Week after week we are seeing the “markets” get more disconnected to the real economy.

I have been beating the “manipulation of all markets” drum for over 10 years now. I believe that many who thought that I was crazy a few years ago are finally seeing that the markets are indeed being managed by the Fed, other central banks, the banks that own the Fed and their buddies at Blackrock and many other firms.

I believe that the numbers are now so big that they can’t hide what has been likely been going on behind the scenes for at least over a decade.

I also believe that since they have been manipulating markets with virtual impunity for years (probably decades) they are now emboldened. I think they see that there is no one to stop them in their quest for world financial domination. The CFTC (Commodities Futures Trading Corporation), which is SUPPOSED to protect commodity investors from the insiders was well aware of the manipulation schemes at the banks since at least 2008. Andrew McGuire (metals trader in London) exposed this 10 years ago and now just in the last few months there have been some charges. Of course, the games continue so it appears the banks still have no fear of reprisal.

Billions in fines have been paid by the banks for manipulating forex, metals, etc. Like I’ve said before- if you can make trillions and have to pay fines in billions it appears crime pays. If anyone thinks selling assets that you don’t actually own isn’t a crime try it and see how long before the authorities are knocking on your door. Clue- it won’t be long!

One reason that I am pretty sure people are getting the picture is that as recently as a year ago I had to do a massive selling job to get clients to consider even small positions in precious metals or miners. In recent  meetings people have been far more receptive. After I made the suggestion that stocks were more expensive than at any time in history and that gold and silver were being suppressed, many have said that they were thinking that gold was the place to be before I brought it up.

This is showing that at least a portion of the population is waking up to the fact that as the Fed “prints and buys” assets in ever-increasing numbers the party will indeed end at some point- and most likely with a THUD.

In addition, the World Gold Council reported that Gold-backed ETFs have broken the previous record for inflows in a year in just 5 months through May.

This is important because the central banks have been buying at a record pace for the past 3 years. It appears that now the general public is waking up to the fact that if the central banks expected that the trillions being conjured up out of nowhere would hold its value long-term there would be NO plausible reason to be purchasing hundreds of tons of gold annually.

One of the big reasons I believe people are waking up is that we can see the economy is dead- regardless of the lipstick applied to the pig on the financial game shows like “Retail Sales Surge In May”. Yeah- no kidding! They were DEAD in April so what a shocker that the recovery would be good month over month. Just don’t ask what it was year over year because it was terrible. Sales were actually down 6.1% from a year earlier and were down 12.7% for the previous 3 months.

This is a chart of the Cass Freight Index. Notice the V-shaped recovery!

Not too impressive when viewed in context. The V-shapes of retail sales, industrial production and MANY other metrics look eerily similar.

 

The industrial production index declined 15.3% according to Bloomberg and is at its weakest since 1946.

 

Viewed in context this “recovery” has a LONG way to go to get back to dismal. However, virtually free “money” is propping up asset prices and fooling many that all is well and when we flip the switch the economy will just get right back on track. That appears to be nothing more than a pipe dream even if we don’t get another setback in the form of a second wave of virus outbreaks.

The stock “markets” are showing tremendous volatility day to day and intra-day. To me, this is a sign that the markets are trying to determine fair value (likely FAR lower) and the central banks, et al are intervening to prevent the markets from determining that fair value.

I have had people tell me that unemployment is improving. After 40 million were laid off- many permanently- getting 2.5 million jobs reportedly “created” in the first 2 weeks of May seems somewhat irrelevant and also highly suspicious. Particularly since most of the country was still CLOSED DOWN. To add to the suspicion that the numbers were nothing but fluff the employment tax receipts are down 33% year over year. Does THAT sound like a recovery?

 

Wile the economy may have taken a break from its freefall it is far from robust.

I always say watch what they do- not what they say. The Robin-hood crowd is speculating in the markets. The person known as the best investor of our time is Warren Buffett. He, and many like him, are holding record amounts of cash (Berkshire Hathaway has over $130 BILLION in cash). The central banks are purchasing assets, including gold and silver while also propping up stock and bond prices with purchases. My opinion is that if you can conjure “money” up from nowhere who cares what price you pay? If you had to earn the money- like Buffett and most other investors you pay a lot closer attention.

My take is that the central banks are doing nothing but preventing an epic collapse that will likely take place no matter what they do. They can suspend economic laws but they can’t repeal them.

 

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

CASS Freight Index Measures North American Freight Volumes and Expenditures.

Industrial Production Index is compiled by FRED (St. Louis Fed) on a monthly basis to bring attention to short-term changes in industrial production. It measures movements in production and output and highlights structural developments in the economy.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.