In yesterday’s “Doctor Death,” we discussed the unwavering link between copper prices and global industrial demand – particularly in China, amidst its historic, speculative construction and real estate bubbles. As you can see below, copper has lost a third of its value in the past three years; in effect, screaming recession, if not depression.
Of course, copper is not the only commodity directly tied to economic activity – and equally ominous is what is occurring in the iron ore market; also, inexorably tied to the Chinese “growth miracle.” In essentially identical fashion, iron ore prices are down 35% from their 2011 highs – and per the below, damning chart, iron ore usage is in freefall. To that end, the Baltic Dry Index – a composite indicator of global shipping activity – plunged 8% yesterday alone, its biggest one-day decline since the heart of the 2008 financial crisis – to a level nearly 90% below its all-time high, also achieved in 2008. Clearly, global economic activity is decidedly not “recovering”; and thus, Central bank money printing – and market “intervention” – appears likely to not only not be “tapered,” but accelerate in the coming months.
In fact, Central banks have so thoroughly commandeered financial markets – in their aim of dissociating them from the aforementioned reality – that even Wall Street is running out of ways to steal money generate revenue. First, equity volumes plummeted to 15-year lows – down 80% from the 2000 high, and 70% from the pre-2008 peak; amidst collapsing retail participation and historic hedge fund losses. And now, as the Fed’s “QE” program has absorbed a third of all Treasuries outstanding and nearly half of all mortgage-backed bonds – whilst absorbing nearly all new Treasury issuance for the past two years – the bond market, too, has been effectively “killed.” Don’t fret for the bankers, which will still pay themselves exorbitant bonuses with the free money handed to them by the Fed – to utilize in “foolproof” HFT algorithms, insider trading and “carry trades” – underscored by fraudulent, non-cash “earnings” generated from accounting gimmickry. However, the fact that Wall Street is about to report its weakest quarter in nearly a decade should indicate just how dead the economy actually is – portending a far scarier, bleaker future.
And nowhere is that future reflected better than the U.S. retail sector; which following a mild respite upon the commencement of “QE3” in December 2012, started its present, epic downward spiral in the second half of 2013. The recent holiday spending season was the worst since the 2008-09 financial crisis; and sadly, early 2014 has started out even worse. The cheerleading “evil troika” of Wall Street, Washington and the MSM has tried to sugar coat such misery by blaming “the weather” – when in fact, not only has some of the worst retail demand been in areas decidedly not impacted by bad weather, but online sales have been even worse than traditional store sales.
But wait a second, the January numbers were just revised this morning – to a significantly greater decline. The MSM is hailing February’s 0.3% increase – will it, too, be revised down next month? – beating the 0.2% estimate; but in the big picture, such increases are not only not statistically significant – or absolutely meaningful – but nearly entirely the product of inflation. Heck, even Goldman Sachs dramatically reduced its Q1 GDP growth estimate this morning – to just 1.5% from 3.0% a month ago – citing “weak retail sales”; and as you can clearly see below, retail sales growth – again, boosted principally by inflation – has fallen all the way back to late 2009 levels, dangerously close to the negative rates seen at the height of the financial crisis. Moreover, as we have highlighted ad nauseum in recent pieces, inventory accumulation has simultaneously exploded – particularly in the auto industry – yielding the potential for a far more “leveraged” GDP collapse in the coming months.
It’s no coincidence that the commencement of such weakness coincided nearly perfectly with the end of the 2008-11 “uber-bubble” – created by historic, globally coordinated money printing efforts to stave off financial oblivion. In summer 2011, when Europe nearly collapsed – before Draghi promised to do “whatever it takes” to save the Euro; the U.S. was stripped of its triple-A credit rating. And the Bank of Japan was preparing to launch “Abenomics,” the global economy commenced a new, slower motion freefall that has accelerated in recent months – yielding collapsing economic data, plunging currencies and now, the implosion of key industrial commodities like copper and iron ore.
Sadly, the so-called “retail apocalypse” discussed in this fantastic compilation by the great Michael Snyder, is as much about secular changes in Americans’ spending habits as the weak economy. Most notably, the trend toward more competitive, tax-free online spending has literally destroyed the big box retail industry – yielding dramatic margin contraction, expanding job losses and plunging commercial real estate values. But make no mistake, collapsing economic activity – and record low consumer savings – are the leading cause; and the more the Fed prints, the weaker the economy will become, and the higher the aforementioned inflation. This “vicious loop” is the hallmark of all fiat currency systems; and thus, the longer one waits for it to “fully express itself” in the form of a dollar collapse, the more likely that the only proven historical protection – i.e, PHYSICAL gold and silver – won’t be available.
As for said metals, I haven’t seen them act so strongly in years. Clearly, the two-plus year Cartel effort to suppress them – not un-coincidentally, commencing at exactly the same summer 2011 time period when the global economy started to really collapse – is losing its strength. Physical demand is at an all-time high; and now that PAPER manipulation is becoming mainstream, it’s just a matter of time before TPTB lose control. Just watching the measly 637,000 ounces of “registered” gold inventory on the COMEX sit unchanged for two weeks, whilst 500,000+ of it should be sent to December, January and February long contract holders that have demanded delivery, should tell you all you need to know about how much gold actually exists; and frankly, I’d be shocked if 2013’s record high PHYSICAL demand isn’t blown away in 2014.
Yesterday, gold not only took out $1,350/oz., but $1,360 and even $1,370 for a time. Every imaginable Cartel trick was utilized to “cap and attack” it back down, but as I write Thursday morning, it’s back at $1,370’s door – knocking harder than ever – as silver fights back toward yesterday’s highs and the Dow’s early PPT-inspired gains have evaporated. With the Ukrainian situation devolving each day – ahead of this weekend’s Crimean referendum regarding secession – and fears of the collapsing Chinese economy, don’t be surprised if anything happens in the coming weeks; let alone, this weekend.
And when “anything” does in fact occur – be it what it may – it will only be those that protected themselves beforehand with the historical safety and inflation protection of PHYSICAL gold and silver that will financially survive. Will you be one of the “lucky” ones; or alternatively, just another devastated part of “the 99%?”