The reason the Miles Franklin Blog is so popular is we tell it like it is. Sure, there are other “good, smart people” out there; but none that write so comprehensively, every day, with three seasoned financial market experts operating from the platform of one of the nation’s largest bullion dealers. And oh yeah, we do it for free.
I had a number of important topics queued up for today, but experiencing the madness that this morning’s “markets” have been, I’ve done a 180 degree turn. That’s the beauty of this blog, as no other is as timely, or topical. Today’s title is quite apt, as Twitter just priced with a $14 billion market cap – despite massive losses and uncertainty about its business model. Will it be another Facebook-like debacle – in which the stock plunged 65% from its opening price? Highly doubtful, as Twitter’s underwriters weren’t dumb enough to price it with a $100 billion market cap. But then again, Twitter lost $65 million last quarter – with no profits anticipated until 2015 – and is experiencing slowing subscriber growth. Worse yet, on a price/sales basis – you know, the vaporous, late 90s internet bubble metric – Twitter’s $26/share pricing is more expensive than Facebook is trading at today. And oh yeah, it just opened at $45/share, making it nearly twice as expensive on a price/sales basis.
And thus, I’m officially changing my tune about the current stock market rally being solely due to Federal Reserve liquidity. No, with retail inflows finally increasing – as NYSE margin debt hits an all-time high – it has all the makings of an historic bubble. Sure, it’s possible such “money printing madness” will cause a Weimar-like surge in nominal terms – as is currently occurring in Venezuela, and to a lesser extent Japan. However, there’s more to the Dow’s inexorable, PPT-aided rise than that. It’s ridiculous enough when staid retail chains like Chipotle trade above $500/share, but another thing entirely when it occurs amidst a miserable retail sales climate; not just here, but worldwide. Meanwhile, modern day “internet stocks” are starting to trade like their 1999 counterparts, such as like Linked In, Fab.com, and Yelp. This article details just how frothy internet stocks have become, and Twitter will take this trend to a whole new level of pre-“Tech Wreck” lunacy.
As this article depicts, Helicopter Ben has created the rare market where equities have a negative correlation with economic data surprises; which sadly, last occurred when Bennie took office in 2006, just before the most horrific market collapse since 1929. The moral hazard he has created via the “Bernanke Put” – soon to be the “Yellen Put” – has caused the widest spread between bulls and bears since just before 2011’s 20% stock plunge; which, by the way, was caused by a similar budget/debt ceiling battle as is anticipated next month.
This morning, “consumer comfort” plunged to a new 13-month low, and real wages to a 15-year low; while yesterday, mortgage applications plummeted to a ten-year low – demonstrating just how ridiculous it is to follow the propaganda of economic “recovery,” such as the below, comical comparison between real home sales and National Association of Home Builders “optimism.” Heck, even cheerleading rating agencies are warning of a housing bubble – which this week’s interest rate surge will only render more likely; like Fitch’s commentary yesterday that U.S. home prices, on average, are 17% overvalued…
The madness and ignorance have reached epic levels; as somehow, there still remains a sizable cadre of believers in the lies emanating from Washington, Wall Street, and the MSM – albeit, a rapidly declining one. To wit, a new poll shows just 19% of Americans trust their government; and why should they – as a new law, written by Citigroup lobbyists, and championed by the largest recipients of Wall Street campaign finance – exempts derivatives trading from the Dodd-Frank financial regulations. Heck, just this morning, it was reported that Goldman Sachs is being “probed” for currency manipulation; and if you read this article by Matt Taibbi – America’s Greatest Journalist – you’ll wonder how anyone still believes the propaganda we are fed.
Case in point is this morning’s farcical “market” action. Talk about proving the various themes I have recently written of, and doing so in a matter of hours. First, we get the fourth day in a row of gold and silver being stopped at the KEY ROUND NUMBERS of $1,320/oz. and $22/oz., respectively; what a shock, via the 110th visit from the 2:15 AM suppression algorithm in the past 122 trading days. And how about that, I wrote of this very topic – the “ULTI-LITS” – yesterday.
Next up, a “surprise” ECB rate cut at 7:45 AM EST; which I say in quotes, as the financial press had made it quite clear that a rate cut was expected either today, or at the latest, in December. Yes, “Goldman Mario” continues to insist Europe is “recovering”; yet, he thought it necessary to cut the ECB’s benchmark rate from an already trivial 0.50% to an even more pathetic 0.25%, as if the extra quarter point will have any impact whatsoever. Of course, the main reason Draghi did it was to emphasize he will truly do “whatever it takes” to save the Euro – even if it means hyperinflation.
