LIES, COLLAPSE, AND THE RETURN OF PRECIOUS METALS
by Andy Hoffman, Miles Franklin
Of all the moronic excuses I’ve heard in a 26-year Wall Street career – including seven as a sell-side equity analyst – this morning’s” management comments” from one the most hideous “hot IPOs” of today’s historic tech bubble, King.com, takes the cake. King, which produces free, mindless online games like “Candy Crush” blamed a variety of miscellaneous issues for the fact that its 15 minutes of fame are over – from foreign exchange losses (Really? Are they honestly trying to portray themselves as a multi-national firm?); to a lack of new product releases (quite the ugly admission from a company that went public last summer); to – get this – expected “seasonally softer” sales in the “mid-year period.”
For a second, let’s forget that if King.com truly has a “seasonally soft” period, it should have disclosed it to investors when it went public – a measly 12 months ago. To wit, when I worked on IPOs as an oilfield service equity analyst at Salomon Smith Barney – creating earnings models and invariably bullish “initiation reports” (our investment bankers wouldn’t “allow” anything else, and potential clients wouldn’t hire us if said bankers didn’t “promise” buy ratings), my research team grilled management about every aspect of their business. Of course, compared to the halcyon days of the late 1990s and early 2000s – when Wall Street fraud was generally limited to the relatively benign sphere of conflict of interest (think Jack Grubman), today’s “research” efforts are far sloppier, with far less attention to rules, no matter how flimsy such rules might be.
After all, Wall Street has commandeered the government; and care of the PPT, no matter what lipstick-covered pigs they take public, they typically do well. That is, until their seedy underbellies starts to show – be it parasitic brain cell destroyers like Twitter; boiler room, pump-and-dump scams like “The Grilled Cheese Truck“; dying, bottom of the barrel fast food chains like “El Pollo Loco“; or highly commoditized, zero value-added societal drains like King.com. Anyhow, the fact that King’s management actually published such drivel in its earnings report shows just how close to Satan’s Lair Wall Street has descended; in KING’s case, as advised by underwriters” such as…drum roll please…JP Morgan and Bank of America.
Why did I start today’s article – written, by the way, after Friday’s market close? To show you that nearly everything Wall Street says is, if not an outright lie, heavily biased toward their own, selfish interests. As are essentially all emissions of the other two legs of the “evil tripod” – of Wall Street, Washington, and the Mainstream Media. The first of these “triplets of terror” will do anything to be elected, while the second would sell their mother’s souls for profit. As for the latter, they care not a whit about truth – but instead, ratings. Hence, the first part of today’s tripartite title – lies.
Putting these three satanic forces together, let’s consider this week’s across-the-board, horrific economic data releases, as well as the “spin” put on them – while on the topic of putting lipstick on pigs. For example, consider yesterday’s miserable April retail sales growth, which came in at a big fat ZERO; which sadly, means the heavily propagandized “pent up demand” due to cold winter weather never materialized. More accurately, there never was any such demand. Moreover, if such a “seasonal component” to retail sales actually existed, it would have been picked up by the government’s myriad, overly optimistic”seasonal adjustments.” To wit, in today’s horrific world of Central bank fostered “peak debt; falling real wages; rising inflation; and the worst economy in generations, it doesn’t matter what “the weather” is; how much the Fed lowers rates; and how much the PPT gooses the stock market. People simply aren’t spending – in strip malls, online, or otherwise. Which is probably why 2014 witnessed the weakest holiday spending season since 2008; and why retail sales haven’t fallen this rapidly since…yep, you guessed it…2008.
Worse yet, not only is consumer spending plunging – which according to Wall Street, constitutes two-thirds of the U.S. economy; but like the BLS’ fraudulent “employment” numbers; the NAHB’s equally fraudulent “housing” statistics; and “Markit’s” upwardly biased, statistically insignificant “diffusion indices”; said numbers are inevitably revised lower. The March NFP headline is a perfect example – last week, revised from +126,000 to +85,000; which by the way, pales in comparison to the BLS’ annual “benchmark revisions” – which over the years, have erased hundreds of thousands of supposed “jobs”; or, for that matter, the equally large “downward revisions” ADP unveiled roughly three years ago. As for retail sales, even I was taken aback by this chart, demonstrating how an incredible 20% of initially reported retail sales over the past five years have been subsequently revised away. In other words, as I postulated last year, “all economic data are lies“; overstated at the least, and fraudulent at worst.
And then there’s “inflation” – right up there with “employment” at the top of the fraudulent data list; in this case, serially understated for myriad reasons, ranging from cheating senior citizens out of appropriate cost of living adjustments; enabling misleadingly low “discount rates” in corporate, municipal, and Federal cash flow projections; and of course, masking the virulent price inflation unfettered money printing relentlessly poisons the economy with. To that end, I’m still incredulous at how the BLS actually applied a negative deflator to its 1Q GDP report, enabling it (before upcoming, potentially significantly negative revisions) to be reported at +0.2%. Aside from the bottom of the 2008 crisis, the last time a negative deflator was used was 66 years ago; and as we all know, the cost of living – notwithstanding a brief, already reversing gasoline price decline – has never risen faster. To wit, essentially the entire Denver area was hit this week with 15%-35% property tax increases – irrespective of actual home price trends.
Anyhow, it was just yesterday when I said the following; regarding the utterly comical Producer Price Index released Wednesday – purporting consumer prices plunging by 0.4% in April.
