Yesterday, I noted Zero Hedge’s headline at the start of a quiet, post-Easter session in which European markets were closed; i.e., “Sleepy Holiday Market prepares for scripted, daily low-volume levitation.” Today, on yet another quiet news morning, Zero Hedge writes “Traders walk in on another Sleepy Session in Search of its Volume-less Levitation Catalyst,” and “S&P Rallies to First 5-Day Streak in 6 Months on No Volume.” Such is the “financial zeitgeist” created by five years of market manipulation particularly when said “markets” no longer are populated by actual people. Last week, SEC commissioner Kara Stein ominously stated, “A lot of our rules were written for people, not necessarily computers” but sadly, such “rules” have never been and never will be enforced.
In 2008, TPTB had but one choice to avoid immediate, global market implosion. That choice was to print money and “inject” it into market via the freshly bailed out TBTF banks – in large part, utilizing HFT programs that were just starting to be “perfected” in terms of their ability to not only front run ordinary investors, but “influence” market movements. By mid-2011, it became apparent that said strategy was a failure; as not only were equity markets plunging anew, but economic activity was dramatically declining, causing investors to fear the very viability of sovereign governments. To wit, Europe’s government bond market was in freefall, S&P stripped the U.S.’s triple-A credit rating (when it had $14.1 trillion of debt, compared to $17.5 trillion today), and gold and silver were at or near all-time highs in nearly all currencies.
By then, TPTB – i.e., Western governments, Central banks and their TBTF bank accomplice – had three years of “manipulation experience” under their belts and with it, spent a great deal of time plotting the next stage of their can-kicking game. Clearly, “influencing” markets with printed money was not enough and it was time to completely commandeer them. And thus, what started as “modest” money printing and “passive” manipulation morphed into the greatest money printing group the world has ever seen, coupled with 24/7 market manipulation and Nazi-esque propaganda that would make Joseph Goebbels blush.
It’s not that they actually sought to boil the world’s population like unsuspecting “frogs in a pot,” but that’s precisely what happened. That is, in the process of taking over markets, and ramping up “QE” and other – inevitably suicidal – monetization schemes; much less, promising to do “whatever it takes” to save the world, they not only removed risk from “risk markets,” but destroyed the public’s will to even question what’s going on. Today, there is not even the faintest semblance of “market” in the stock, bond, or currency realms; as utilizing HFT algorithms, naked shorting, and “open market operations,” TPTB have realized they can put any paper market wherever they want. And better yet, they can do so with little or no volatility unless, of course, they want to “create a stir” – such as “scaring” tech stocks down 10% to get foolish traders to buy treasury bonds; and thus, unwittingly aid their QE efforts. To wit, there’s no better chart depicting how TPTB has created a temporary “eye in the storm” than this one – of the near 100% correlation between Fed money printing and S&P 500 performance.
Consequently, paper “markets” have been 100% dissociated with reality, aided by government sanctioned procedures enabling corporations to lie about earnings. By the way, it’s quite the “coincidence” that the below “death cross of global rationality” occurred right around the time of Obama’s April 12th, 2013 “closed door meeting” with the 15 largest bank CEOs; i.e., the day the “Alternative Currencies Destruction” raid was launched, taking $250/oz. and $6/oz., respectively, out of gold and silver prices in just two trading days.
Of course, such unprecedented manipulations are not without consequences; as in the process of “stabilizing” major equity indices with unfettered money printing, inflation has been exported the world round. Moreover, as discussed in last month’s “Anatomy of a Bubble,” valuations of essentially all Western “paper markets” have been pushed to historical extremes, despite the world sitting at its low economic point of the past century. And thus, the next time you see an MSM headline touting “recovery,” take a look at these graphs – and ask yourself what planet the author comes from.
Or better yet, check out the Baltic Dry Index; i.e., one of the most comprehensive measures of global trade.
In this weekend’s Audio blog – “Death of a Market” – and yesterday’s commentaries from myself and Bill Holter, we wrote of how Japan’s 10-year government bond market – i.e., the world’s second largest – had not a single bid for 36 straight hours last week. Such a cataclysmic event symbolizes exactly what I am describing, as the ramifications of driving prices to unsustainable levels has driven all demand from the market – other than that of the inflation machine that is Abenomics which as you can probably ascertain, can never be stopped at this point, let alone slowed.
