Now that the “transition year” between economic purgatory and hell is over, ask yourself exactly what happened in 2015, and what it means.
Ask yourself, is there something wrong when stock markets are “supported” every second of every day, yet not only end the year lower – for the first time since 2008 – but with the worst “breadth” in decades. To wit, following Friday’s bloodbath of an “anti-Santa Claus rally,” the Dow, S&P, and Russell all ended the year lower – with the average U.S. stock down 20% from its highs; i.e., in bear market territory. Then again, such a “breadth anomaly” is hardly surprising, given that outside the U.S., the average stock market was down as well – and far more so, when priced in U.S. dollars. Worse yet, the so-called “FANG” stocks – Facebook, Amazon, Netflix, and Google – gained $500 billion of market cap in 2015, whilst the other 496 members of the S&P 500 lost $520 billion. To that end, if you want to understand just how insane 2015’s “tech bubble 2” has been, read David Stockman’s latest article on Amazon’s ludicrous valuation.
Next, ask yourself what it means that in nations with the most powerful Central banks, interest rates are either at, or near, 500-year lows; as in Europe, where nearly $2 trillion of sovereign bonds have negative yields, despite a collapsing economy, expanding social unrest, and political chaos. Meanwhile, yields on bonds of all kinds are surging elsewhere. Let alone, in the “high yield” space, which is amidst a 2008-like crash as we speak – helped none the more by the Fed’s insane decision to raise rates, even if by a mere quarter percent. To that end, exactly one year ago – with WTI crude, the CRB Commodity Index, and the Baltic Dry Index trading at $54/bbl, 231, and 780, respectively, versus $37/bbl, 176, and 478 today, I espoused “2015 shale oil equals 2008 subprime mortgages.” Yet, even I couldn’t have imagined how much “potential damage” the post-2008 money printing/financial engineering bubble has created – and consequently, how much worse the upcoming crash will be.
Regarding the Fed’s historic “policy error” – in fueling further commodity, currency, and corporate earnings collapses, by simply threatening to tighten policy (not actually doing it, as the Fed Funds rate is still 0.12%) – ask yourself why it would even dream of “raising rates” into the worst global economy of our lifetimes, as highlighted by the last economic data points of the year; i.e., the Chicago Fed’s horrifying November print of 42.9 – featuring the lowest new orders and backlogs since early 2009; and one of the largest weekly jobless claims surges on record. Throw in the economy-destroying expansions of Obamacare and the minimum wage that commenced January 1st; the expanding Middle East war; and the recent spate of destabilizing worldwide political developments – and it becomes increasingly more puzzling why the Fed would take such an arrogant, self-defeating stance. I mean, take a look at this chart of how the world looked a year ago, versus today, and tell me if you think a prudent Central bank would opt to raise rates.
Which brings me to the last question you should ask yourself, as we commence what I believe will be the most tumultuous political and economic year of our lifetimes. Which is, why have dollar-priced gold and silver declined for the past four-plus years? I mean, weren’t we told that the U.S. breaching its $14.1 trillion “debt ceiling” was why dollar-priced gold surged to $1,920/oz, and silver to nearly $50/oz? Not to mention, explosive money printing; European political deterioration; worldwide economic collapse; and oh yeah, surging physical demand? I mean, if you think the above chart is damning, consider what a chart comparing the aforementioned issues, from 2011 to today, would look like! In other words, an “anomaly” of epic proportions; i.e, a veritable “perfect storm” of Precious Metal bullish factors, amidst an epic (paper) price crash. Which, like all other anomalies, must inevitably “revert to the mean”; particularly when such factors are only becoming more Precious Metal bullish with each passing day.
In other words, the epic “deformation” caused by four years of historic, unparalleled market manipulation – of not just Precious Metals, but stocks, bonds, and any “markets” governments could get their hands on – is ripe for reversal, as said perfect storm passes through its “eye,” exposing the world to its deadly “back end.” And not just any reversal, but one more violent, and terrifying, than any in recorded history – politically, economically, and socially. To which, we simply suggest you “ask yourself” what you think are the most likely scenarios. And equally importantly, are you prepared for what’s coming?