Ah, the “short squeeze”; i.e., the epitome of what’s wrong with Wall
Street-polluted, derivative-dominated “markets.” The bane of
capitalism, it allows people to “borrow” what they don’t have, for the
purposes of pushing prices down. Like everything else Wall Streets’
cancerous derivative machine peddles – particularly since 1999’s elimination
of Glass-Steagall – shorting is often done illegally, and always on leverage.
I, for one, believe the deleterious impacts shorting has on capital
formation, market volatility, and economic perception far outweighs the
positive of “liquidity” and speculative alternatives. Moreover, more
money is lost on “short squeezes” – particularly when catalyzed by overt or
covert “intervention” – than any other market phenomenon.
Currently, we are amidst the quantitatively largest “short squeeze” of all
time; as highly leveraged speculators – as always, on huge leverage,
typically with other people’s money – are being “targeted” by algorithmic
programs aimed at the “most shorted” stocks, commodities, and
currencies. To that end, it should surprise no one that one of the
“most shorted” commodities is oil – amidst the worst fundamentals
in its century-old history. Not to mention, “Dr. Copper” – or as I
deemed it two years ago, when it was still $3.00/lb, “Dr. Death.” Or
heck, the “granddaddy of oversupply” itself, iron ore – which yesterday
alone, was “short-squeezed” by 19%; joining oil, copper, and the rest of the
oversupply kings in a brief, PPT-orchestrated moment in the sun. To
that end, stocks are now more overvalued technically than at any time
in the past 12 years; and fundamentally, more than any time
EVER. Unless, of course, one anticipates hyperinflation – which in real
terms, will destroy equity values regardless of what nominal prices do.
Conversely, gold and silver – bull
market re-emergence and all – NEVERhave short squeezes, despite the most
bullish fundamentals imaginable (check out theseIndian
demand figures); the most “oversold” condition in its history (check out thislong-term
chart); and more naked shorts, amidst a global price surge, than any other
commodity! That said, recall what I wrote yesterday, of a dramatic
change in a multi-year trend.
“In what is, in my view, a clear signal of incremental Cartel weakness,
they failed to prevent PMs from surging at the “2:15 AM” open of
the London paper pre-market session for the third straight day –
after doing so at the “sixth sigma” rate of 610 of the previous 696
sessions. Unquestionably, this is the first such three-day streak.”
Well, guess what? Today makes four straight “2:15 am”
failures. Which, utilizing Cartel statistics, is an “eight sigma”
occurrence! True, as you can see below, they still attacked at all other
“key attack times” around the clock – just as they did yesterday.
However, clearly something is not right in gold suppression land.
Furthermore, per what I noted in yesterday’s “Admiral
Sprott rides again” – of the exploding
institutional demand that threatens to overwhelm the Cartel in short
order – the premium on Sprott’s PSLV silver fund surged an entire percentage
point yesterday, to nearly 4%. Which, in my view, is right on the cusp
of the level at which a Cartel-busting secondary offering is feasible.
To which I can only add, stay tuned – as the mother of all “short-squeezes”
may be awaiting the “white metal” market.
That said, the principal reason I’m so comfortable holding physical Precious
Metals, instead of fraudulent, naked-shortable paper proxies – like
the IAU ETF, which oversold the amount of gold in its portfolio with
unregistered shares – is that fundamentals are more powerfully
positive than at any time in history. “Dead cat” bounce
notwithstanding, nearly all currencies are near, at, or below previous
all-time lows; whilst some, like the Egyptian Pound, are freefalling as we
speak. Let alone, the fact that we are just two days from what might be
a major Euro-destroying policy decision by the ECB. Not to mention, the
increasingly lunatic calls for “helicopter money” – i.e., rained down on the
masses – from jurisdictions as supposedly “first world” as Switzerland and
Ontario, Canada.
However, NOWHERE is the “final currency
war” more evident than in China, where the initial devaluation of the
Yuan I first predicted in last April’s “ugliest
economic data I’ve ever seen” – not to mention, 24 hours before it
actually occurred, in “the
upcoming, cataclysmic, financial big bang to end all big bangs” – is
about to commence its “second phase” in the coming months.
Last April, said “ugliest economic data I’ve ever seen” – that prompted my
prediction of a Yuan devaluation – was a 15% year-over-year decline in
Chinese March exports. And in August, when I wrote the “upcoming,
cataclysmic big bang…” article, it was following an 8% year-over-year decline
in Chinese July exports. Well, last night’s data was so bad, it was
actually worse than those two reports combined; as February’s Chinese
exports were reported to be…drum roll please…down 25% year-over-year,
and 13% year-to-date. In other words, making the Chinese government’s
claim two days ago that its economy grew 7% last year, and will do the
same this year, even more incredulous. And subsequently, dramatically
escalating the odds that China will step up its currency war participation in
short order – whether due to outright easing, such as last month’s “surprise”
reserve requirement reduction; further growth of its already exponential
“lending” activity to the “private” sector; or otherwise. To that end,
last weekend’s official government plan to grow the money supply by 13% in
2016 was borderline hyperinflationary before this data was
published. So if you think the “dilution” of the world’s largest
economy’s currency is going to slow down any time soon, I’ve got a bridge in Brooklyn
to sell you.
As I said yesterday, tomorrow’s “horrible headlines” will always be worse
than today’s. And I assure you, the “ugliest data we’ve ever seen” is
about to get a lot uglier. Which, conversely, will make the
fundamentals for physical Precious Metals ownership become more attractive,
for more billions of people, with each passing day.
