Extremes To The Extreme
Extremes To The Extreme by Andy Hoffman
It’s just one day before the Ides of March; when not one, not two, but three potentially explosive “PM bullish, everything-else-bearish” factors are “scheduled” to occur. During which, Andrew Maguire claims the wholesale physical gold market – where the world’s largest buyers, like Central banks and sovereign funds, play – has never been tighter; with massive unseen buy orders at the $1,200/oz level. Will this in fact “break” the paper market in the next few months, as he anticipates? I guess we’ll have to wait and see. As for me, all I can say is that I’ve never seen such extreme levels of, well, extremes, in the political, economic, and monetary arenas; which tell me, given all I’ve learned over a three-decade career, that what we are witnessing today is not only historically unsustainable; but unequivocally, nearing the “end of its rope.”
And it’s not just in the “big three” financial market catalyst groups noted above, but the social arena as well. To wit, the social divide in not only America, but much of the civilized world, is like nothing witnessed in our lifetimes. Nor is, sadly, the level of mental “dumbing down” of the populace, due to a combination of neglected education; a lack of parental discipline; 24/7 financial market manipulation; and the misguided belief that history’s largest, most destructive fiat Ponzi scheme makes “free lunches” available to anyone that wants them. Throw in the mind-altering, critical-thinking-destroying phenomenon that is the societal blight of social media – I mean, geez, the President is tweeting all day long – and you can see why financial markets trading at all-time high valuations; amidst all-time low fundamentals; are as endangered as dinosaurs on the eve of the Asteroid collision that destroyed them. Heck, just yesterday, one of the smartest people I know thought it was a “good idea” that Fair Isaac, the company that produces FICO credit ratings, will be boosting thousands of subprime borrowers’ ratings by “adjusting” them – to exclude the penalization of anyone whose prior delinquencies were “settled” with collection agencies; no matter how long it took to do so, or what discount was applied to the outstanding loan balance! This, just a decade after a subprime mortgage lending crisis nearly destroyed the world. Which, in its wake, has spawned equally large auto and student loan subprime bubbles.
Frankly, I can’t think of a single person in my personal life with a clue what’s going on; let alone, the motivation to learn about it. Sure, people are “cutting back” in all aspects of their life, given the explosive rise of the cost of living that has been dwarfed by “COL” increases in the world’s 180+ non-reserve-currency-issuing nations. Such as, for instance, the equally “first world” UK; where, in the wake of yesterday’s formal Parliamentary decision to move forward with the BrExit, the Pound has plunged to nearly an all-time low. However, generally speaking, the average person doesn’t understand the simplest of economic concepts.
Like, for instance, the hideous, bankrupting economics of socialized healthcare; or a brick-and-mortar retail industry suffering from the “quadruple whammy” of consumers’ historically low savings and real wages; surging operating costs – principally due to Central bank money printing and overbearing government regulations; the irreversible secular trend toward online shopping; and oh yeah, unprecedented financial leverage, amidst history’s biggest commercial real estate glut. Or the fact that the world’s biggest military, which already spends more than the next ten nations combined, doesn’t need to be “rebuilt”; nor does the world’s biggest nuclear arsenal, by far, need to be upgraded to, in Trump’s words, “top of the pack” status. This, from a man who LOL, in the very same speech claimed to want to see a world free of all nuclear weapons.
No, they don’t understand that four decades of unfettered money printing; financial leverage; manipulated markets; and predatory lending have created historic oversupply in essentially all aspects of the global economy – from retail infrastructure; to copper and crude oil production (see today’s massively bearish oil headlines, like this; and WOW – thisOPEC-busting development); ghost cities; agricultural output; and government itself. Or that unprecedentedly ugly demographic trends will reduce economic demand for decades, no matter what “policies” governments enact; how much money Central banks print; or how desperately, overtly and/or covertly, markets are “supported.” Or that the unwinding of these historic bubbles; and the equally epic debt underlying them – on the individual, corporate, municipal, and sovereign level – will be the most deflationary event since the Great Depression. Only this time, because the gold standard has been abandoned, the world is awash in debt, which can only be discharged via outright default or hyper-inflation; and given the unblemished “track record” of hundreds of prior fiat regimes, you can bet it’s the latter method we’ll be “treated” to.
