GREED, FEAR, AND PRECIOUS METALS
by Andy Hoffman, Miles Franklin
It’s Sunday morning, and even I am in awe of the cumulative lethargy of a Mainstream Media so dumbed down by propaganda; and so beaten down by the relentless decline in its readership and viewership; it no longer even publishes. To wit, two days after a horrific decline to yet another horrific week – both economically and financial market-wise; amidst the worst economic environment of our lifetimes, and a burgeoning, global financial crisis with “2008” written all over it – I see “nary a peep” from the major news services. Sure, Zero Hedge is flooded with “alternative media” commentaries; but as for actual “news” reporting, absolutely nothing. Nada. Zip. Heck, you’d think it was a lazy, devil-may-care summer weekend of the late 1990s, mid-2000s, or even 1987 or 1929!
That said, the unfortunate reality is that things are that bad. And unfortunately, just getting started; as not only has “September cometh,” but done so following the worst August stock performance in memory. And don’t forget next week’s “Shemitah” biblical prophecy; as whether it’s true or not, it’s difficult to dispute the coincidence of its timing. And by the way, on the rare “seventh seven-year cycle” this year’s Shemitah brings, the prophecy is that the year following the Shemitah (starting September 14th), civilization as a whole will experienced a massive “debt jubilee.” Again, quite coincidentally timed, as said “debt jubilee” is mathematically guaranteed to occur irrespective – be it in the coming year, or shortly thereafter.
Starting, perhaps, in none other than the original cradle of civilization, Greece; which despite said lack of news coverage, never received the so-called “bailout” we’re to believe “saved” it. And following the upcoming “snap elections” on September 20th – incredibly, the collapsing nation’s second in eight months – whatever shards of hope for avoidance of the Eurozone “GrExit” that must inevitably occur may be permanently destroyed. Just look at the stock of the “National Bank of Greece” – ticker NBG – which closed at an all-time low on Friday, if you think otherwise. Not to mention, the 25 or so global stock markets well into bear market territory; the majority of which are “emerging markets” on the verge of equally tragic economic and political meltdowns.
Yes, the very day I published “death of the BRICS,” the Brazilian Real, Indian Rupee, and South African Rand plunged to all-time lows – whilst the Russian Ruble closed barely above its own, dating back nearly a century. And these are the nations Goldman Sachs, barely a decade ago, decreed to be the world’s “growth engines” for the next 50 years! Let alone, “lesser” nations like, the dozens of “emerging markets” whose currencies, too, closed at all-time lows. I mean, we’re talking about the cumulative purchasing power of billions of people here – and I haven’t even discussed the biggest “BRIC” of all – China; or as I deemed it last week, the “most dangerous, destabilizing force on Earth.”
Amidst an environment where tens of trillions of dollars’ worth of Chinese municipal and “shadow bank”-financed corporate debts are going sour, history’s largest financial bubble (which is saying a lot) is amidst an historic collapse – which even the governor of China’s Central bank admitted last week. As I wrote in the aforementioned article, the PBOC is burning through hundreds of billions – soon to be trillions – of the ill-begotten currency reserves garnered from two decades of its global destructive currency pegging campaign; which clearly, is “coming home to roost.” And thus, when Barclays Bank espoused this week that it doesn’t think the “massive cost involved in such currency intervention is sustainable,” they could not have made a bigger understatement. To wit, no matter how hard the PBOC pretends to be “managing” the Yuan’s decline, it MUST inevitably take the politically expedient route of all-out de-pegging. Or, as I described it last month – one day before the devaluation process commenced – the “cataclysmic financial big bang to end all big bangs.”
That said, I last week wrote that “only one financial event could be as cataclysmic as a significant Yuan devaluation.” Which, of course, would be the Federal Reserve raising rates – albeit, by a miniscule, immaterial eighth or quarter of a point – in an environment of collapsing equities, commodities, and currencies. I mean, Friday’s NFP job report – you know, the Fed’s admitted “most important data point” – was an unabashed disaster, portraying the “unhealthiest” labor market in the nation’s history; which sadly, is accelerating downward at an alarming pace. And as for the “2% inflation” the Fed claims to be targeting, what part of the CRB Commodity Index touching a 40-year low last week – with far lower levels a near certainty – gives it confidence that the time to reduce monetary accommodation has arrived?
Much less, as the aforementioned meltdown in worldwide commodities would exponentially accelerate if such a callous, aggressive action were taken. Let alone, when the White House itself has issued countless warnings of the “economic headwinds” the strong dollar is causing. And oh yeah, the fact that America’s largest economic competitor, Europe, expanded its already maniacal “QE” program last week – in yet another nuclear salvo of the “final currency war” I predicted nearly three years ago – with the Bank of Japan clearly “on deck” to expand Abenomics; and thus, reduce America’s already dying manufacturing competitiveness further. To that end, Friday’s NFP report purported the first decline in U.S. manufacturing jobs in two years; which, I assure you, is just “jacks for starters.”
