I believe that something big just happened this morning. I was waiting until today to buy some gold, silver and miners. Call me to find out WHY! For the last 10 years or so this day has been an almost automatic down day because the banks (who have been manipulating the price) can make the price fall and today would have been a day they would have wanted that to happen even more than others.
As the gold price pushed far above $1600.00 on Wednesday, I really thought a buying opportunity would present itself, maybe around $1600.00 on Friday. As I write this the gold price s up to $1646.00 and silver is up to $18.61 according to Kitco.
So, what is the “something big”? It appears that even though the open interest (paper contracts) at the Comex have more than doubled (the mechanism for suppressing the metals prices) it is not enough to keep the lid on the price at this time.
It also appears to me that the world is getting the picture that, as the Fed adds $50-$100 billion per day into the repo markets, buys $60 billion per month in Treasuries (All PRE- Covid-19) along with China adding $700 billion to their “markets” in February and Japan and the EU also providing “money from nowhere” there is likely a LARGE problem that they are all aware of. It also appears that China may be a lot farther away from re-opening for business than the financial game shows have been touting. (Financial numbers from the central bank web sites)
It seems clear to me that we are now on the cusp of the greatest “printing” spree the world has ever seen. I also believe that the absurd amount of stimulus already conjured up out of nowhere will be dwarfed by what is coming now.
It appears China has no choice but to go all-in. Massive debts and an economy that is in freefall is a dangerous cocktail. There are many reports of rising prices for necessities and a shortage of the same. There are reports of virtually NO economic activity in many places as measured by pollution, coal usage, traffic and rail traffic. (Zerohedge)
Just ask yourself this- if you were to have your income stop how long would it be before you would default? Every company that is in China or depends on production from China has to ask itself this question right now. Let’s not forget that debt levels are at all-time records and the global economy is grinding to a halt. This is a toxic combination. (Every financial channel has reported about record debt at all levels)
When an amount of people that equals 2 USAs are quarantined this is going to lead to a major problem with production, shipping, consumer demand, etc. There is a report out this morning that China’s car sales are down 92% year over year. (Zerohedge)
As I have said all along- if they stop “printing” paper asset prices would likely collapse and bond yields would likely spike uncontrollably. Stocks would likely also be battered because of the market doing its only job- finding true value. It can only do its job when the trillions that are being fed to the markets stop having the effect they have now of manipulating prices to fit the narrative. I am NOT expecting this outcome although it IS a possibility.
If they continue to conjure up “money” in ever-increasing amounts the cliff just becomes higher but it does buy some time. (Maybe until November?) I believe this is the hope but I have said before I don’t think we are going to get there. We’ll see! In any case, I believe they will go down “printing” until the world realizes that what they are buying assets with is quickly becoming worthless.
Over the next few weeks we will see how this virus plays out and what the central bank’s actions will be.
My best guess is a “printing” spree of epic proportions to keep this zombie economy appearing to be alive even though almost all economic reports have been bad. It appears they are about to get a lot worse in the next couple of months.
The sad part is that a majority of people still are of the belief that we have “the greatest economy of all time” when, in my opinion, we have the greatest risk to our economic survival of all time.
I really believe that the central banks will be exposed shortly as every economic challenge is met with more “money from nowhere” to give the illusion that all is well- keep buying!
Like I have said- this produces NOTHING and all of us need “stuff” like food, water, energy, etc. to live.
They have already gone too far but far too many are still oblivious to it so they continue to get away with their charade.
If shortages of necessities start showing up tell me how we are going to eat, etc.
Another report this morning on Zerohedge adds Australia to the list of countries with historically bad crop harvests in the last 12 months. Of course, the central banks will just conjure up some corn and beans right? Good luck!
The precious metals markets are giving us a clue that a major change just may be coming shortly. Remember a few weeks ago I wrote about Rhodium- the only precious metal WITHOUT a paper market to keep the price down? It was around $6000.00 per ounce. How about a few weeks later it is at $12,300.00 this morning according to KITCO. Still think gold and silver are expensive? They are undervalued in my opinion and could blast-off at any time. Actually, I believe the engines are revving right now.
While this “printing” may lead to higher stock prices short term I am still of the belief that the metals will outperform and likely have far more upside because they have been artificially suppressed while traditional assets have been artificially inflated to a place that has never existed in history (historic overvaluation of stocks and bonds). My guess is that as traditional assets go over a cliff the metals just might be like a parachute that allows us to survive and hopefully thrive after all of this excess is worn off.
Are you ready for a reversion to the mean- or a finding of fair value of all assets? If not, I would suggest you…
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