Frankly, on this eve of the LOL, “debt ceiling” returning after a 17-month hiatus – as for some reason, John Boehner’s Republicans allowed Barrack Obama’s Democrats to “suspend” it through the 2016 Presidential election – I’d bet that 90% of American adults have no clue that the national debt is $20 trillion. Let alone, that an additional $5 trillion is held “off balance sheet”; or that America’s “unfunded liabilities” are at least $100 trillion more, and rising. Or that said debt was just $5 trillion when Bush was inaugurated in 2001; $10 trillion when Obama took office in 2009; or $14 trillion when the U.S. was stripped of its “triple-A” credit rating in 2011, because Congress had no viable plan for reducing it. Or that one day before said “debt ceiling” re-materializes, the government has essentially “run out” of cash.
Or that no matter what Trump’s budget proposes, trillion dollar deficits are already “baked in the cake” in perpetuity. This, under the CBO’s, or Congressional Budget Offices’ (talk about an oxymoron) laughable assumptions that we never have another recession (despite already being in America’s third-longest-ever “expansion”); and that interest rates never rise from the lowest levels in the nation’s 240-year history. This, at a time when an “historic” infrastructure spending bill; “massive” tax cuts; and the “repeal and replace” of Obamacare are assumed to be imminent – when in fact, they haven’t even been proposed. Except the latter, of course, in a “Trump-Care” format so moronic, it actually rivals Obamacare in its destructiveness. And given that there’s not a snowball’s chance in hell of it passing, America should be preparing itself for the ramifications of what Paul Ryan (the “creator” of Trump-Care) said yesterday; i.e, if we don’t pass this hideous bill, we will see a “further collapse of the health insurance markets.”
Consider the lunacy of the fact that Trump’s initial “budget” proposal will be delivered on Thursday, one day after the debt ceiling freezes up government. Not that it has a chance of being passed irrespective; but consider how incredibly dysfunctional the world’s largest government, of the world’s “most powerful” nation is; that it doesn’t even have a mechanism requiring a budget proposal before the system is shut down? Let alone, that on that very same day, its “independent” Central bank plans to raise interest rates, into arguably the weakest economic environment since the 2008-09 crisis – as evidenced by their own GDP estimate of 1.3% for the first quarter, which was “accomplished” amidst historically high post-election “consumer confidence,” and equally historic “soft data” economic readings. Not to mention, their own “Labor Market Conditions Index”; which, despite Friday’s “awesome” jobs number, managed to not only decline in February, but nearly turn negative! Let alone, “inflation” rates that are being weakened, as I write, by plunging commodity prices; and the equally deflationary impact of the interest rate and dollar index surge that the Fed’s ill-advised – and potentially, militaristic (against Trump) – rate hike jawboning has caused.
And did I mention tomorrow’s Dutch election, which could catalyze the vaporization of the Euro’s “support” at its 14-year low of roughly 1.045/dollar; and in its wake, that of countless other currencies already trading near, at, or in many cases well below previous all-time lows? Which was just “turbo-charged” yesterday by Turkey’s declaration of diplomatic and “refugee war” against the Netherlands, in what can only be viewed as the “dream scenario” for the violently anti-EU, anti-Euro Geert Wilders’ Freedom Party. Which in turn, would be both hyperinflationary in local terms; and massively deflationary for the U.S. – as the historic level of dollar-denominated debt becomes patently unpayable. Not to mention, the massively deleterious impact on corporate America, which has already seen its (historically low-quality) earnings decline for six straight quarters; whilst the President himself rages about the “too strong” dollar “killing” us. Heck, Steve Mnuchin will be warning our major partners of this very “threat” this weekend, when he confronts the leaders of “grand champion” currency manipulators China, Japan, and Germany at the first post-election G-20 meeting.
Amidst this cumulative lunacy, everywhere I look I see “extremes to the extreme” in history’s most overvalued (and over-manipulated) financial markets. Like, for instance, China’s “worst start of the year for retail sales since 2002”; investors’ “highest degree of junk bond bearishness since 2008”; “risk ignorance” – as depicted by the P/E: VIX ratio – at “23 year lows”; and even the “Buffet Measure” of stock market valuation – i.e., total market capitalization to GDP – exceeding the Dotcom peak. This, despite “GDP” having been goosed by a “revised” calculation method three years ago, making this metric that much more glaring in comparison. But don’t worry, Buffet says we should ignore his own metric, and buy, buy, buy!
In other words, the world appears to be on the verge of political, economic, social, and monetary implosion, at a time when “extremes to the extreme” can be seen across all aspects of financial markets, and society at large. And nowhere more so than in the historically suppressed Precious Metal markets, where a combination of already record-high demand; terminally – and dramatically – declining production; historically low above ground, available-for-sale inventories; and unprecedentedly bullish catalysts; may well break the U.S. government led “Cartel” that’s been holding them down for two decades, in spectacular, and unprecedented fashion; potentially, far sooner than most than even imagine.