Modigliani painting sold yesterday for $170.4 million; and it wasn’t even
the top art auction ever – coming in second to last year’s $179.4 million
Picasso sale. I’m guessing that neither weighed more than ten pounds –
compared to the 10,381 pounds that the 151,385 ounces of registered gold on
the COMEX exchange, worth $164.8 million as I write early Tuesday morning,
weigh. In fact, said gold’s value fell by $833,000 in the first minute
of COMEX trading this morning – whilst likely, not a single ounces of
actual metal was sold. And this, at a time when global demand for physical
gold and silver is at an all-time high, just as it for rare artwork.
Of course, rare artwork is only trading at an all-time high due to
monetary inflation; which inevitably, will be undermined by the greatest
deflationary wave in modern times. Gold and silver demand, on the other
hand, will be relentlessly buoyed by fear that the very currencies that are
being inflated – and eventually, hyper-inflated – will become worthless, as
every previous fiat currency has. Now, more than ever – as we are
unquestionably amidst the “worst
global economy of our lifetimes” – coincident with the final, lunatic
stage of history’s largest, most destructive fiat Ponzi scheme.
To that end, yesterday’s “direst
prediction of all revisited – more dire than ever” couldn’t have been
more prescient – as this morning, the “attack of the sevens” is the day’s top
story. As in, a new seven-year lows for the world’s most broadly
industrial commodity, “Dr. Copper” – or as I deemed it 18 months ago, when it
was still $3.20 lb. (versus $2.24/lb. today), “Dr. Death”; as well as
the stock of the world’s largest mining company, BHP Billiton. More
ominously still, the Euro currency has also plunged to a seven-year low – on
the cusp of breaching the 12-year low set earlier this year – as the
global commodity crash is exploding as we speak. And oh yeah,
the ECB is not only preparing to expand QE next month – when LOL, the Fed
wants to “raise
rates”; but in a big way, per yesterday’s viral quote from an
“anonymous ECB board member,” saying “let’s go for a big rate cut.”
Which, considering the ECB’s benchmark rate is already negative, is
quite a mouthful. And geez, zinc is down a whopping 3% this morning, to
its own seven-year low – putting both the metals Glencore relies on
below the lows achieved at the height of the Glencore frenzy last month;
which obviously, is just getting started.
To that end, things are getting so ugly in the global economy, yesterday’s
19% plunge in China’s October imports were trumped by this morning’s 25%
collapse in Philippine exports. Not to mention, the much-worse-than-expected
0.5% plunge in U.S. October import prices, as WTI crude prices imploded below
$44/bbl. But don’t worry, every FOMC statement for the past year has
said the following, so everything will be fine.
“The Committee expects inflation to rise gradually toward 2% over the
medium term as the labor market improves further, and the transitory effects
of declines in energy and import prices dissipate.
By the way, here’s how energy and import prices have performed since this
statement was first introduced by Whirlybird Janet on December 17,
2014. That is, eleven months ago – which constitutes the “medium-term”
in most people’s view, even if the Fed will never define it. I mean,
talk about a complete “credibility
implosion.” And regarding the former, last week’s news that Saudi
Arabia increased its “discount” to global prices to its highest level since
oil’s 2009 bottom; or OPEC’s Secretary, this morning, claiming
non-OPEC members must share the burden of the oversupply; or British
Petroleum espousing that oil won’t exceed $60/bbl until at least 2019,
whilst the IEA, or International Agency, claimed 2020 as a more likely
“recovery timing,” underscores just how massive the glut has become.
And don’t forget, all you “U.S. recovery” believers – the U.S. shale oil
industry, which was by far the biggest incremental employer of the past five
years, is not only the world’s high-cost oil producer, but financed by $500
billion of junk bonds and “leveraged loans.” Let alone, hundreds of
billions of collapsing equity, rammed down investors throats by ZIRP-abetted
Wall Street and “private equity” funds.
As for the Fed’s hoped for “labor market improvements”; aside from
the complete
farce Friday’s October NFP report was (according to Zero Hedge, “no
one with an IQ greater than their shoe size – save corrupt, captured American
economists – buys it”), check out thesegraphs
of the likely path of U.S. employment, if you have any lingering
doubts. Which eerily compare to those in 2008; whilst corporate
revenues, which for the first time since the first three quarters of…drum
roll please…2009, have declined for three straight quarters. Even the
Fed’s own household survey depicts plunging
income expectations; and with the gap between corporate inventory and
sales at an all-time
high, it’s hard to believe anyone could still believe retail
employment has anywhere to go but down. Heck, even Apple, the company
that can do no wrong,announced today it is cutting orders for iPhone 6S
components, due to weak demand!
Which brings me to today’s primary topic, given how fearful Precious
Metal investors have become; albeit, less so for the savers that view
their long-term wealth in terms of ounces – knowing full well that the
laws of “Economic
Mother Nature” cannot be reversed in the physical markets, even if they
decidedly can in the fraudulent, speculative paper arena.
Not that I haven’t discussed this countless times before; as heck, the
Fed’s imminent rate hike” propaganda goes all the way back to April 2013 –
“coincidentally,” just after Obama’s April 11th, 2013 “closed door
meeting” with the CEO’s of the “too big to fail banks.” That very day,
Goldman Sachs – whose “god’s work” CEO, Lance Blankfein, likely chaired the
meeting – issued an “aggressive short sell” recommendation on gold.
Which, “coincidentally,” was followed by the Friday, April 12th
and Monday, April 15th “alternative
currencies destruction” raids. During which, for no apparent
reason, paper gold and silver prices were annihilated, by13% and 20%,
respectively. It was precisely at that point that the Fed
started speaking of “tapering” QE, whilst trumpeting the “recovering”
economy, and its desire for an imminent “exit strategy.”
