It’s early Wednesday, and I’m going to do something rare – and petty – in
the name of making a point. Which is, to refer yet again – anonymously,
of course – to the reader a few weeks back, who hounded me with emails,
asking why I don’t “back up” my “call” for lower oil prices with more
“proof.”
The reason this annoyed me was manyfold – starting with the fact that
neither I, nor Miles Franklin, have “called” anything. Nor are we
required to, given that our service is entirely free of charge, with no
pretense other than to tell the truth as we see it. Which hopefully,
will inspire you to protect yourself from the political, economic, and
financial hell unfolding as we speak – which will NOT STOP until every fiat
currency is dramatically devalued, if not destroyed. Yes, we’d like you
to purchase and/or store your metals with Miles Franklin – which we believe,
offers the best combination of prices, service, and ingenuity in what is
generally speaking, a highly
homogenous bullion industry. But we’d be just as happy if we helped
you understand the world better, and give us a reference – or heck, a mere
shout out – when warranted.
Back to oil, I cannot emphasize enough that aside from being a Chartered
Financial Analyst, or CFA, for the past 18 years, I spent 10 years working as
an oilfield service, equipment, and drilling analyst – including six at
Salomon Smith Barney, where my team was ranked by Institutional Investor magazine
as one of the top research groups in our sector for four straight
years. Moreover, the top-ranked analyst covering the major oil
producers, for as long as I worked there, sat right next to us. His
primary job, aside from covering Exxon Mobil, BP, and other large producers,
was generating the firm’s oil price forecast – which, I might add,
consistently understated reality, as he apparently “forgot” to incorporate
that little old thing called monetary inflation. That said, I have a
very deep background in the fundamentals behind oil supply and demand – plus,
the history and efficacy of OPEC – although I certainly don’t claim to be an
“expert” in all facets.
In other words, when I make claims about oil, I know something of what I
talk about, albeit not everything. And in that context,
everything I’ve seen and read tells me the supply/demand outlook is worse
than, as I put it last week, “any time since oil was first used
commercially.” Which sadly, goes not just for oil, but essentially all
commodities, per the “manifesto” I wrote nearly two years ago, based on
the fantastic work of David Stockman, titled “the direst
prediction of all.” In which, I discussed how three-plus decades of
unfettered money printing and financial engineering have caused historic
gluts in essentially every commodity – other than gold and silver, which have
experienced the polar opposite effect, due to the simultaneous suppression of
those decidedly non-commoditized commodities. Non-commodities,
because unlike all other substances that fit such description, gold and
silver have been universally used as money throughout history.
Moreover, I also know a thing or two about market manipulation, given that
I’ve spent the past 14 years exhaustively analyzing every tick of the stock,
bond, commodity, and Precious Metal markets. And trust me, despite the
fact that oil sits all the way down at $45/bbl, it has been “goosed” higher
by every imaginable manipulative tactic since bottoming (temporarily) at
$26/bbl earlier this year. The so-called “oil PPT” has attempted
everything from OPEC rumors; to relentless propaganda; to even, as we saw
last week, cooking inventory numbers to desperately prevent the continued
collapse of the world’s most important financial market. To wit,
commodities generate more revenues; jobs; and subsequently, social stability
than any “business” on the planet. And now that they are free falling,
it’s no wonder economies are crashing, currencies imploding, Central banks
hyperinflating, and political regimes tumbling. And sadly, they will
continue to do so for years to come, as the worst oversupply in global
history is unwound. And nowhere more so than in oil, which is probably
why the possibility of war is greater than at any time in recent
memory. So to the readers who questions my reasoning for oil price
bearishness – have a gander at what the International Energy Agency itself
published yesterday, of how supply, demand, and inventory factors
are simultaneously converging in a perfect storm of negativity. And if
you think OPEC – much less, OPEC plus non-OPEC – are going to cut
production when they are all desperate for cash and hell-bent on protecting
market share, I have a bridge in Brooklyn to sell you. Let alone, that
such an agreement – which like a Fed “rate hike,” isn’t going to happen
anyway – could never be enforced, as every OPEC supply constraint
agreement ever made has been cheated on. Much less in the dozens of
commodities not supported by Cartels, which are entirely at the mercy of
Economic Mother Nature.
As for said “rate hike,” Peter Schiff puts it best when he describes the
Fed’s strategy of recent years. Which is, given that it knows it
can never again raise rates – look what happen when they tried last December
– the only remaining “tool” they have is jawboning. Well, that and
outright hyperinflation. Even economic propaganda no longer works – as
frankly, the vast majority of the actual investment community are laughing
at the comical headline NFP job numbers by now. Heck, some are
even starting to read the NFP report, which clearly shows the
“headline numbers” to be meaningless – especially as they are continually
revised, as the BLS did last week, when it eliminated 150,000 of jobs that
were reported in the March 2015-March 2016 period, with the “stroke of a
pen.”
In other words, EVERY week now, they trot out Fed governors – many of
which, don’t even vote at the FOMC meetings – to “trial balloon” the concept
of upcoming rate hikes. Which of course, are loudly parrotted by the
mainstream media, led by the Pied Pipers of CNBC. Given the Fed’s, for
all intents and purposes, mandated role of cheerleading, they always claim
the economy is strong; just as the government does, like Obama claiming
anyone who says the economy is weak is “peddling fiction.”
