It’s early Thursday morning – and the fifth major, massively PM-bullish (and “everything-else-bearish”) news event of the past 21 days just emerged. In order…
1. March 10th – ECB reduces interest rates to -0.4%; raises its (already one-year old) QE program from €60 billion to €80 billion/month; and adds “corporate bonds” to the pool of monetizable assets
2. March 16th – the FOMC’s most dovish policy statement to date – as described in “Clueless Janet launches the Final Currency War into Hyperspace.”
3. March 22nd – Belgian terror attack, one of the worst in European history
4. March 29th – the most hyper-inflationary statement in Fed Chairman history – as discussed in yesterday’s Audioblog, “the Ultimate Circular Reference.”
5. And today, March 31st…drum roll please…Standard & Poor’s revises China’s credit outlook from “stable” to “negative”; citing rising debt, a weakening economy, and declining foreign investment
In between – as in, every second before and after such news items, the Cartel has maniacally capped and attacked Precious Metals, amidst an environment of record global demand; vanishing above-ground inventories; declining mine production; and parabolically-rising money printing; such as yesterday’s response to the aforementioned “event #4” – featuring every illegal, naked shorting trick in the Cartel’s book.
And yet, as I write this morning, gold and silver are back up to $1,235/oz and $15.40/oz, respectively; “defying the odds” – and the “COTs” – by resiliently fighting back, building stronger and stronger bases above their respective 50 and 200 day moving averages. As no matter how much the Cartel naked shorts paper PMs, the underlying physical markets continue to strengthen.
And now that the “largest ever commodity short squeeze” appears to be rolling over, the “powers that be’s” ability to paint additional lipstick on the pig that is the world’s most overbought, overvalued equity markets in memory will be considerably harder. To wit, this morning’s Zero Hedge comments, that “the Ripley’s Believe It Or Not world continues – as earlier today, Hong Kong’s Hang Seng Index entered a bull market, rising 20% from its February lows, just as Hong Kong’s February retail sales plunged 21%, its biggest drop since 1999.” And no, that is NOT a typo. Retail sales actually declined 21% from a year ago, in one of the most affluent markets; just as Chinese mainland automobile sales plummeted an astonishing 44% in January/February 2016, compared to January/February 2015.
Heck, even CNBC itself published an article yesterday, by a reporter named Jeff Cox, titled …drum roll please…”All the Fed rate hike talk was a bunch of nonsense.” Apparently, he read my “Most Transparent Lie of All Time” articles – parts one and two; describing how even by Federal Reserve standards, this month’s installment of post-FOMC propaganda and misdirection hit new, uncharted lows – as since the Fed’s aforementioned, uber-dovish policy statement on March 16th alone, its own “GDP Now” estimate of 1Q GDP “growth” has plunged from +1.9% to +0.6%. As have Treasury bond yields, with the benchmark 10-year down to 1.80% as I write, from 2.35% when rates were “raised” 3½ months ago. Not to mention, European bond yields – which on average, are now below zero. Hence, Yellen’s historically dovish speech at Tuesday’s New York Economic Club lunch; followed by yesterdays’ by Chicago Fed President Charles Evans, espousing of how U.S. economic risks are “tilted to the downside.” Which may turn out to be, in hindsight, the biggest understatement in history!
As for today’s principal topic, the title is a paraphrase of something I wrote often in 2011 and 2012. Unfortunately, I never specifically titled an article as such – and even Google’s superior search engine can’t find quotes that narrow in scope, from four to five years ago. However, rest assured, I said it first when the U.S. government’s “Triple-A” credit rating was stripped in August 2011 (when the national debt was $14.2 trillion, compared to $19.2 trillion today); and second, amidst the European credit crisis of July 2012, when Draghi infamously said he’d do “whatever it takes” to save the Euro. Which ironically, turned out to be the hyperinflationary policies that have pushed it to nearly an all-time low valuation, and taken the European Union to the brink of collapse.
Which was – again, to paraphrase – that we would NEVER see a sovereign credit rating increase of note – at least, until after the upcoming, cataclysmic credit and currency crisis. Or, for that matter, a material credit rating upgrade of any major sovereignty or multi-national corporation. Which is quite the statement, in light of the fact that credit rating agencies like S&P, Moody’s, and Fitch continue to be incentivized – both financially, and via the threat of government reprisal – to issue falsely positive ratings. Regarding the latter, try Googling anything related to S&P’s historic U.S. credit rating downgrade of August 2011, and you’ll get the following. Really, try it yourself!
Today, as China’s credit outlook was downgraded by S&P to “negative”; two days after Moody’s reduced Chicago’s rating to one notch above junk (undoubtedly, keeping it in the “investment grade” category due to fear of political reprisal); I’ve reflected on just how accurate my statement was. Five years have passed; and from what I see, essentially all major corporations, municipalities, and sovereignties are dramatically more indebted – at a time when the global economy is, quantifiably, at its weakest point in generations. Not to mention, political and geopolitical risks have surged parabolically, to the point that any number of “black swans” have the potentially to cast what’s left of the collapsing global economy over the abyss, “at one fell swoop.”
Actually, I believe Ireland – of all places, one of the PIIGS – had a modest rating upgrade in the past year or so. And LOL, Greece was “upgraded” from “effective default” to one notch higher, when last summer’s, LOL, “bailout #3” was announced – which I assure you, will fall apart just like “bailouts” #1 and #2. Those anomalies aside, my prediction has been as spot on as could be – and will become MUCH MORE SO in the coming years; when, “conflicts of interest” aside, ratings agencies are forced to downgrade everything in sight, as history’s largest serial debt default rapidly encircles the globe. Which, by my estimate, will negatively impact essentially all asset classes. That is, except the only assets to have served as money from the dawn of human existence – physical gold and silver.