It’s early Wednesday, and I’m going to do something rare – and petty – in the name of making a point. Which is, to refer yet again – anonymously, of course – to the reader a few weeks back, who hounded me with emails, asking why I don’t “back up” my “call” for lower oil prices with more “proof.”
The reason this annoyed me was manyfold – starting with the fact that neither I, nor Miles Franklin, have “called” anything. Nor are we required to, given that our service is entirely free of charge, with no pretense other than to tell the truth as we see it. Which hopefully, will inspire you to protect yourself from the political, economic, and financial hell unfolding as we speak – which will NOT STOP until every fiat currency is dramatically devalued, if not destroyed. Yes, we’d like you to purchase and/or store your metals with Miles Franklin – which we believe, offers the best combination of prices, service, and ingenuity in what is generally speaking, a highly homogenous bullion industry. But we’d be just as happy if we helped you understand the world better, and give us a reference – or heck, a mere shout out – when warranted.
Back to oil, I cannot emphasize enough that aside from being a Chartered Financial Analyst, or CFA, for the past 18 years, I spent 10 years working as an oilfield service, equipment, and drilling analyst – including six at Salomon Smith Barney, where my team was ranked by Institutional Investor magazine as one of the top research groups in our sector for four straight years. Moreover, the top-ranked analyst covering the major oil producers, for as long as I worked there, sat right next to us. His primary job, aside from covering Exxon Mobil, BP, and other large producers, was generating the firm’s oil price forecast – which, I might add, consistently understated reality, as he apparently “forgot” to incorporate that little old thing called monetary inflation. That said, I have a very deep background in the fundamentals behind oil supply and demand – plus, the history and efficacy of OPEC – although I certainly don’t claim to be an “expert” in all facets.
In other words, when I make claims about oil, I know something of what I talk about, albeit not everything. And in that context, everything I’ve seen and read tells me the supply/demand outlook is worse than, as I put it last week, “any time since oil was first used commercially.” Which sadly, goes not just for oil, but essentially all commodities, per the “manifesto” I wrote nearly two years ago, based on the fantastic work of David Stockman, titled “the direst prediction of all.” In which, I discussed how three-plus decades of unfettered money printing and financial engineering have caused historic gluts in essentially every commodity – other than gold and silver, which have experienced the polar opposite effect, due to the simultaneous suppression of those decidedly non-commoditized commodities. Non-commodities, because unlike all other substances that fit such description, gold and silver have been universally used as money throughout history.
Moreover, I also know a thing or two about market manipulation, given that I’ve spent the past 14 years exhaustively analyzing every tick of the stock, bond, commodity, and Precious Metal markets. And trust me, despite the fact that oil sits all the way down at $45/bbl, it has been “goosed” higher by every imaginable manipulative tactic since bottoming (temporarily) at $26/bbl earlier this year. The so-called “oil PPT” has attempted everything from OPEC rumors; to relentless propaganda; to even, as we saw last week, cooking inventory numbers to desperately prevent the continued collapse of the world’s most important financial market. To wit, commodities generate more revenues; jobs; and subsequently, social stability than any “business” on the planet. And now that they are free falling, it’s no wonder economies are crashing, currencies imploding, Central banks hyperinflating, and political regimes tumbling. And sadly, they will continue to do so for years to come, as the worst oversupply in global history is unwound. And nowhere more so than in oil, which is probably why the possibility of war is greater than at any time in recent memory. So to the readers who questions my reasoning for oil price bearishness – have a gander at what the International Energy Agency itself published yesterday, of how supply, demand, and inventory factors are simultaneously converging in a perfect storm of negativity. And if you think OPEC – much less, OPEC plus non-OPEC – are going to cut production when they are all desperate for cash and hell-bent on protecting market share, I have a bridge in Brooklyn to sell you. Let alone, that such an agreement – which like a Fed “rate hike,” isn’t going to happen anyway – could never be enforced, as every OPEC supply constraint agreement ever made has been cheated on. Much less in the dozens of commodities not supported by Cartels, which are entirely at the mercy of Economic Mother Nature.
As for said “rate hike,” Peter Schiff puts it best when he describes the Fed’s strategy of recent years. Which is, given that it knows it can never again raise rates – look what happen when they tried last December – the only remaining “tool” they have is jawboning. Well, that and outright hyperinflation. Even economic propaganda no longer works – as frankly, the vast majority of the actual investment community are laughing at the comical headline NFP job numbers by now. Heck, some are even starting to read the NFP report, which clearly shows the “headline numbers” to be meaningless – especially as they are continually revised, as the BLS did last week, when it eliminated 150,000 of jobs that were reported in the March 2015-March 2016 period, with the “stroke of a pen.”
In other words, EVERY week now, they trot out Fed governors – many of which, don’t even vote at the FOMC meetings – to “trial balloon” the concept of upcoming rate hikes. Which of course, are loudly parrotted by the mainstream media, led by the Pied Pipers of CNBC. Given the Fed’s, for all intents and purposes, mandated role of cheerleading, they always claim the economy is strong; just as the government does, like Obama claiming anyone who says the economy is weak is “peddling fiction.”