And when markets don’t tank too badly – which takes a lot to occur, given
relentless PPT support – the Fed continues to suggest the “possibility” of
rate hikes, until finally the markets start to actually “discount” them – as
they started to do last week, when the Fed went “too far,” with “too many” of
its lackeys suggesting rate hikes were “possible” despite some of the worst
economic data to date. In other words, the market is starting to
believe the Fed may have some other agenda than the “data dependency” they
relentlessly speak of. As frankly, if they can actually look at recent
data and believe the “case for raising rates has strengthened,” they are either
certifiably insane, or have an alternative agenda of self-immolation.
As I have discussed for years on end – particularly since April 2013, when
the all-out war on Precious Metals, and economic reality, started, the Fed
now uses every opportunity it can to manipulate – er, “influence” –
perception, by scripting the comments of each of its governors’ and regional
Presidents’ speeches. This way, not only do they have more “cover” to
attack Precious Metals , whilst supporting stocks and bonds, but more opportunities
to change their message (with simultaneous PPT, ESF, and Cartel “ground
support”) when they feel markets are getting out of hand.
To that end, we are now seeing “de facto FOMC meetings” nearly every day –
as if a regional Fed President, an FOMC governor, or the Chairman or Vice
Chairman themselves speak, the Fed’s “message” can be either significantly,
or not so significantly, altered. Let alone, at regularly scheduled
events like the bi-annual Humphrey-Hawkins Congressional testimony, the Jackson
Hole symposium, and the dozen or so annual “FOMC minutes” releases – which
strangely, tend to have far more relevance to current market factors than
those existing at the time of the actual meeting.
This week has been particularly egregious, starting with Vice Chairman
Stanley Fischer being “recruited” to a Steve Liesman interview an hour after
Janet Yellen’s Jackson Hole speech was perceived as too dovish. Then
the robotic follow-up comments from Regional Presidents Dennis Lockhardt and
Eric Rosengren, of how a September rate hike was “possible” despite horrific
economic data being reported simultaneously. Throw in the ridiculous
rumors of a potential Japanese “Reverse Operation Twist,” and voila, a
violent market sell-off, of both stocks and sovereign bonds. Which I
assure you, would have accelerated dramatically if yesterday’s “eagerly
awaited” speech by FOMC governor Lael Brainard continued the ruse of
“potential hawkishness.” Of course it didn’t, as not only did Brainard
push September rate hike odds all the way back to 20% with her unabashed –
and clearly, Fed-scripted – dovishness, but she also happens to be an overt
Hillary Clinton campaign contributor. Which somehow is allowed, no
matter how unethical, demonstrating the absurdity of several Fed governors’
speeches last week on Capitol Hill, defending the Fed’s so called political
independence.
The problem is, that when you “cry wolf” too often, you are eventually
called out. And no one has cried wolf more than the Fed, in constantly
finding reasons not to raise rates, despite their unwavering claim of a
“strong” economy – which tellingly they prefer to refer to as merely
“recovering,” six years into what is now the third longest “expansion” in
U.S. history. During which, GDP growth – book cooking and all – is
barely 1%; manufacturing activity has collapsed; debt has exploded; real unemployment
has surged to Depression Era levels; and corporate earnings have declined for
six quarters running.
Thus, not only is the Fed’s – and all Central banks’ – credibility all but
dead, but no one even knows how to interpret their propaganda anymore,
particularly now that de facto FOMC “policy statements” are being issued
nearly every day. Which is probably why the market is crashing again
this morning, Brainard “dovishness” notwithstanding – and why the Cartel is
doing “double overtime” in trying to convince investors, as in 2008, that
Precious Metals are not the ultimate safe haven they have always been, and
may perhaps always be. Which, like 2008, when the Cartel initially
attacked paper PM prices when the crisis commenced, created an
avalanche of physical demand that nearly destroyed the Cartel then
and there. Which I assure you, will be dramatically more
powerful this time around, given that currencies are crashing – and being
hyperinflated – the world round. And oh yeah, global physical demand is
far higher (U.S. Mint Silver Eagle sales are three times larger than in
2008); supply is declining; and inventories are paper thin, particularly
compared to the aforementioned amount of hyperinflation global “currency
units.”
In other words, it looks like we are finally at the end of the rope of
Central bank credibility – which perhaps, will be destroyed “at one fell
swoop” following next Wednesday’s simultaneous Fed and Bank of Japan
meetings. Either way, the end game appears to have finally arrived – as
I anticipated, by year end. To that end, there are literally dozens of
potentially cataclysmic events in the crosshairs this Fall – politically,
economically, and monetarily. Hopefully, you have taken heed of what
truth tellers like the Miles Franklin Blog have long warned of,
because the “rubber is hitting the road,” and doing so NOW.
P.S. As I was about to hit send, Goldman’s “Hapless Hatzius” himself, Jan
Hatzius, who on September 2nd raised his “September rate hike odds” from 40%
to 55% – prompting me to specifically call him out with my September 3rd article;
expanded on his September 6th decision to lower his September rate hike odds
back to 40%, by taking them all the way back to 25% today. Which, as it
turns out, is about where market expectations have been all along!
