Another week- another 360,000 Plus people applying for first-time jobless benefits. More bad economic news to confirm that our economy is crumbling and that the only way stocks are staying elevated is through central banks “printing and buying” schemes- also carried out by their owners- the major banks.
As I am writing this, stocks are valued at historically high levels, insider (C-Suite) trading is historically high in the past few weeks and people are still sure that the Fed and other central banks will have their backs. I had to specify C-Suite because we have found out the Fed Presidents have been trading on inside information that would lead any of us peons into a jail cell for a long time but will likely result in no action because- well- they WERE Fed Presidents after all.
People should remember what happened in 2008. The “markets” collapsed in October of 2008. Stocks, bonds, and real estate (which all rose together from 2003-2007) all collapsed in unison. The markets were struggling through most of 2008 but even though they were down for the year most people expected a Santa Claus rally but instead got sucker-punched with a devastating downturn that was only halted when the Fed stepped in and starting buying or at least guaranteeing just about everything in sight.
There did happen to be a warning prior to the collapse that many saw as weakness in the gold and silver market that turned out to be a warning sign that was missed by most. Gold was up to $927.00 in May of 2008 and retreated to $720.00 bottoming out on Oct. 23, 2008. (By March 2009 it was back to $950.00 and by 2012 it was at $1650.00).
Similar to then is that gold and silver have been retreating for a few months. It makes no sense unless it is another clue as to what may lie ahead. The central bank buying of bonds and stocks has not stopped and can’t stop without an immediate adverse reaction in all of those artificially propped up assets. It would be devastating to all of us but would also put our “leaders” in the crosshairs so I do not expect them to let that happen.
My point here is that gold was the first to forecast a downturn and the first asset to turn around and move higher. Gold does best when real (inflation adjusted) interest rates are low- even better when negative like they are now and when faith in the system is waning. All of these components are upon us and yet the price of gold has fallen for the past few months.
For those of us that have large positions in the metals and miners it has been a harrowing few months BUT my conviction is stronger than it has ever been for many reasons. I’ll lay out a few.
#1 All the “news” is nothing but propaganda
All of the numbers that are created and reported on by the financial game shows are manipulated beyond comprehension. John Williams uses the government’s own numbers and recreates the reports using the same method as was used in the 1980s- quite different than todays “reports” which really are nothing but tools to fool the public. Does it seem like we have a 5.2 unemployment rate that they bombard us with? If you think that number is way off, you would be correct. The actual unemployment rate is north of 25%. Does the reported inflation of 5% seem low? That’s because without all of the massaging of numbers the actual inflation rate is around 13%. Of course, everyone has their own inflation rate depending upon what they are buying.
Seems to me this type of “reporting” is the same type of reporting that TASS (Soviet Propaganda machine newspaper) used to do right before their economy collapsed. Obviously, it was crashing long before the world recognized it. Hopefully I am wrong about this, but I believe we are headed headlong into the same type of outcome.
Taking it one step further remember that most trading is done by machines via algorithms. Some of the information is from headlines and government reports. Machines don’t think they just act as programmed. This is another reason for misinformation to move markets in an intended direction. For the benefit of the few in most cases.
#2 They can’t stop that “printing and buying without causing a massive breakdown in the “markets”
The reason that I always use “markets” is that we really have no markets at all. They have been hijacked by the central banks and rich buddies at our expense. It is so far gone that if the “markets” didn’t get their daily dose of liquidity (money conjured up out of nowhere to buy assets that there would be FAR lower demand for without it) they would likely implode in minutes.
Much of the weakness in metals and in commodities have been, in my opinion, a belief that central banks are going to reduce their “printing and buying” and that the world economy is slowing dramatically. I believe they are right that the world economy is contracting BUT that just likely means that central banks will have to just do MORE. Look at Japan. They collapsed a decade before the USA and have been doing MORE every year. They are still stuck in the mud no matter how much MORE they do. If you base the “printing and buying” schemes of central banks by the size of their economy the Japanese rule the roost. The Japanese Central Bank balance sheet was 726,710,000,000,000 yen in August of 2021. That is over 726 TRILLION YEN. And they think doing more of the same thing will lead to a different result this time?
Also, let’s think about what would happen to interest rates if the Main buyer (Fed) stopped buying US Treasuries. It would be the end of our ability to even pay interest on the debt and would make issuing new debt so prohibitive that spending would have to be scaled down to a level that would likely lead to massive starvation of the population and defaults on all sorts of assets from cars to homes and businesses. Pensions- many already grossly underfunded- could also collapse so this is EVERYONE’s problem. It could also lead to state failures. Many states are surviving (barely) with loans directly from the Fed (Illinois) and billions in handouts from the Federal government disguised as Covid relief.
I believe that the “printing and buying” will continue because the illusion must be maintained until those in charge decide it is time to let this system crash and burn so they can give us that “great reset” they keep hinting at.
Unless we are at the cusp of a great reset the games will continue. If we are on that cusp how much risk are you actually taking in paper assets that are basically promises that will not likely be kept?
#3 Central banks, banks and billionaires are all buying gold in record amounts *
Of course, if you want to buy an asset you want to buy it at the lowest possible price. If you have the ability to conjure up fake gold (paper contracts that supposedly are backed by gold) and sell into the market when nobody is around to buy- therefore driving the price lower and then purchase the real asset on sale- like they are doing, you probably would too. Unfortunately, if you or I tried that we would be in jail. They are basically selling something they don’t own (naked shorting). It is well known what they are up to but nobody puts a stop to it. The only way I can really play this is to buy what they are buying. Too bad I can’t conjure up my own cash too. Central banks have bought record amounts of gold each of the past 4 years and between January and June of 2021 they reported buys of over 330 TONS.* This from entities that can literally print money and get any asset they want.
Could it be that they believe- as JP Morgan himself did that “Gold is money- everything else is debt”?
Could it be that they know what is coming and that many will not be able to honor their commitments to repay without the unit of account (Example US Dollar) losing most of its perceived value?
Could it be that they know that gold, silver and commodities are assets rather than liabilities?
Could it be that having some of these hard assets for yourself might be a good idea to mitigate some of the risk associated with a declining dollar and the inability of many to repay what they have promised?
Could this artificial beatdown be one of the best buying opportunities for us as well as our “masters”?
Again, I ask: What is the value of a promise that cannot be kept?
*Central Bank reported this information for themselves, Ted Butler has reported numerous times about JP Morgan buying 25 million ounces of gold and over a billion ounces of silver
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.
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.