Again, it is not possible to understate the devastating “deformation” of global economies and finance caused by years of unnaturally easy monetary policy. Let alone, when combined with unprecedented market manipulation. From the destruction of the “New York Taxi Cartel” – which was heavily “over-monetized” by cheap money and Wall Street financial engineering; to countless third world nations that “benefited” from the historically low interest rates doomed-to-fail Federal Reserve policies temporarily engendered. And of course, the oversupply of commodities, industrial infrastructure, and “government” of all types; the world is headed for pure economic – and shortly thereafter, political and social – hell, no matter what the world’s rapidly crumbling Central banks attempt.
And trust me, if the Fed is dumb enough to raise rates, this catastrophic process will be immediately shifted into hyper-drive. I mean, geez, the IMF itself is begging the Fed to hold off; whilst everyone from European Central bankers to the Fed’s own officers are admitting the failure of various “ZIRP” and “QE” programs to revive global economic activity! Oh well, we won’t have to wait too long to find out if the Fed is indeed suicidal. And by the way, how “coincidental” is it that the Fed’s all important, “damned if they do, damned if they don’t” decision is scheduled for September 17th – just four days after the prophesized “Shemitah?”
As for Precious Metals – i.e., the only real money the world has ever known; physical demand is exploding, as the “universal, unprecedented fear” I spoke of last month – and Miles Franklin’s President and Co-Founder, Andy Schectman, validated in spades on the special podcast we taped two weeks ago – is clearly enveloping the world like a giant, cancerous dust cloud.
No matter where one looks, evidence of vanishing supply is prominent – from all-time low COMEX gold inventory; to record gold exports to China; to exploding Central bank gold purchases. Which, of course, pales in comparison to what the Miles Franklin Blog has spent the past month painstakingly highlighting regarding the dramatically tightening physical silver market; which frankly, is emitting the same terrifying signal as in 2008. Only this time around, global demand is dramatically higher – perhaps more than twice as much; global inventories are significantly lower; and, most ominously, the outlook for future silver production has not been bleaker in decades, if not centuries. Here at Miles Franklin, one of the nation’s largest bullion dealers, we can no longer source “junk silver” – i.e., the “ultimate fear asset.” And while we still have modest availability of “peripheral” silver products, popular coins like U.S. Silver Eagles and Canadian Silver Maples are now backordered by eight weeks and counting, with physical premiums at their highest levels since 2009. To wit, if this doesn’t tell you just how much of a charade soon-to-be-destroyed paper exchanges like the COMEX have become, I don’t know what will.
Which brings me to today’s primary topic, catalyzed by consideration of the world’s most famous investment “saw”; i.e., “buy low, and sell high.” By now, anyone reading this blog has experienced enough of financial markets to realize such ironclad logic is rarely adhered to – particularly in paper financial markets, where the ease of entry and exit are too difficult to resist. Not so much in physical markets like gold and silver – where buying and selling take a bit more time and effort; and certainly not illiquid markets like real estate.
Of course, said paper markets are where the Cartel has done all its damage, causing “investors” to sell everything not nailed down; in the process, not only destroying themselves, but the global mining industry. Conversely, the physical market has seen essentially zero selling throughout the past four years of Cartel-orchestrated, catastrophic paper losses; and in fact, is as strong as its been at any time in the past century.
That said, it would be far stronger if paper prices would even modestly tick higher. And frankly, it was the two-week mini-rally in mid-August, at the onset of the global equity, commodity, and currency collapse, that precipitated the aforementioned explosion of global physical demand. And this, with gold and silver simply rising from six-year lows – of $1,070/oz and $14.40/oz, respectively – to $1,170/oz and $15.70/oz, before being immediately smashed back down by the Cartel, to this weekend’s closing prices of $1,122/oz and $14.58/oz. Again, the aforementioned demand explosion – which if anything, has intensified – has occurred not only amidst relatively flat paper prices, but six-year lows. Quite impressive, given how human nature compels us not to “buy low, and sell high,” but “buy high, and sell low.”
Of course, if there’s one thing Miles Franklin has observed in its 26 years of operations, it’s that the aforementioned “flaw” of human nature is no different in Precious Metals than stocks. Which is, that NOTHING generates stronger demand than rising prices; which we saw in spades in our best-ever year of profitability, in 2011; and even 2008, when despite the Cartel-orchestrated price decline at the onset of the financial crisis, the previous eight years of price increases still kept a “buy the dips” mentality around.
Not so today; and in fact, most mainstream “investors” – as opposed to “goldbugs,” who rightfully view Precious Metals as “savings” and/or “insurance,” as opposed to speculative investments – remain out of the sector, scared off by falling prices, poor “charts,” and relentlessly negative PM commentary, due to either ignorance, fear-mongering, or targeted propaganda campaigns. Bill Holter asked on Friday, “you think (physical PM) premiums are high now?” To which, I can only agree whole-heartedly; as once the Cartel – and “manipulators” of all kinds – start to really be overrun in the coming months, it’s entirely possible that physical gold and silver will become “priceless.”