Unfortunately, the same thing is occurring right here in the States, where food prices are having an unprecedented surge – in large part, due to the unfettered money printing funding the explosive growth of entitlement programs, as a jobless America rapidly morphs into a “dependency nation.” Better yet, its economy is being killed further by excessive, rapidly expanding taxation, as it becomes a socialist “taxation nation” – which itself, care of the resultant surge in government spending, creates additional taxation – particularly in high-cost states like California. In turn, consumer spending is plummeting – and with it, the very lifeblood of our “consumption economy” – retail sales, which are contracting at their fastest rate since the 2008 financial crisis. And don’t forget the so-called driver of the “recovery”; i.e., the Fed-funded housing bubble – which is currently crashing in dramatic fashion.
Back to the “paper markets,” we are witnessing historic bubbles of both valuation and complacency as “frogs aboil” don’t understand the power of government money printing and manipulation – such as the “Tuesday algos” that cause the Dow to rise EVERY Tuesday; or the “Dollar Index algos” that manage its three key components – the dollar, Euro, and Yen – to constantly produce a result around 80, whilst “emerging market” currencies crash and burn or the interest rate derivatives that maintain the benchmark 10-year Treasury yield in an (increasingly) tight band between 2.5% and 3.0%, whilst the real economy crashes and national debt explodes.
Of course, the physical markets are another thing entirely; which is why items we “need versus want” to live on – such as food, energy, and health insurance – continue to explode higher, despite TPTB’s best efforts to create a façade of “deflation.” And nowhere is this more obvious than in the Precious Metal markets, where paper algos attempt to control a physical market, per this must read article – but fail miserably, as manipulating the world’s only real money is causing demand to explode, whilst supply rapidly contracts.
To wit, as paper silver was viciously attacked by Cartel algos in the wee hours Sunday night – to the tune of 2% in minutes, with absolutely nothing going on other than Easter dinners, physical demand was rocketing higher. It turns out; yesterday (Monday) was another day of massive U.S. Mint demand for silver Eagles; and per this fantastic commentary from Steve St. Angelo, Shanghai Futures Exchange silver inventories are not only down 11% in the past eight days, but 42% in the past six weeks, and an incredible 70% in the past year. And as for gold, I’m not sure how much more obvious it can be that physical demand is tight than the fact that we are witnessing historic backwardation – in terms of both elapsed time and depth – for the first time ever, six months out. But don’t worry, frogs, all is well, because paper gold was attacked at exactly the 10:00 AM EST close of the global physical markets today! And no, frogs, there’s no way silver could possibly win “Battlefield $20”, despite record demand and plunging production, as prices continue to be held well below the cost of production.
Last but not least, the world’s “frogs” are held at bay by misinformation – particularly in the Precious Metals market, where hope is held out that a singular “event” is required to turn the tides. Sure, a “black swan” could end TPTB’s reign of manipulative terror over the masses; and given the swirling winds of inflation, recession, unrest, and currency war, it may well do so – potentially, in short order. However, more likely, it will be a simple reversion to the mean over time, as the inevitable, global “realization of reality” swamps government efforts to obfuscate it with ever-increasing money printing, market manipulation, and propaganda.
A case in point is the long awaited “goldbug” hope that China will end the Cartel’s reign of terror by simply announcing it owns 10,000 or more tonnes of gold – as if anything the Chinese government publishes should be taken at face value. In our view, it will be far more PM-bullish if they continue to accumulate gold quietly, taking out any and all material supply before ultimately, the West has ZERO left in its coffers. That day may be much sooner than most can imagine; but as we wrote in Thursday’s “Chinese Gold Reserve Update?” the PBOC has no incentive to do so until there is literally zero physical gold left to buy. And sure enough, just yesterday, we learned that China is allowing gold to be imported into Beijing – where import statistics are not published – as well as Hong Kong; clearly, in an attempt to further hide just how much they are buying. Ultimately, this is wildly bullish for gold prices, but to those looking for a quick hit on their “investment,” they’ll just have to wait a bit longer.
Sorry if I’m a bit circuitous in my topic this morning but frankly, even I get more than a bit irritated when watching the financial crimes around me, each and every day. Fortunately, I long ago left the paper markets entirely – in both my career and investments; and instead, hold nearly my entire liquid net worth in the scarce, timeless safety of physical gold and silver – while simultaneously, devoting my career to what I view to be the most noble of goals, working for perhaps the world’s most honest, reputable bullion company.