When I think of all the vacations, holidays, and market “slow periods” the Cartel has deprived me peace of mind during, by attacking when everyone else is taking it easy; over a 15-year period, no less; you can see why I have never been angrier. That said, per what I wrote earlier this week, I have no regrets about my career or investment decisions – and frankly, have never been less worried.
This week is a perfect example – as heading into today’s COMEX options expiration, a Cartel desperate to inflict “maximum pain” on those that still buy short-dated gold and silver calls knew full well that an enormous amount of “open interest” existed at the $1,300 and $1,310 levels – which not only would cause great financial loss if exercised deep in the money, but could catalyze a run on the extremely thin supply of actual, available-for-delivery inventory. That, and the barrage of “PM bullish, everything-else-bearish” headlines that relentless rain down on their historic price suppression scheme, which with each passing day hangs by a thinner and thinner thread.
It started with Friday’s surreal $0.40/oz smash of silver, for no reason other than to “get the ball rolling” on this week’s COMEX expiration; and hopefully, enable them to cover some of their historic, off-the-charts short position. Next, the $0.40/oz Sunday night silver smash – at the open, with not a shred of news anywhere; followed by massive capping efforts Monday and Tuesday; yesterday’s COMEX-opening dump of $1.5 billion of paper gold (followed by an additional $1.0 billion in the ensuing ten minutes); and finally, this morning’s “2:15 AM” and COMEX-opening waterfall declines – the first, for absolutely no reason; and the second, “covered” by a supposedly “strong” durable goods report.
Which, just like any of the (extremely scarce) “better than expected” economic reports of recent years, was due entirely to accounting chicanery. As it turns out, the headline gain only “beat expectations” because last month’s figure was revised lower. Moreover, core durable goods orders were down for the month; and for the second straight month, down nearly 10% year-over-year. This, including the data-goosing “seasonal adjustments” that the government itself just admitted to be flawed, regarding both their GDP and personal income calculations. And by the way, isn’t it funny how no one is discussing yesterday’s “four for four” economic data misses – of existing home sales, mortgage applications, the FHFA home price index, and DOE oil inventories?
To that end, per what I wrote in this week’s “charting for dummies” article, silver has been pushed to levels as oversold as any we’ve seen in the past year – in this case, without even a propagandized “catalyst” to explain it; demonstrating the prototypical bull market behavior of higher highs and higher lows we have seen in PMs all year; unlike Deutsche Bank stock and crude oil prices, for instance, which continue to post lower highs and lower lows.
Regarding the latter, a reader recently asked for more “supporting evidence” of my beliefs regarding crude oil oversupply – NO ONE in the PM community has written more of the poor commodity outlook than me, starting with my thesis on the topic two years ago. That said, in a nutshell, this chart – depicting the unprecedented explosion of U.S. product inventories – is all you need to know, about why crude oil prices have nowhere to go but down. That, and the catastrophic “feedback loop” that causes the dollar to surge when market turmoil arrives. Which, given the historically perilous political, economic, and monetary environment, could emerge any day, at any time. And oh yeah, the explosion of industry-wide debt – which inevitably, must lead to production maximization; particularly in financially collapsing OPEC nations, like Saudi Arabia. Production freeze, you say? ROFLMAO.
Which brings me to today’s principal topic, a day before Janet Yellen’s “all-important” speech at the Jackson Hole symposium tomorrow morning. Which historically was a non-event, until the collapsing global economy caused the Fed to turn all Fed Chairman speeches into de facto FOMC statements. Not to mention, the, LOL, “minutes” of meeting held three weeks prior.
In my view, tomorrow’s speech will be a non-event, as far as content, based on the fact that nothing material has changed in recent weeks – nor will it, as the global economy continues to collapse. Today’s headlines alone feature the Deutsche Bank CEO himself warning of the “fatal consequence to savers” of Central bank policy (red flag, anyone?); as well as the imminent collapse of Obamacare; global trade declining for the second straight quarter; and investors pulling $109 billion out of hedge funds this year (gee, I wonder who has been buying).
Not to mention, stellar two- and five-year Treasury auctions the past two days, suggesting not a whit of “rate hike fear.” Plus, long-term rates hovering near all-time lows, and a Treasury yield curve on the verge of inversion. Let alone, countless articles about crashing pension and insurance funds; and oh yeah, news that the (“adjusted”) U.S. budget deficit will be $600 billion for the fiscal year ending 2016, well above the CBO’s year-ago estimates. The CBO’s own forecast – which like last year’s, will prove to be woefully optimistic – anticipates an average deficit over the next ten years of $850 billion. Throw in the fact that the Fed not only has the world’s largest balance sheet – at $4.5 trillion, not including “off balance sheet” holdings – but amongst the highest duration portfolio imaginable (in other words, highly leveraged to rate rises), and the mere concept of raising rates is patently ridiculous. Then there are the nearly catastrophic experience of what happened the last – and only – time they attempted a rate hike last December. Or the fact that a Presidential election is just three months away, for which Janet Yellen needs the status quo to be maintained.
