It’s one of those days when I feel overwhelmed with “horrible headlines”; in which, frankly, it seems difficult to focus on just one. For example, what is the “relative importance” of Beijing being literally shut down by the smog that has plagued it for years? Any chance this has something to do with its plunging stock market (i.e., the world’s only plunging stock market)?
Or Nigel Farage – i.e., the “Ron Paul of Europe” – highlighting the collapse of the Greek economy; and consequently, the potentially “watershed” impact of the upcoming European Parliament elections – which may well turn out to be an unofficial referendum against the failing Euro experiment?
And how about news of the parabolic, record growth in China’s 2013 money printing, as it desperately maintains the Yuan’s potentially hyperinflationary peg with the dollar? Meanwhile, the Bank of Japan is considering the expansion of its failing “quantitative qualitative” money printing scheme, amidst its worst ever current account deficit; prompting U.S. Treasury Secretary Lew to lash out against Abenomics, as the world’s “final currency war” intensifies. Meanwhile, the ECB appears to be right behind the BOJ; clearly considering additional monetary easing, per IMF head Christine Lagarde’s warning of impending European “deflation.”
Then we have the recent, powerful resilience of the Precious Metals; which have now fought off identical Cartel attacks for the past four days, as well as 2:15 AM blitzkriegs on nine of 2014’s ten trading days. Silver again bounced off $20/oz., whilst gold appears ready to make a run at its own “line in the sand” at $1,250/oz.
And why shouldn’t it? As not only is gold trading well below its all-in cost of production, but PHYSICAL supply is disappearing. Here in the States, the U.S. Mint hasn’t updated sales figures for more than a month, but finally hinted that early January sales have been blistering. Meanwhile, another 90,000 ounces left the COMEX’ registered gold inventory last night; still leaving more than 100,000 ounces as yet unsettled from December contract delivery demands – but irrespective, down nearly 90% in the past nine months, to by far its all-time lowest level.
Despite all these alarming events, the clear winner in today’s “horrible headline sweepstakes” is the plunging U.S. economy; which on multiple levels, could not be more obvious. Yesterday, extremely weak December retail sales were reported; validating the increasingly widespread understanding that the 2013 holiday shopping season was indeed the worst since 2009’s post-crisis environment. Macy’s and Penney’s announced major store closing programs this week; and per the two self-explanatory charts below, the outlook for countless other chains is equally dismal.
And then there’s Best Buy, one of last year’s best performing stocks; although to this day, I have no idea why. Plagued by weak sales and a bloated cost structure, it underwent a bitter proxy battle early last year, leading to the chain’s founder attempting to acquire it via leveraged buyout. The buyout failed, and for some reason investors subsequently fell in love with the stock. Unfortunately, sales trends at the world’s largest electronics retailer have been miserable – as validated by this morning’s announcement that December same store sales actually declined by 1%, compared to “expectations” of 2% growth. The stock is down 30% this morning; and what do you know, the benchmark 10-year Treasury yield is falling further from the Fed’s 3.0% “line in the sand” – as discussed in last week’s article, “3.0% – ‘Nuff Said.” By now, it should be patently clear the Fed will do NOTHING at Bennie’s last meeting in two weeks; and then, America will be subject to the even more dovish “Yellenomics” platform.
Then you have today’s “unexpected” 3.5% decline in the NAHB Housing Market Index; which given the recent interest rate surge, and rapid slowdown in the inflow of “hot” Wall Street money, may well drop significantly in the coming months. Throw in this week’s surge in continuing jobless claims – to six-month highs, rising at their fastest rate in five years – it’s becoming increasingly apparent that last week’s miserable NFP report was no aberration. But don’t worry, the “unemployment rate” is on the verge of plummeting to unprecedented levels, as more than a million people leave the labor force this month – and perhaps three million more by year-end.
When it comes down to it, there’s no way of denying that not only is the U.S. economy not “recovering”; but conversely, is measurably weakening. This reality will undoubtedly swamp the Goebbels-like propaganda blitz of 2013 in the coming months; and when it does, the entire world will realize that “Tapering” is but a mirage. Chicago Fed President Charles Evans couldn’t have been more vehement in his speech yesterday – for those that would listen – that both QE and ZIRP “to infinity” are in the cards.
But more importantly, we have a giant pink elephant in the room; i.e., the PBOC’s announcement last month that “it is no longer in China’s favor to accumulate foreign exchange reserves.” China already started divesting its more than $1.3 trillion of Treasuries in the second half of 2013, and likely will continue to do so in the coming months and years. Likewise, it’s only a matter of time before the demographically challenged Japanese are forced to start liquidating their own $1.2 trillion stash; thus, forcing the “buyer of last resort,” (i.e., the Fed) to, if anything, increase its monetization efforts – both overtly and covertly.
In our view, the global economy is “hanging by a thread”; of which, the spool is nothing but money printing, market manipulation, and propaganda. Marc Faber puts it beautifully in this ten-minute interview, which hopefully helps you further in your personal due diligence process. We are approaching an historic confluence of events – which will undoubtedly have unprecedented, global ramifications on the political, economic and social orders we have known for generations. And when it hits, with a force far more powerful than 2008, either you will have already protected your assets with REAL MONEY, or it will already be too late.