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“Us” Against The World

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Published : March 21st, 2017
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Category : Opinions and Analysis

This just isn’t fair!  As every time the weekend passes, I wake up Monday with a gargantuan amount of “horrible headlines” to process (or, as I have recently deemed them, “PM bullish, everything-else bearish); which I dutifully gather every second of the day, be it Saturday, Sunday, or holiday.  In other words, the Miles Franklin Blog tirelessly works 24/7, to give you the best, and most actionable information available.

In this particular case, there are literally four topics worthy of stand-alone articles – or heck, Audioblogs.  Plus, a handful of “second tier” topics worth at least my attention, if not significant commentary.  Of which, I intend to get to all this morning, culminating in what, after a significant amount of consideration, I determined to be today’s “winner.”  To that end, I’ll say one thing about my job – particularly in a world where Zero Hedge exists…it is never done, and never lacks excitement!

That said, let’s start with some of said “second tier” topics – like the myriad articles discussing how the U.S. shale oil industry, after years of cost reduction and relentless technological advancements, can now comfortably produce at prices as low as $40/bbl,  proving that not only was OPEC’s desperation to prop prices from last year’s sub-$30/bbl lows beyond anything seen in its hideous, six-decade reign of incompetence; but that, as I have maintained for the past year, said reign is about to ignominiously end with the vast majority of OPEC nations going bankrupt – particularly, the purveyor of the dying, but still dollar-supporting “Petrodollar” agreement, Saudi Arabia.  Which, when prices finally do succumb to the massive non-OPEC production increases that must continue – from companies, and nations, equally desperate for cash to fund their exploding debts and crashing economies and currencies, will see its “Middle East Apartheid” government implode, in favor of far less pro-American factions. 

TRUST ME, the single biggest factor behind last year’s “magical” appearance of the paper-oil-price-supporting “oil PPT” – which like the “stock PPT” and “gold Cartel,” is unquestionably led by the desperate-to-preserve-the-dying-status-quo U.S. government – is to hold prices up enough to enable the “sucker IPO of the century” to occur this year.  I.e., the proposed $100 billion IPO of Saudi Aramco.  And by the way, along with the economic and monetary carnage the collapse of the world’s largest commodity market will bring, will be a whole new level of European migratory hell – just as nations from France, to Italy, to Germany are amidst potentially continent-changing national elections. 

Did anyone notice the terrorist attack at France’s Orly Airport this weekend, when a radicalized Moslem shouting “I am here to die for Allah; there will be deaths” stole a soldiers’ gun, and was killed in the subsequent firefight?  That – and Turkish President Recep Erdogan’s lunatic rant this weekend, promising to “blow Europe’s mind” by unleashing 15,000 refugees per month –  can’t be bad for Marine Le Pen’s recently surging poll numbers, methinks.  This, as we head for May’s French Presidential election which, in my view, could turn be a “BrExit times 100” event.

While on the topic of LOL, “second tier issues,” it’s absolutely incredible – but in today’s recent “mad, mad, mad world,” par for the course – how little attention is being given to the fact that America’s new $19.9 trillion “debt ceiling” will be breached within two months, once the last remaining “extraordinary measures” – like “borrowing” from Federal pension funds – are exhausted.  Just this weekend, Trump’s all bark, no bite Budget Director Mick Mulvaney admitted that under a best-case scenario, the budget might be balanced within LOL, ten years.  This, as we prepare for an expected explosion in the fourth quarter current account deficit, to be reported tomorrow; whilst Paul Ryan submitted additional changes to the pathetic Trump-Care “repeal and replace” bill – which has as much likelihood of passing as Hillary Clinton overturning the Presidential election.  In other words, America is not inching, but rocketing towards the most destructive, and unresolvable, debt ceiling crisis in global history. 

Frankly, the only actual “budget reductions” that will likely come to pass – given that Trump’s dead on arrival “skinny budget” proposed absolutely nothing politically viable – is the heartless rollbacks Trump aims to launch, of Obama’s ban on tax collectors issuing financial penalties on the legions of delinquent student loans that cannot be repaid under any circumstances.  This, as we learned that said delinquencies skyrocketed to record levels last month, exposing just how Ponzi-esque the soon-to-be-taxpayer-bailed out student loan program (which I kid you not, represents the single largest asset on the hopelessly insolvent Federal government’s balance sheet) actually is.

Moving to the private side of the ledger, perhaps the dollar’s relentless slide to post-election lows (upcoming European collapse notwithstanding); and the benchmark 10-year Treasury yield, “post-FOMC,” again falling below the 2.5% “economic line in the sand” I drew more than two months ago, were influenced by Friday’s miserable, unchanged February industrial production report.  Or perhaps, the lowest level of new U.S. loan creation since the Great Financial Crisis of 2008.  Or continuing reports of the massive retail store closures I’ve harped on – until recently, to deaf ears – for months.  Which, with each passing day, make it more and more likely that the Fed’s inevitable day of ignominy will arrive sooner rather than later.  When, once and for all, it is forced to admit the economy is weakening; and thus, that the farce of a “tightening” bias they are trying to perpetrate – in the process, causing massive damage to already weak interest-rate sensitive industries – is over, in favor of the new, historically hyperinflationary easing cycle that once and for all, spells its doom.  This, as Donald Trump will have the ability to replace essentially the entire FOMC leadership within the next 12 months; likely, with far more dovish sycophants, given his unequivocal, but patently fallacious, belief that the “too strong” dollar is “killing” America.