And when markets don’t tank too badly – which takes a lot to occur, given relentless PPT support – the Fed continues to suggest the “possibility” of rate hikes, until finally the markets start to actually “discount” them – as they started to do last week, when the Fed went “too far,” with “too many” of its lackeys suggesting rate hikes were “possible” despite some of the worst economic data to date. In other words, the market is starting to believe the Fed may have some other agenda than the “data dependency” they relentlessly speak of. As frankly, if they can actually look at recent data and believe the “case for raising rates has strengthened,” they are either certifiably insane, or have an alternative agenda of self-immolation.
As I have discussed for years on end – particularly since April 2013, when the all-out war on Precious Metals, and economic reality, started, the Fed now uses every opportunity it can to manipulate – er, “influence” – perception, by scripting the comments of each of its governors’ and regional Presidents’ speeches. This way, not only do they have more “cover” to attack Precious Metals , whilst supporting stocks and bonds, but more opportunities to change their message (with simultaneous PPT, ESF, and Cartel “ground support”) when they feel markets are getting out of hand.
To that end, we are now seeing “de facto FOMC meetings” nearly every day – as if a regional Fed President, an FOMC governor, or the Chairman or Vice Chairman themselves speak, the Fed’s “message” can be either significantly, or not so significantly, altered. Let alone, at regularly scheduled events like the bi-annual Humphrey-Hawkins Congressional testimony, the Jackson Hole symposium, and the dozen or so annual “FOMC minutes” releases – which strangely, tend to have far more relevance to current market factors than those existing at the time of the actual meeting.
This week has been particularly egregious, starting with Vice Chairman Stanley Fischer being “recruited” to a Steve Liesman interview an hour after Janet Yellen’s Jackson Hole speech was perceived as too dovish. Then the robotic follow-up comments from Regional Presidents Dennis Lockhardt and Eric Rosengren, of how a September rate hike was “possible” despite horrific economic data being reported simultaneously. Throw in the ridiculous rumors of a potential Japanese “Reverse Operation Twist,” and voila, a violent market sell-off, of both stocks and sovereign bonds. Which I assure you, would have accelerated dramatically if yesterday’s “eagerly awaited” speech by FOMC governor Lael Brainard continued the ruse of “potential hawkishness.” Of course it didn’t, as not only did Brainard push September rate hike odds all the way back to 20% with her unabashed – and clearly, Fed-scripted – dovishness, but she also happens to be an overt Hillary Clinton campaign contributor. Which somehow is allowed, no matter how unethical, demonstrating the absurdity of several Fed governors’ speeches last week on Capitol Hill, defending the Fed’s so called political independence.
The problem is, that when you “cry wolf” too often, you are eventually called out. And no one has cried wolf more than the Fed, in constantly finding reasons not to raise rates, despite their unwavering claim of a “strong” economy – which tellingly they prefer to refer to as merely “recovering,” six years into what is now the third longest “expansion” in U.S. history. During which, GDP growth – book cooking and all – is barely 1%; manufacturing activity has collapsed; debt has exploded; real unemployment has surged to Depression Era levels; and corporate earnings have declined for six quarters running.
Thus, not only is the Fed’s – and all Central banks’ – credibility all but dead, but no one even knows how to interpret their propaganda anymore, particularly now that de facto FOMC “policy statements” are being issued nearly every day. Which is probably why the market is crashing again this morning, Brainard “dovishness” notwithstanding – and why the Cartel is doing “double overtime” in trying to convince investors, as in 2008, that Precious Metals are not the ultimate safe haven they have always been, and may perhaps always be. Which, like 2008, when the Cartel initially attacked paper PM prices when the crisis commenced, created an avalanche of physical demand that nearly destroyed the Cartel then and there. Which I assure you, will be dramatically more powerful this time around, given that currencies are crashing – and being hyperinflated – the world round. And oh yeah, global physical demand is far higher (U.S. Mint Silver Eagle sales are three times larger than in 2008); supply is declining; and inventories are paper thin, particularly compared to the aforementioned amount of hyperinflation global “currency units.”
In other words, it looks like we are finally at the end of the rope of Central bank credibility – which perhaps, will be destroyed “at one fell swoop” following next Wednesday’s simultaneous Fed and Bank of Japan meetings. Either way, the end game appears to have finally arrived – as I anticipated, by year end. To that end, there are literally dozens of potentially cataclysmic events in the crosshairs this Fall – politically, economically, and monetarily. Hopefully, you have taken heed of what truth tellers like the Miles Franklin Blog have long warned of, because the “rubber is hitting the road,” and doing so NOW.
P.S. As I was about to hit send, Goldman’s “Hapless Hatzius” himself, Jan Hatzius, who on September 2nd raised his “September rate hike odds” from 40% to 55% – prompting me to specifically call him out with my September 3rd article; expanded on his September 6th decision to lower his September rate hike odds back to 40%, by taking them all the way back to 25% today. Which, as it turns out, is about where market expectations have been all along!