On this news, with gold trading at $1,317 at the time, I kid you not, the Cartel immediately smashed PMs – with gold tanking to $1,310 whilst Dow futures surged. After two tries, and 15 minutes, gold finally broke through $1,320/oz. and ran up to $1,324; when “miraculously,” it suddenly plunged right back to $1,317 – where it sat for ten minutes before the day’s real farce commenced. And by the way, while this was ongoing, the Bank of England extended its own 0.5% funds rate indefinitely, as well as its ongoing, $600 billion quantitative easing program.
Just after the COMEX opened, following news that another 3% of its registered inventories were withdrawn – per the “physical supply countdown” I wrote of last week – third quarter GDP was reported at 2.8%, versus 2.0% in the second quarter and a 2.0% “consensus estimate.” I’ll get to the tragic internals of the report in a second; but suffice to say, the “market reaction” was beyond ridiculous. While neither stocks nor bonds budged, PMs were waterfall declined yet again. As I wrote last month, silver has now had an at least 2% intraday decline on roughly half of all trading days this year, and this was no exception; in this case, a particularly blatant attack as the price was at – what do you know – just under $22/oz. when it commenced.
The guys at Zero Hedge attributed the PM attack to Draghi commencing his press conference; but make no mistake, the Cartel was using the fraudulent GDP report as “cover” to push gold and silver away from $1,320/oz. and $22/oz., respectively; and oh yeah, deflect attention from the ECB money printing announcement. True, the Cartel has commenced numerous attacks around PM-bullish European announcements; such as December 2011’s “Operation PM Annihilation II” – right after a surprise ECB rate cut, and February 2012’s “Leap Day Violation” – right after a larger than expected “LTRO II” announcement. However, today was more about trying to convince the aforementioned 19% of believers that the economy is “recovering”; although in doing so, they will only make it harder to contain the economy-killing rate rise – in turn, necessitating further quantitative easing. And thus, it’s easy to see why the global fiat Ponzi scheme must fail; likely, in the VERY near-term.
Before I get to the GDP fraud itself, I’d like to highlight yet another point I highlighted last week. In “If A Nuclear Bomb Destroyed Europe,” I argued that Jim Sinclair’s forecast of a dollar index at 53 could NEVER happen, as it would suggest massive Euro strength. In my view, this is not possible, as the Euro is “lower on the totem pole” than the reserve currency dollar; and thus, could never survive a dollar collapse that severe. Nor would its (unelected) leaders allow it; likely, announcing a massive devaluation to prevent a loss of manufacturing “market share.” After all, the final currency war has begun – with the counterintuitive goal of destroying the purchasing power of one’s own currencies.
Sure enough, after the ECB announcement, the Euro plunged; and thus, the supposedly “collapsing” dollar surged. In other words, this game of yo-yo between the two leading pieces of fiat trash will continue to go on until both are destroyed by inflation; with the odds of one rising dramatically against the other being very slim. In fact, with the dollar still holding the title of “reserve currency,” the odds of a dollar surge against the Euro are dramatically higher than a dollar crash. I discussed this last month in “The Most Important Article I’ve Ever Written”; and feel more strongly about it than ever.
As for the third quarter GDP report; like all “better than expected” U.S. economic reports, one must only take a casual glance at its internals to refute the false bullishness bound to be reported by the “evil troika” of Washington, Wall Street, and the MSM. Aside from using a comically low price deflator of 1.9%, the report’s “strength” was entirely due to inventory building and government spending – which combined, added an entire percentage point. Even Goldman Sachs called this out; immediately adjusting its fourth quarter GDP estimate from 2.0% to 1.5%, to account for the inventory destocking bound to occur. In other words, corporations – like GM, which last week reported record “channel stuffing” – simply borrowed “growth” from the future, in the form of speculative inventory building.
Worse yet, the most important component of America’s “consumer-driven” economy was down sharply; as personal consumption expenditure growth declined to its lowest level since the second quarter of 2011. So yes, the horrific retail sales numbers posted in the real world are having a significant negative impact; which is precisely why the GDP report was fudged – and why said “inventory building” was more likely a massive overestimation of end demand. Heck, even the leading MSM cheerleader – Yahoo! Finance – posted as its top story a Reuters article citing these very issues; yet, we’re supposed to believe that just a week after the Fed reiterated QE4, with a miserable NFP report anticipated tomorrow, that somehow the economy is rapidly improving? Not to mention, the fact that the third quarter data precedes the government shutdown/debt ceiling debacle of October; as well as the plummeting consumer confidence reported since.
As I write at 12:05 PM EST, gold is back up to $1,310 and silver $21.70, with the same old DLITG algorithms working in full force. Interestingly, the NASDAQ is down sharply, and only time will tell if the Twitter IPO will be an inflection point in its bubble-like rally. Frankly, I don’t give a darn, particularly as future stock market gains – if any – will likely be in nominal terms only. In my view, “financial defense” is the order of the day; and thus, I continue to “stack” physical gold and silver, in advance of the guaranteed collapse of history’s most spectacular fiat Ponzi scheme.