As for Whirlybird Janet’s speech, it frankly has far more of a chance of sparking a significant PM rally than a decline; as 1) prices are highly oversold; 2) options expiration will be over; and 3) per the reasons cited above – and countless others – there is essentially no incentive to even hint at being incrementally “hawkish,” relative to the “safe play” of speaking in platitudes, but volunteering nothing material. After all, it isn’t even an actual FOMC meeting, but a mere symposium about monetary policy in general. That said, the extreme, 20-year low market volatility TPTB have created during the August doldrums – as the political and economic world crashes and burns around it, with the end of the summer looming mere weeks away – could turn this speech, no matter what is said, into a significant launching point for an extremely volatile (read: ugly) Autumn, unless one holds assets proven to protect investors from such environments.
To that end, the dictionary definition of “red herring” is “something that is, or is intended to be, misleading or distracting.” And if anything describes Janet Yellen’s role in the U.S. government – er, the “privately owned Central bank” – it’s just that. In other words, her principal job responsibilities are to pretend all’s well; convince gullible, clueless, and blatantly compromised investors that Fed policy “works”; and, in partnership with Wall Street “henchman” like Goldman Sachs and JP Morgan (whose former officers dominate the FOMC board), manipulate markets to promote said lies. Particularly, stocks, bonds, and Precious Metals.
However, with each passing day, Yellen’s “red herring effect” is wearing thinner and thinner, as the entire world realizes all’s decidedly NOT well; Central banks are not only not the solution, but the primary source of the problem; and financial markets are blatantly manipulated – like when $1.5 billion of “paper gold” hits the bid for no apparent reason, amidst a veritable blizzard of PM-bullish news flow.
In other words, it won’t be long before Central bank credibility is permanently dead – led by that of the “ultimate red herring,” Whirlybird Janet herself. To that end, will tomorrow be the Fed’s “Jimmy Shaker Day?” Or September 4th, per Jim Rickards? Or “the coming weeks,” per David Stockman? I guess we’ll have to wait and see, but shame on you if you’re not prepared for something with just as much likelihood of being imminent as it is inevitable.
GREETINGS FROM POLAND!!! AWAITING YELLEN…I LOVE THE LAST PARAGRAPH….YOU HAVE DUTIFULLY WARNED AND AT THIS POINT THE HOLDOUTS WHO HAVENT BOUGHT DO SO AT THEIR OWN PERIL…
What another great writing piece, I am a big fan of Andy. One small point on oil. Andy said:
” That said, in a nutshell, this chart – depicting the unprecedented explosion of U.S. product inventories – is all you need to know, about why crude oil prices have nowhere to go but down”
Most of the gains in this chart is from crude. The U.S. has the largest storage capacity in the world.
The second largest storage capacity that has been filed up is tanker ships at sea which is the most expensive Storage. As expected as U.S. storage is emptied tanker storage is being off loaded into the U.S. A good indicator that this is happening is that tanker rates have been falling.
The third largest storage place is in Europe. Over the past few months ship born storage in Europe has dropped by 50%. A good indicator of how tight the oil market in Europ has become is the gap between Brent and WTI which has expanded to over $2 a barrel. At this difference crude will flow from the U.S. to Europe.
Since the start of the year oil storage by the Saudis has dropped by 80 million barrels. The draw down was necessary for the Saudis to keep their exports at high levels.
I believe that the major danger in the oil markets is not low prices, but higher prices. Think of the impact that $80 oil will cause. On the plus side is oil related jobs will,be created, but economic damage from higher prices will,also be caused.
Thanks as always for the big picture analysis. Yellen’s statement is now out today! Big news “Materially nothing”, but I think there was big news that is missed by most, which is TPTB morons now have their game faces on! They know this ship is going down and my opinion they now are finalizing their story when it does go down. The next 6-12 months of TPTB BS should be hilarious.
My best advise to all that see this message is stock up big time on tangibles and get ready for the show to arrive in the nearest town near you. God Bless.
GET RID OF THE US FEDERAL RESERVE!
Looking at the latest EIA data on refined products, gasoline ect, since mid April the surplus has been shrinking.
Taking out NGL which has nothing to do with refined products, and are used as a feed stock for chemical plants, the surplus of refined products peaked in April of 2016 at 86 million barrels. As of the last report that surplus has dropped to 57 million barrels.
Andy and to all the great people here, some of the Fed heads are saying a very critical comment that monetary policy has done all they can do and they need fiscal policy right now. But we know that fiscal policy is not here, not coming and the global economy is weakening by the day. The markets will go crazy spastic when the Fed announces there decision from their live meeting early September. IMO, the jobs number coming this Friday will intentionally be a soft number so the Fed can point to that for not raising rates. It’s the rigging game they play with the fraud data they have been putting out for years now.