“The U.S. government is so desperate to slow the “interest rate train” down, it actually reported – get this – an April PPI depicting the biggest monthly collapse in five years. Yes, even with average U.S. gasoline prices having risen by 4% during April – and by the way, another 4% in May; the BLS – already infamous for publishing the monthly NFP employment report – actually reported American’s cost of living declined by 0.4%, compared to expectations of a 0.2% rise.”
Well, it appears my math was a bit off – as I was simply looking at the unofficial “Gas Buddy” website; as opposed to the BLS’ official energy inflation algorithm, which depicted an average U.S. gasoline price increase in April of not 4%, but 7.9%. Yes, actual Americans, on average, paid 7.9% more for gasoline in April than March; again, according to the BLS’s own calculations. And yet, the number it used to calculate the April PPI was minus 4.7%! As I wrote in this week’s “final round of finance’s most momentous heavyweight battle,” the government will lie about anything and everything to preserve a dying status quo based on hyper-inflating fiat currency. That said, their “footprints” – like the gold Cartel’s – are as large as the Sasquatch. And thus, if you simply seek the truth – which fortunately, is always on display at the Miles Franklin Blog – you should have no trouble understanding the tragic direction the world is going; and consequently, how to protect yourself from it.
For that matter, let’s move on to today’s “trifecta” of hideous economic reports – including an “unexpected” decline in Industrial Production; a “less than expected” Empire State Manufacturing Index, depicting the lowest corporate spending outlook in 15 months; and last but not least, an utterly catastrophic plunge in consumer sentiment. Regarding the latter, the report revealed further evidence of what we have purported all along – including, in great detail on yesterday’s Audioblog, how plunging “weekly jobless claims” is the most misleading of all the government’s “island of lies” statistics. To wit, this incredibly damning chart; which, just as the weekly jobless claims plunge has eerily correlated with the collapsing labor participation rate, has also plunged with a nearly perfect negative correlation to the “worried about losing one’s job” subcategory. Which, you’re probably not surprised to hear, surged in April – “good weather” notwithstanding – to its highest level since…drum roll please…late 2008.
Of course, such “lies” and “collapse” are becoming standard practice worldwide – as are the manipulation of financial markets on a 24/7 basis, entirely with freshly printed money fiat toilet paper. I mean, the fact that Japan – where the Yen has collapsed, and consumer inflation is exploding – still uses a negative GDP deflator should tell you all you need to know. Or, for that matter, that it is now estimated that fraudulent accounting regulations allow trillions of non-performing Chinese corporate and municipal bonds to be held “off balance sheet”; which is probably why the PBOC last month issued a “trial balloon” regarding a soon-to-be launched monetization scheme, akin to the off balance sheet “swap agreements” the Fed still holds with countless insolvent European banks – enabling the Fed to print money without reporting it, by terming such transactions “swaps” instead of “loans.” And still, per my earlier comment regarding “Sasquatch-ian sized” footprints, the Fed’s balance sheet continues to surge to unprecedented levels. As do all the world’s hyper-inflating Central banks – such as the ECB, which promised so much today.
That said, “markets” are starting to do strange things. Sure, global PPT initiatives are hyper-inflating stocks to unprecedented valuations – whilst underlying economic activity implodes beneath them (what could possibly go wrong?). Not to mention, unprecedented attempts to paint every imaginable market in a manner favorable to the terminally cancerous status quo – including a handful of politically-sensitive physical markets, like gold, silver, copper, and oil (which inevitably, will be steamrolled by the “unstoppable tsunami of reality.”) Moreover, the past two weeks’ “tectonic market shifts” indisputably portend disaster – as surging rates are causing Central banks, both overtly and covertly, to step up QE to unprecedented levels. Meanwhile, violently volatile currency markets – i.e., the “single most Precious Metal bullish factor imaginable” – are destroying global trade as powerfully as the massive supply/demand “deformation” caused by four decades of unfettered money printing. And not just in mining, manufacturing, industrial production, and infrastructure – but agriculture, where plunging prices of key foodstuffs like rice, corn, oats, soybeans, and wheat; acute water shortages in drought-riddled areas like California and Brazil; and the first farmland price declines in three decades, portend a “farming emergency” in the very near-term.
That said, despite the most violent, blatant Cartel activity I have witnessed in my 13 years in the sector (I’m celebrating my “anniversary” this week), gold and silver prices have significantly reversed to the upside. Oh, the “Sunday Night Sentiment“; “Cartel Herald“; and “2:15 AM EST” algorithms are as pervasive, and relentless, as ever. However, amidst soaring global PM demand – everywhere but the still-brainwashed U.S., that is; plunging inventories; the bleakest production outlook in decades; and oh yeah, explosive money printing, set to go parabolic in the coming months and years, the massive bottom formations created by years of suppression are starting to lift. As the aforementioned, terrifying economic and financial trends accelerate in the coming months – particularly in the United States of “Recovery,” which ultimately will yield the long-awaited “Yellen Reversal” – Precious Metals’ historic monetary power will return to the fore, just as they have with the collapse of every collapsed fiat currency. Let alone, today’s unprecedented catastrophe of all currencies having zero backing. Clearly, the tides are turning – and as the dying fiat regime moves through its death throes, the “Return of Precious Metals” will have the same impact on the status quo as the “Return of the Jedi” did on the political structure a long time ago, in a galaxy far, far away.