Given how paper financial markets have been completely commandeered, I have in recent years spoken little, if at all, of “valuation”, “fundamentals”, and “technical analysis.” In my mind, all the financial community was taught for centuries has been rendered meaningless by government intervention – which is why it’s become futile to “invest” in stocks and bonds, particularly on the short side that governments attack as viciously as gold and silver longs. To wit, yesterday’s prototypical “dead ringer” algorithm on the “Dow Jones Propaganda Average“; whilst gold was attacked at the “key attack times” of 10 AM and 12 PM EST – and subsequently, “contained” with equally prototypical DLITG, or “don’t let it turn green” algorithms….
…before being violently attacked at today’s COMEX open, and again at 10:00 AM EST (yes, they took paper silver down 3.5% in ten minutes, to eliminate the burgeoning bullish PM sentiment that even Miles Franklin experienced yesterday. Of course, given that global PM demand is already soaring, and supplies tightening, all these attacks will “accomplish” is an explosive supply shortage in the coming months and years – particularly as said suppression has put the PM mining industry on the verge of collapse – and irreversibly, “peak production.” To that end, I wrote two years ago of the implosion of the high cost South African gold mining industry; and watching stocks like Goldfields, Harmony, and Anglogold Ashanti implode into the abyss, it wouldn’t surprise me if the world’s fifth largest gold producing nation experiences an utter collapse in production unless prices dramatically increase, in the very near-term.
I didn’t think it possible, but today’s financial asset mania is far larger – and ultimately, will prove far more destructive – than the 1990s internet bubble. Only this time, retail participation is at or near all-time lows, given the massive losses incurred in both the 2000-02 stock crash and 2008-09 financial crisis. Which is probably why the Pied Pipers of investing, CNBC, are experiencing all-time low ratings. To wit, internet blogger Mark St. Cyr last night described exactly how capitalism and free markets have been annihilated in the post-crisis world – setting us up for a far larger, far more cataclysmic crash.
“Before QE and the outright intervention of monetary policy directly influencing stocks – people bought stocks reflective of the economy. Today? Central Banks across the globe are now openly manipulating markets as a matter of policy.”
Nothing saddens me more; not just because money printing and market manipulation destroyed the vocation I spent 25 years pursuing, but because the world’s “99%” (myself included) are suffering from the virulent, ever-expanding price inflation it has spawned. Worse yet, the resulting economic “deformation” has generated unprecedented global overcapacity – and hopelessly mangled balance sheets – yielding a bleak economic future that could take decades to “normalize.” That is, after the horrifying fiat currency regime responsible for such carnage destroyed. Which, of course, it will – as will the “profits” enjoyed by the handful of people with large stock and bond portfolios; perhaps not nominally, but certainly in real terms.
Even Wall Street, which benefits more from the free money, manipulated markets, and non-existent regulation than anyone, is starting to realize that while the casino is rigged, it must inevitably go bankrupt; which is quite the apt example, given how global gaming revenues – representing the epitome of discretionary spending – are in freefall. To wit, the astounding commentary from Wall Street ringleader Deutsche Bank yesterday afternoon – as reported by Yahoo! Finance, no less – that perhaps we are in recession. Or better yet, Merrill Lynch’s recommendation this morning, to “add gold” given potentially dangerous and volatile market conditions. Huh? Wall Street advising us to buy gold as a safe haven investment? Comically, Wall Street’s 2Q GDP “consensus” is as over-optimistic today as it was halfway into the first quarter. However, given the aforementioned Wall Street comments, it shouldn’t be long until even their ridiculously upwardly biased cheerleading expectations trend toward the ZERO growth America is at best experiencing.
And this, amidst today’s (Tuesday’s) “markets” featuring exploding Chinese stocks because the Chinese government is encouraging banks to lend to insolvent municipalities (can you say upcoming, hyperinflation QE?); and exploding European stocks – upcoming “Grexit” notwithstanding – because the ECB intends to “frontload” its QE program ahead of an expected “low liquidity” period this summer. In other words, the horrifying collapse of the Euro – and explosion of Europeans’ cost of living, despite ZERO economic growth – is simply not enough for Mario Draghi. And thus, he’s literally making up reasons to accelerate QE – and consumer inflation – further, by pretending banks have “seasonally weak” liquidity during the summer. Just like King.com – which I mocked yesterday – claiming to have “seasonally soft” online gaming traffic during the summer – LOL. Here in the States, this morning’s extremely ugly WalMart earnings report and outlook wasn’t enough to slow the aforementioned stock mania one bit – especially after Chicago Fed President Charles Evans claimed it “not appropriate” to raise rates until 2016.