Which brings me to this weekend’s “big three” horrible headlines – starting with last night’s “quietly” reported news that Deutsche Bank is holding yet another massively dilutive rights offering to stave off its inevitable collapse – to the tune of €8 billion, at a gargantuan discount of 35% to the current market price.  This, as LOL, Deutsche Bank’s own analysts published a report stating that the probability of a severe negative economic shock is extremely high.  To which, I can only respond by stating that DB is more than ever, the “worlds’ most systematically dangerous institution”; or, as I deemed it last summer, before the “Deutsche Bank PPT” bought it a few more months by pretending the dying bank was “saved,” the “Lehman of Europe.”

Make no mistake, the “consortium” of more than 30 banks; plus, Deutsche Bank’s largest investors, the Chinese and Qatari governments; many of which, like Italy’s Unicredit, desperately require capital themselves; was nothing more than a taxpayer-funded bailout fund – with printed Fed and ECB money; which undoubtedly, will be dramatically increased in the coming months, in light of “big three” topic number two.  I.e., a report published this weekend by the EU, suggesting massive European bank losses if, and when, the ECB reduces its historic QE program.  Which, not un-coincidentally, is scheduled to occur next week, when its monthly sovereign bond monetization rate is reduced – until at least year-end – from €80 billion to €60 billion (as if this, plus a negative 0.4% interest rate, can be considered “tightening”). 

In the report, the horrifying – and undoubtedly, considerably understated – levels of bad European debt are estimated to be between 16% and 20% in Ireland, Italy, Portugal, and Slovenia; and I kid you not, nearly 50% in Greece and Cyprus, the nations that were LOL, “bailed out” and “bailed in,” (dis)respectively.  The former of which, requires another €7 billion by July to (pay off its Troika masters and private banks like Deutsche Bank); and thus, stave off default.  This, as it is widely understood that not a shred of the previous three bailouts’ “austerity” measure demands have been met, or even attempted to be implemented.  In other words, Europe is headed for a catastrophic implosion, engendering the collapse of banks, corporations, and nations states alike; and with them, the political union, and Euro currency itself.  Likely, far sooner than anyone can imagine; which I assure you, a Marine Le Pen victory two months hence will catalyze.  And if not, something else, with the most likely catalysts being, in my view, in the banking industry itself; or politically unstable nations like Italy, Greece, or Spain (i.e., Catalonia).  Oh, and did I mention that the BrExit’s “Article 50” launch was officially scheduled today, for March 29th?

Last but not least, we have this weekend’s “winner” in the “PM bullish, everything-else-bearish” contest – which started with Friday’s painfully awkward state visit of soon-to-be-ousted Chancellor Angela Merkel to Washington, where she and Donald Trump refused to shake each others hand.  Which is understandable, given how Trump has single-handedly destroyed U.S.-German relations by treating Merkel like Rosie O’Donnell, in accusing her of being responsible for Europe’s migrancy crisis; serially manipulating the Euro; preventing German automakers from building U.S. manufacturing plants; and underpaying NATO – all as she is attempting to be re-elected.  I mean, if that alone is not reason to buy Precious Metals, what is?

I’ll tell you what…the results of this weekend’s historically contentious, and potentially inflectionary, G-20 meeting, when trade negotiations got so ugly, the meeting’s typical, sugar-coated communique was forced – by Donald Trump himself, against the wishes of essentially all other participants – to remove long-standing references to a universal support of free trade, and rejection of protectionism.  In other words, Trump made it clear that it’s “U.S. against the world”; and for all intents and purposes, launched World Trade War I; which I assure you, will be the most deleterious to global trade since the Smoot-Hawley tariffs of 1930; which, in many historians’ view, were a major catalyst of the Great Depression.  Well, that, and the massive stock market crash of the prior year, which today’s historically overvalued stock market – more so than 1929, 1987, 2000, or 2008 – has only been thus far avoided by an historic money printing and market manipulation campaign; which inevitably, must collapse under its own weight.  Certainly in real terms, if not nominal terms as well.  Oh, and did I mention that back in 1930, the U.S. was on a gold standard – and thus, had essentially no debt, compared to $20 trillion today?

Yes, my friends, the day of reckoning is closer than ever– as is, to the interest of the vast majority of Miles Franklin Blog readers, the “inevitable, decisive 200-week moving average war victory” in the Precious Metal markets.  Which, as I write, will be “won” when gold and silver cross the tantalizingly close levels of $1,250/oz and $18.30/oz, respectively; in the process, recovering all of the damage done by April 2013’s “alternative currency destruction raids” (launched one day after the unprecedented “closed door” meeting between Obama and the largest “too big to fail” bank CEOs), and catalyzing what will likely be one of the most powerful rallies in financial market history.  Which, simultaneously, will coincide with some of the most horrifying fiat currency purchasing power losses imaginable.

P.S. For those eager to learn more about the dramatic, ongoing events in the Bitcoin market – particularly, the rapidly escalating “scaling debate”; I’ll be taping a special podcast today with Bix Weir; in which, we not only discuss these topics, but the parallel issue of the risk versus reward proposition of various asset classes – from stocks and bonds; to Precious Metals; and cryptocurrencies.

Data and Statistics for these countries : Cyprus | France | Georgia | Germany | Greece | Ireland | Italy | Portugal | Saudi Arabia | Slovenia | Spain | All
Gold and Silver Prices for these countries : Cyprus | France | Georgia | Germany | Greece | Ireland | Italy | Portugal | Saudi Arabia | Slovenia | Spain | All
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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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