CHINA, THE GROWLING COUGAR, AND THE RED-TAILED HAWK
by Andrew Hoffman, Miles Franklin >
It’s Wednesday morning; and after the dollar index briefly touched 100 last night – up 25% from a year ago, and an incredible 5.5% in less than two weeks (these are currencies we’re talking about, which are supposed to maintain their value!); it has fallen back to “just 99.2” following a Euro dead cat bounce from below 1.05 to the 12-year low of 1.06 it achieved yesterday morning. In other words, whilst the MSM will be dying to claim “the bottom” is in, not a thing has changed in the past six hours – other than traders taking profits. Amazingly, the “oil PPT” struck again after yesterday’s horrific inventory announcement, for the fifth straight week; in which yet again, despite the historic rig count plunge, U.S. oil production achieved a new all-time high. That said, said “oil PPT” is clearly floundering, at with WTI just $48.40/bbl this morning, it’s “line in the sand” of $50.00/bbl is becoming more and more distant. As it should, given oil has perhaps the worst supply/demand balance of any industrial commodity. And as for its “sister,” the “copper PPT,” all one has to do is observe it’s second blatantly obvious surge in three days – at what do you know, the same “2:15 AM” EST time stamp when gold was raided for the 397th time in the past 455 days, to realize “someone” doesn’t want “Dr. Copper” – or as I deem it, “Dr. Death” – to hail the global economic implosion that all other base metals, and the CRB Index at large, are loudly depicting.
Heck, even the Federal Reserve’s own, heavily “massaged” economic model depicts a current 1Q GDP run rate of just 1.2% growth; which is why the desperation to prevent the most widely watched “economic barometers” from crashing – and conversely, to prevent gold and silver prices from surging – is so powerful. To wit, below is a table depicting where gold would be trading in various currencies – relative to previous all-time highs – if U.S. dollar priced gold was still at the $1,300/oz level of Sunday night, January 25th, when Syriza’s unexpected landslide victory unleashed the global currency crash that rages in full force as we speak – i.e., the “single most Precious Metals bullish factor imaginable”; causing the Cartel to go berserk in its effort to prevent a 2008-style stampede to real money. Ultimately, “Economic Mother Nature” always wins the day; and in the case of Precious Metals, her victory will be spectacular; as not only is global demand surging – increasingly so, as myriad fiat currencies crash and burn; but, as discussed in yesterday’s Audioblog, and countless others, the mining industry is amidst an all-out implosion that will unquestionably yield significant production declines for years to come.
As the terminal stage of history’s largest – and first-ever global – fiat Ponzi scheme unfolds, the unprecedented money printing, market manipulation, and propaganda scheme that commenced in late 2008 – and accelerated dramatically in 2012 – will reach a crescendo; with the “final currency war” going nuclear when the U.S. “re-enters” the fray with QE4, and the Chinese with the ultimate “big bang” of a Yuan devaluation. To that end, I’m dying to see what the Fed will say at Wednesday’s FOMC meeting; as since Janet Yellen delivered the “most unequivocally dovish FOMC statement in memory” to Congress two weeks ago, global currencies, commodities, and bond yields have plunged – and heck, even the “Dow Jones Propaganda Average” as well. In fact, the White House itself issued a statement of “discomfort” with the rising dollar Tuesday – and none other than Goldman Sachs yesterday; so the pressure building for a “Yellen Reversal” is reaching a boiling point. And, my god, look at the retail sales catastrophe that was just reported as I write; not only dramatically below expectations, but depicting the first three-month plunge in retail sales since the heart of the 2008 financial crisis! And this, simultaneous with the biggest import price plunge since the 2008 financial crisis; and a horrifying plunge in Intel’s forward guidance, based on collapsing global demand.
As for the Chinese, I was asked by a reader why they would devalue the Yuan amidst record trade surpluses. Not that I haven’t discussed this ad nauseum, but since China’s 1.5 billion people, $3+ trillion cash hoard, and unparalleled gold holdings are the fulcrum of the future monetary regime, it can’t be discussed enough. In a nutshell, despite China’s significant economic advancement of recent decades, it is still run in typical, counterproductive Communist fashion; and despite the hype of U.S., European, and Japanese QE, the PBOC has printed more money than the Fed, ECB, and BOJ combined – in its desperate effort to maintain the dollar peg that has enabled its massive manufacturing growth. Moreover, its lax regulatory environment puts ours to shame; as since 2008 alone, the Chinese government has allowed $20 trillion of debt to be accumulated by local governments and private companies, as history’s largest real estate, construction, and credit bubble fomented. And here we are today, with even China’s hideously overstated economic data – putting America’s top book-cookers to shame – depicting a full-blown, expanding recession.
Meanwhile, as the dollar explodes higher – not due to U.S. economic strength (LOL), but a flight to liquidity as “the big one” commences, the pegged Yuan is being dragged higher – destroying Chinese manufacturing competitiveness as rapidly as it increased with the falling dollar of the 2000s decade. Moreover, yesterday’s “unexpected” rate cuts by South Korea and Thailand – the 23rd and 24th Central bank rate cuts since year-end, demonstrate how not only is said “final currency war” going global, but doing so in its own backyard; enabling its principal competitors – like South Korea and Japan – to “enjoy” collapsing currencies; and hence, rising manufacturing market share. And whilst the PBOC’s blatant stock market bubble blowing has achieved the same near-term perception-altering effect as that of the Bank of Japan, the ECB, and the Fed, its economic implosion continues unabated. And thus, just as the political pressure on Janet Yellen to initiate QE4 is building like steam in a teapot, so is Chinese political pressure to devalue the Yuan. Which is why said “Big Bang” is not only a fait accompli, but potentially a far more imminent event than most could imagine.
OK, now that today’s “horrible headlines” have been properly addressed, let’s discuss something I actually enjoy; which is, the nuances of Precious Metal bullion. Specifically, the Royal Canadian Mint’s Wildlife, Call of the Wild, and Bird of Prey gold and silver coin series’, which Miles Franklin has been a big fan of since the programs commenced in 2011.
In a nutshell, the RCM has been minting limited edition wildlife-themed coins for the past four years; including nine silver coins – with one more to come; and two gold coins, with one more to come. The silver coins all have mintages of exactly one million coins, whilst the exact mintage of the gold coins has not been made public. In the case of the gold coins – such as 2014’s “Howling Wolf,” their .99999 purity is the most of any bullion coin, making it unique in multiple aspects.
At Miles Franklin, we vehemently believe numismatic coins – i.e., those with subjective value above their intrinsic “melt value” – are only to be invested in by experts and hobbyists, given the extreme speculative risks regarding said subjective value. However, we could not be more bullish about numismatic coins trading at premium at or barely above generic bullion coins, given the essentially free “option” value of potential numismatic valuation. We have consistently “pounded the table” on such coins upon their release, when numismatic values tend to be lowest; and as you can see, each of the eight silver Wildlife and Bird of Prey coins have steadily increased in value since their launches.
In fact, the table above depicts said premiums six months ago; which as you can see below, have actually increased since, despite silver prices having fallen from $17.75/oz to $15.60/oz. In other words, numismatic value changes are not necessarily correlated with bullion prices – including the newest such coin (highlighted in red, below), the “Red-Tailed Hawk.”
As for gold, the “Howling Wolf” – the first of three “Call of the Wild” coins – was minted last year, and already a modest numismatic premium has appeared. The second coin, the “Growling Cougar,” was just published last month; and as you can see below, its premium (to a generic gold Maple Leaf) has started to creep up as well.