Strange Occurrences? It would seem to me that with the stress being shown in the overnight funding markets, it would be a clear sign that all is NOT well and that some serious caution should be taken at this time. It seems to be a revelation that even though hundreds of trillions in new currencies have been conjured up in the past 10 years, it still is not enough to provide adequate liquidity to keep this massively inflated bubble growing without continued monetary methadone.
It would seem that hard assets should be flying higher because of the extra stimulus that is being provided and the likely longer-term damage that will be done to the currencies being conjured up at will and in obscene amounts globally- most notably right here in the USA.
So, what is actually happening? In the case of gold and silver they have actually been under pressure since the repo actions have started. Many ask me how this could be. It appears to me that since the banks now have a backstop by the Fed they now feel free to (and have the liquidity necessary to continue) the manipulation that they have been engaging in for as long as I can remember. Without the virtually unlimited capital the banks are not able to manipulate virtually all prices as they have been.
Many may ask- didn’t you just write a week ago that three traders at JP Morgan just got criminally indicted for rigging gold prices? Yes, I did. I also believe that these three amigos are probably being sacrificed so that those doing the real work are left to do what they have to do to keep the illusion alive.
It is pretty amazing to me that as soon as the liquidity spigots were turned back on the games that we have become accustomed to particularly in the past 10 years have resumed yet again. The only question is how long before the world wakes up. The clock is ticking and the numbers are so staggering that it is, in my opinion, only a matter of time- a short time.
In addition, just today (10-1) the repos last night (remember this was just a quarter-end thing) were over $55 billion. FYI- the quarter end is over but the banks still need liquidity. This is not really a surprise since the Fed said that they would be providing $75 billion minimum daily until October 10th.
As I have been writing about for months the economic numbers have been bad and are accelerating to the downside. Today we got the weakest manufacturing numbers (RIGHT HERE IN THE USA) in the last 10 years. Germany’s PMI is in freefall, Korea’s exports are falling, Japan found out last night that if the Japanese Central Bank doesn’t buy the government bonds there are very few others who will buy it. They tried reducing their purchases to steepen the yield curve and almost wound up with a failed auction. (More bonds to sell than those that want to buy). It was the worst 10-year auction in 3 years and led to large losses for those that had leverage on their rate bets.
Sound familiar? 8 years ago I wrote that the endgame would be the central banks own everything- for nothing but a keystroke on a keyboard. It is obvious in Japan and Europe and should be obvious to anyone paying attention that this is the path we are on. In Japan, they are virtually there. Europe is racing to catch up and the USA will, in my opinion, catch up real fast at some time in the near future as our debts dwarf our ability to service them. (We are already there but the “printing and buying” is buying time by giving the illusion of solvency which will last probably as long as people trust our currency).
While we are being bombarded minute by minute about our “greatest economy of all time” the BIS has issued a stark warning about an imminent economic problem. The World Trade Organization economists issued a statement that said “Macroeconomic risks are firmly tilted to the downside”. It appears that the risks far outweigh the rewards in traditional assets.
I mentioned earlier about the falling exports globally. (PMI) New export orders peaked at a high of 54 in January of 2018 and has been declining since with a 47.5 reading in August (anything under 50 is actual contraction) and that is the lowest reading since October of 2012. Again, the WTO sees no signs of a rebound any time this year.
In my opinion we are seeing the beginning of the end of the fiat currency experiment launched in 1971. This means that all of the excesses that have built up since then need to be reconciled- not just the last 10 years but nearly the last 50. I believe that soon we will find out the real “value” of assets- not just prices that are driven by wild money “printing”, leverage and buying sprees that would not be possible without virtually unlimited credit creation.
Just think about this. Those in charge are basically promising infinite growth on a planet that has finite resources. It is only a matter of time before reality rears its ugly head and exposes the folly of “infinite growth” because it’s different this time. It’s not. This “printing” produces NOTHING but the ability for those at the top to purchase assets first and profit immensely while the regular people get stuck with rising prices, higher taxes and debts and a lifestyle that is far less than it would be if our “money” held its value over time.
There is not one example of “printing” money creating lasting wealth but there is a precedent set for “printing” being the reason for the destruction of the currency being conjured up out of nowhere. It is human nature to go too far and kill the golden goose.
This is the main reason that I believe it is so important to have real money- like gold and silver to move in the opposite direction of the assets that are being artificially propped up at this time and appear to be in real trouble if the liquidity spigots dry up- which appears to be happening right now.
For those who get hung up on whether we will have inflation or deflation and base your purchases on that I believe it doesn’t matter. Gold wins either way. Inflation- dollar loses value and the price of gold in dollars goes up. Deflation- debts get harder to carry, bankruptcies start, Many wonder who is next and poof- confidence is lost. Gold goes up because it is nobody else’s counterparty and has been accepted as payment for over 5000 years. This is likely the reason so many banks, central banks, countries and large hedge fund managers are loading up while talking gold and silver down. This is most likely so they can get it at the lowest possible price. WATCH what they DO- NOT what they say!
If what I am writing makes any sense to you but you have questions about how to go about establishing positions in hard assets call me at any time.
Financial Advisor, Raymond James Financial Services, Inc.
2642 Route 940
Pocono Summit, Pa 18346
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