From that day on, the Cartel’s viciousness has known no bounds – attacking
Precious Metals no matter what the “news.” Just as the PPT has
relentlessly goosed stocks – like yesterday’s “worst day in six weeks,” in
which the “Dow
Jones Propaganda Average,” following a spirited “hail mary” rally, fell
by, I kid you not, 1.000%; i.e., the PPT’s “ultimate limit down,” just like
the “Cartel’s “ultimate limit up” of 1.0% for gold and silver and 99% of all
trading days. Frankly, the parallels are uncanny – which makes sense,
given the propaganda emanates from the same sources. Such as, for
example, “attributing” Precious Metal declines to contradictory factors –
like one day, claiming a “strong” economy is reducing Precious Metals demand
due to a lack of safe haven demand; and the next day, claiming a weak
economy is prompting PMs to sell off due to “deflationary fears.” Heck,
in the past week alone, Bloomberg blamed an “equity selloff” on fears that
the Fed would raise rates – whilst Reuters attributed an “equity surge” on
confidence that…drum roll please…the Fed would raise rates!
Let’s face it. Anyone that actually believes raising rates could
have even the slightest positive impact – on anything –should be put
in the aforementioned category of those with IQ’s below their shoe
sizes. Let alone, the type of minuscule, infinitesimal hikes the Fed is
talking about; when even massive hikes, of hundreds of basis points, wouldn’t
push real rates above the true
cost of living. Which, I might add, even Vice Chairman Stanley
Fischer owned
up to last week! I mean, we’re talking about an historically
indebted world – with debt levels, from all corners of the planet, and all
categories – rising parabolically, with nowhere to go but up. In other
words, a Ponzi scheme by definition – which must grow exponentially
larger to survive, and do so without a catastrophic loss of confidence.
Most of all, in the Federal Reserve itself, whose $4.5 trillion balance sheet
– which hasn’t “tapered” one iota since that fateful day in April 2013 – is
the history’s largest;
most heavily levered; highest
duration; and given that it was built by being the “buyer of last resort”
of toxic Treasury and Mortgage-backed bonds, the most overvalued, and
vulnerable, as well. And geez, I haven’t even mentioned the balance
sheet of its masters at the U.S. Treasury – whose “on balance sheet” debt of
$18.5 trillion is history’s largest, but pales in comparison to its “off
balance sheet debts” of many
multiples more!
Simultaneously, the U.S. dollar – as I said it would two years ago – is
exploding higher as the global commodity crash accelerates; putting most
currencies at all-time lows, and many in danger of all-out
collapse. Everyone from corporate America, to Wall Street, to the White
House itself is violently against a higher dollar – as amidst said “final currency
war,” the only hope, misguided as it is, of retaining
manufacturing jobs is via a weakened currency. And now that everyone,
including China,
are actively devaluing their currencies, would the U.S. government really
tolerate a rate hike now? Let alone, in an election year, when
Whirlybird Janet’s only hope of re-appointment is by a Democratic
President? And don’t forget, no one is losing manufacturing jobs
faster than America!
That said, what if the Fed did raise interest rates; LOL, from a “range of
0.00%-0.25% to 0.25%; or god forbid, 0.5%? Particularly given that,
whatever they did do, would be accompanied with wildly dovish language.
Under such a scenario, do you really believe this would cause physical
Precious Metals demand to decline – when it’s already at record
levels? I mean, the Fed set rates at zero in 2008, yet gold has been
“plunging” since 2011, despite an ever weakening global economy; historic
levels of QE; and essentially every Central bank at or near record low
interest rates as well.
Not to mention, it is only “dollar-priced
gold” that has materially declined – as in nearly all other nations,
prices have been rising. In Europe, for example, the ECB is on the
verge of expanding QE and taking rates further negative; whilst
in Japan, Shinzo Abe’s “two-year” Abenomics plan has now been, for all
intents and purposes, extended “to infinity.” The People’s Bank of
China is now actively devaluing the Yuan; the Swiss National Bank is
monetizing U.S. tech stocks (like Valeant Pharmaceuticals); and countless
Central banks are devaluing their currencies despite them hitting
all-time lows. Such as, per yesterday’s
article, the Reserve Bank of India.
Last but not least, after 15 years of suppression – mining production of
gold and silver has clearly peaked – with any further declines in price
likely to exacerbate that historically dire situation further. And
particularly in the copper, lead, and zinc industries – which unlike gold and
silver, are experiencing historic amounts of oversupply. To that end,
given that roughly half the world’s silver production emanates as byproduct
from base metal mines, anything that pushes base metal prices down further –
like Fed rates hikes, for instance – will only make this situation worse as
well. And then there’s that little thing called physical demand –
which, following all major Cartel raids of the past four years, has
stair-stepped higher, to the point that on a global basis, demand has never
been higher. Including, I might add, after this July’s “Sunday
Night Paper Massacre”; after which, Miles Franklin experienced its
strongest ever quarter of demand – focused principally, I might add, on
silver.
In other words, for as stressful as the past four years have been, the
absolute last thing I worry about least is a Fed rate hike.
Firstly, given how astronomically stupid – and likely, suicidal
– such a move would be to the Fed’s own best interests. Holding gold
and silver, my view is that, if the Fed were actually stupid enough to raise
rates into a collapsing global economy – and surging dollar – in a vain
attempt to “save face” after 15 years of destroying the world with money
printing, the net result would be wildly bullish for physical demand, and
catastrophically dangerous for almost anything else. And even if, like
2008, the Cartel is able to push paper prices down further, the odds of an
unparalleled split between the paper and physical markets would likely
surge.