However, with oil prices finally starting to succumb to the horrifying reality of historic, rapidly expanding oversupply; and the “copper PPT” I have harped on for months being overwhelmed by “Economic Mother Nature” (base metals, on average, are down an incredible 9% in the past 24 hours, rejoining the rest of the collapsing commodity universe); the PPT is fighting an increasingly uphill battle. To wit, the “tectonic market shifts” we warned of last week are only worsening – as yet again, interest rates are surging despite across the board economic weakness (notwithstanding this morning’s comical “housing starts” surge – in direct contradiction to yesterday’s home building sentiment plunge; collapsing lumber prices; and oh yeah, the time-honored, home building-destroying impact of rising rates). Moreover, the dollar is surging anew, yielding plunging currencies – and surging inflation – the world round. And given what we learned last night from Zero Hedge – ironically, a day after I castigated them for shoddy Precious Metal reporting – the “sum of all fears” we have warned of may well be unfolding.
Which is, this amazing analysis of the recent Treasury International Capital, or TIC reports – in which it’s pretty hard to dispute that not only was China the “mysterious U.S. Treasury buyer” in early 2014 (likely, doing the Fed a “favor,” given it’s purporting to be “tapering”); but that today, China is decidedly a major Treasury seller. This is what I have suspected – and written of – for months; as frankly, there is NO WAY Treasury yields could be rising given the across the board collapse of global economic data (and “most unequivocally dovish Fed statements in memory“), unless a major bond seller like the Chinese was involved.
Assuming this extremely logical analysis is even remotely close to the truth, this is the worst imaginable news for the horrifically indebted U.S. government; as well as an historically indebted planet that bases so many of its interest rates on the “benchmark” U.S. Treasury market. Which is why today’s supposed “eight year high” in housing starts is that much more laughable; as not only are mortgage applications already at multi-year lows, but with rates rising even marginally, mortgage activity will likely implode into oblivion. And thus, with U.S. home ownership already at 30-years lows, amidst not only a supposed six-year economic “recovery,” but multi-century interest rate lows, the potential for a new, economy-destroying housing collapse is extremely high. And this, with the Fed’s balance sheet – “tapering” and all – sitting at its all-time high level of toxic bond infestation. Worse yet, with home rental rates at all-time highs, the resulting surge in new renters could, ironically, cause rents to surge so strongly, the overall cost of housing may not even decline! Putting an exclamation point on this terrifying topic – ironically, coinciding with essentially every house in the Denver area having its property taxes raised 15%-30% – is perhaps the most ominous chart I have ever seen, depicting what happened the last time housing starts surged so strongly, in June 2008.
Which brings me to today’s featured topic, of how decades of market manipulation, academic brainwashing, and a marked decline in intellectual curiosity – ironically, amidst an all-time accumulation of student debt – has created an army of robotic “Keynesian youth.” Just as America’s entrepreneurship was destroyed by two decades of stock and real estate bubbles, its educational system has been racked by the poisonous monetary and economic policies that fostered them. Yes, there are young people out there that get it – like Elijah Johnson, for example. However, such “anomalies” are few and far between; and with each passing day, the society portrayed in “Atlas Shrugged” becomes more and more lifelike. And of course, we all know how that ended.
To wit, even I was appalled after watching this hideous segment on CNBC (who else?), celebrating the winners of the 2015 “National Economic Challenge, sponsored by the “Council for Economic Education (has a name ever sounded more Atlas Shrugged inspired?). Frankly, even the government’s head television-based economic propagandist, CNBC’s Steve Liesman, sounded a bit uncomfortable at the answers to his ridiculous question, “who is your favorite economist?”
Nat’l Economics Challenge participant #1: Keynes. I just love Keynes.
Nat’l Economics Challenge participant #2: I do too, because he spends a lot of money.
Yes, these were the responses of the winners of a challenging featuring 10,500 of America’s advanced students – espousing that the best way to optimize an economy is to print, borrow, and spend money until peak debt is reached; mal-investment maximized; and under a fiat currency regime, hyperinflation achieved. In other words, taking the short-term “easy way out” – which in the long-term, always ends horribly. And all these 10,500 high school and college students had to do to figure this out was read books – instead of the propaganda spewed by Wall Street, Washington, and the Mainstream Media.
What scares me most about this group idiocy – which taxpayers will ultimately be asked to “bail out” when the historic student debt bubble bursts – is we’re approaching a time where the vast majority of “market participants” have not a clue how basic economics work; not to mention, freely-traded markets. And as for monetary policy, I’d bet not 1% of said 10,500 participants – or 5% of traders, analysts, and bankers under 40 years of age, have any idea how destructive, and guaranteed to implode, fiat currency regimes are. In other words, the ultimate “deformation” – of human minds!
Back in the 1980s, Whitney Houston was immortalized for singing “I believe the children are our future” – although few realize it was actually George Benson that first wrote and recorded the song, a decade earlier. For that matter, I’d bet few music aficionados realize George Benson is one of the greatest guitarists of all time, certainly in the jazz realm. Anyhow, in watching the above video, celebrating such horrifyingly misguided youth, it nearly brought a tear to my eye. Here at the Miles Franklin Blog, we do everything we can to educate as many people of the ugly reality that’s approaching – and hopefully, you too will help spread the words of TRUTH. In time – likely, after the deluge – a new crop of intelligent, anti-Keynesian youth will arise to navigate us through extremely troubled waters. But for now, if these children are our future, our only advice is to run – and protect your assets as quickly as possible!