It’s Monday morning, and the “new era” of indefinitely depressed oil prices has officially arrived. To wit, on Saturday, the International Atomic Energy Agency validated Iran’s compliance with the U.S.-led “nuclear deal,” enabling Iran to add 0.5 to 1.5 million barrels per day to global supply this year. This, to a market already sporting record high inventories, and a daily glut of roughly 1.0 million barrels, per this commentary from a Miles Franklin Blog reader this weekend.
“I flew over the Houston ship channel on Friday. The Gulf has literally hundreds of ships sitting out there, I am assuming filled with crude. Easily 2-3 times more than last year.”
Subsequently WTI crude is at a 14-year low of $28.85/bbl as I write, and Brent crude $28.55/bbl. But don’t worry, according to the modern day General Custer, John Kerry, “today marks the start of a safer world.” As for me, I’ll stick to my October 2014 prediction that “crashing oil prices portend unspeakable horrors.” Such as, for instance, the wildfire-like surge of interbank lending rates; energy-related corporate credit downgrades; and financial institutions admitting to dangerously high energy (and let’s face it, commodities in general) exposure. Including, I might add, “TBTF” banks like Citibank and Wells Fargo.
Which is probably why it was “leaked” that the Dallas Fed held a secret meeting with Texas banking institutions last week, “ordering” them to not write down energy-related assets. You know, like the Financial Accounting Standards Board, or FASB, did in April 2009, when it “decreed” banks no longer had to mark mortgage-related assets to market; but instead, to fantasy. Frankly, I’m not sure the Fed even has the authority to make such rules; but since the U.S. government gives the Fed its marching orders – as both Alan Greenspan and Ben Bernanke recently admitted – I guess it’s a moot point. However, for those that think such decrees will enable banks to “paper over” their losses, I point to the aforementioned surge in interbank lending rates – a la 2008, as everyone starts to fear everyone else’s financial stability.
Let alone, as none other than JP Morgan was busy lowering its 4Q GDP growth estimate to a measly 0.1%; atop the release of extremely ominous capital flow data, revealing that foreign Central banks – unquestionably, led by China – sold an incredible $47 billion of U.S. Treasury bonds in the year’s first two weeks. And yet, the benchmark 10-year rate is on the verge of plunging below 2%. No doubt, “aided” by a Federal Reserve that supposedly ended QE 13 months ago. Throw in the East to West plunge in commodities, currencies, and equities – the latter, to “bear market territory” in the vast majority of nations – and you can see how terrified “the powers that be” are getting, that the “big one” may well have commenced.
Which brings me to today’s extremely important topic – which, per its title, has I’m sure piqued your interest. Which, as is so often the case, formed at the gym – whilst running on the Stairclimber, browsing the internet for interesting articles and podcasts. In this case, I came across Mike Maloney’s most recent video, describing four reasons why “deflation” must arrive first, before hyperinflation inevitably “comes to town.” Not that all items fall in price during deflation – but the vast majority certainly do, particularly those that take down the finances of individuals, corporations, municipalities, and sovereign nations. In my view, Maloney is one of the most talented economists of our time, and I essentially agree with everything he says – about both the economic outlook, and financial market prognosis.
However, where it really gets interesting is at the end of this 30-minute video – when, after entering your email address – you receive a link to a second, 60 minute video, featuring Maloney and long-time “Precious Metals nemesis” Harry Dent.
To that end, I’m not here to rehash my criticisms of Dent’s ultra-bearish Precious Metals outlook – as discussed here and here. And for those still fearful that he will be “right,” keep in mind that his two most famous – or should I say, infamous – market prognostications were 1) his 1999 prediction that the Dow and NASDAQ would reach 41,000 and 20,000, respectively, by…drum roll please…2008; and 2) his April 2011 prediction that the Dow would plunge to 3,000 by…again, drum roll please…2014. Frankly, as I have noted before, Dent is as talented an economist as anyone in our field – and as Maloney points out several times, the only area where he (we) and Dent disagree is whether Precious Metals will be a primary safe-haven asset, as they were during both the 1930s and 2008-09 deflations. In my view, Dent is one of the world’s leading authorities on “cycle” analysis, but has a glaring “blind spot” for microcosmic financial analysis; such as, for example, gold and silver supply/demand fundamentals. Not to mention, the “pink elephant” that he arrogantly chooses to ignore; i.e., the manipulation of markets that skews even the best technical; fundamental; and heck, cycle analysis.
That said, these MUST SEE videos will unquestionably help you to realize how dire the global economic situation has become. And subsequently, why “Harry Dent, Mike Maloney, and Miles Franklin” synchronously believe that, as Maloney calls it, the “Greatest Crisis in the History of Mankind” is upon us. In a nutshell, irrespective of the impact of market manipulations and other ephemeral factors, all long-term cycle factors are converging bearishly – regarding economic activity, financial markets, and demographics, and politics. Which, I might add, are doing so with such violent, world-destroying fashion as the result of Central banks’ suicidal – and, for the first time, globally coordinated – attempts to stave off “Economic Mother Nature” with unprecedented money printing, market manipulation, and economic propaganda (read, data cooking). Honestly, even I was incrementally scared after watching them; and this, from a person who has already “prepared for the worst,” and advised others to do so.
Basically, the “moral of the story” is that, irrespective of your short-term market expectations, the intermediate-term outlook (which in terms of most peoples’ finances, might as well be the long-term) is as ugly as at any time in history. In such an environment, Precious Metals have essentially always outperformed other asset classes; and consequently, have been the only assets proven to preserve purchasing power throughout the ages.
In other words, they are – plain and simple – the “once and future kings” of the monetary realm. Which I might add, countless billions agree with today – living in countries like South Africa (ironically, the long-time “capital of global gold mining), where currencies have already all but collapsed. To that end, it’s just a matter of time before the fiat currency cancer climbs “up the totem pole” to the world’s “reserve currency” – destroying the dollar just as all 600+ fiat Ponzi schemes before it. Perhaps, much sooner than most can imagine – if indeed, the “Big One” has commenced.