brazil with nearly all incremental production from ultra-expensive, ultra-deep-water projects (which I know a thing or two about, having been an oil service and drilling analyst for ten years). Brazil was in recession before this month's oil price collapse; so if you want to know how they're being impacted, take a gander at the collapsing Brazilian Real.
And then there's the United States of "Recovery," where Obama's approval rating tumbled yesterday to an all-time low. Back in June, when MSM and Wall Street optimism was at its highest, and the "Dow Jones Propaganda Average" at its all-time high (excluding inflation and survivor bias, of course), we wrote that "Need Or Want, Demand Is Dying" - at the time, focusing on collapsing demand of both "need" retailers like Wal-Mart and McDonalds and "want" purveyors like Amazon.com. Well, just this morning, Wal-Mart was at it again, dramatically reducing its long-term growth expectations due to the "strong dollar" - whose adverse effects we have practically screamed of all month; mandated food stamp spending cuts (amazing howthis is the only program the government is cutting); and generally weak retail demand.
Conversely, on the "want" side of the ledger, eBay dramatically reduced its expectations, as fewer people are spending less money on internet auctions; whilst former "market darling" Netflix - the epitome of "want" purveyance - is down 25% this morning after dramatically reducing its own sales expectations. But have no fear, the government's "island of lies" economic reporting has no shame - in this morning, reporting that "weekly jobless claims" plunged to April 2000 levels. Yes, my friends, this rigged meaningless metric claims jobless claims equate to that of the peak of the post-war global economy, simultaneous with a Labor Participation rate at 36-year lows, as well as essentially all other metrics of economic activity. Remember, mid-term elections are just two weeks away, so the BLS and BEA data-cookers are working overtime to "paint the tape" - just as the PPT uses every illegal trick in its arsenal to preventing 2008's horrors from exposing themselves in all their glory.
However, PPT or not, no manipulations are powerful enough to overcome the "most damning proof yet of QE failure" - i.e., the utter freefall of Treasury yields toward all-time lows as the entire world anticipates "QE to Infinity." To that end, yesterday's yield plunge was unquestionably the most rapid in Treasury market history - with even 2008 unlikely to have witnessed a similar move. Thanks to HFT algorithms' utter destruction of market dynamics, the world's largest financial market - U.S. Treasuries - moved like illiquid OTC stocks on not only their largest volume ever, but nearly ten times the average of the past decade! Seriously, thischart has to be seen to be believed depicting a permanently broken market, enroute to a horrific, unprecedented conclusion. The benchmark 10-year Treasury yield shockingly plunged from 2.20% to 1.91% in a matter of minutes before being run back to 2.16% at the close - followed by this morning's plunge to 1.99% and 2.11% as I write at 10:35 AM EST, following an utterly hideous plunge in the NAHB's housing market index from 59 in August to 54 in September versus "expectations" of 59.
European stocks are falling my BIG percentages with major indices like Germany's DAX down 15% this month, but the U.S. PPT simply will not allow the daily 3% plunges common in Europe. Yesterday's low for the Dow was 450 points or 2.7%; but only for moments, before the PPT "Hail Mary'd" it to just a 173 point loss in the day's final hour. Just as this morning, with major European indices down more than 2%, the PPT wouldn't allow Dow Futures to fall more than 1.5% with the market "miraculously" erasing most of its losses in the opening minutes of NYSE trading - just as it did yesterday, with the follow up second wave of selling also met by relentless PPT forces. In other words, U.S. manipulators are using every tool in their arsenal to prevent the world from realizing the U.S. is coming apart at the seams - like the Cartel's unrelenting "Cartel Herald" algorithms every time paper precious metal prices attempt to surge (in line with surging physical demand); as they did yesterday at the "key attack times" of 10:00 AM and 12:00 PM EST and this morning when gold attempted to surge toward yesterday's "line in the sand" highs. Not to mention, the Fed's "new hail mary trade" goosing of Treasury yields from their lows at nearly the same minute in the early hours of New York pre-market trading, both yesterday and today.
When all is said and done, the relentless Fed, PPT, and Cartel manipulations are not only patently obvious to the entire world, but no longer able to mask the fragility of the dollar-led Western financial system. With stocks, Treasuries, commodities and currencies entrenched in the hideous, downwardly-biased volatility characteristic of collapsing markets, it shouldn't be long before
all control is lost - first, of the aforementioned paper markets and shortly thereafter, the physical gold and silver markets that act as the "financial world's Achilles Heel."
Before I go, please remember to look on the blog tomorrow when we upload this afternoon's widely anticipated "Miles Franklin Silver All-Star Panel Webinar." Not to mention, an upcoming article and podcast describing significant, positive developments at Miles Franklin's industry-leading storage program with Brink's Montreal. And given the stress and strain of working so hard against such powerful (but failing) forces, I wanted to share the joys of doing what I and the Miles Franklin Blog and Newsletter in general, do - as exemplified by a message received yesterday, from reader "Shelley"...
Hi Andy. Great article as usual. Your words are like inhaling freedom!