I’m writing earlier than usual; starting before 5 AM MST Wednesday, given I have three podcasts scheduled later this morning. Today’s litany of “horrible (PM-bullish) headlines” is as long as ever, and the Cartel is as out of control blatant as at any time in my 13 years following this sector. To wit, three straight “2:15 AM” EST caps to start the week – bringing the tally to 431 of the past 493 trading days; and anyone watching the carbon copy “cap and attack” algorithms of the past two days, amidst the most PM-bullish news imaginable, has to realize this so-called “market” is no longer anything remotely resembling such; particularly when noting that yesterday’s high – at exactly the 10:00 AM “key attack time #1” – was at…drum roll please…$1,199.70/oz, just below the $1,200 “line in the sand” level the Cartel has manically defended for the past two years.
To wit, we last week witnessed the worst U.S. GDP report in years; followed by yesterday’s biggest ever trade deficit explosion; today’s hideous Eurozone PMI and retail sales data (which the MSM comically dressed up as “mixed signals”); the IMF claiming it’s time for Greek debt to be written off; and even falling stocks and inexorably surging interest rates and oil prices, amidst the horrific economic data. And yet, and yet…TPTB continue to fight the “unstoppable tsunami of reality” with all their might – utilizing every illegal, unethical, and amoral method imaginable.
Again, we don’t highlight this criminality for our own edification, and certainly not to act as “financial historians.” No, we are simply trying to demonstrate that market manipulation has become the sole “weapon” of the trapped rats TPTB have become, in the terminal stage of the historic fiat Ponzi scheme they created 44 years ago. Which against real money, cannot succeed – as behind the relentless naked shorting of paper futures, ETFs, closed-end funds and mining shares, is an exploding physical market; in which demand is at record highs, and supply on the verge of collapsing. Heck, even the mainstream world is starting to get it; such as this shocking commentary from 200 year old investment bank Brown Brothers Harriman – which yesterday had this to say about financially collapsing Venezuela’s recent $1 billion “gold swap” with Citibank.
“One of the advantages for Venezuela of the gold swap is that by some accounting, it may still count the gold as part of its reserves. This underscores that central bank reserves may not always be what they seem. Central banks have used a number of ploys to hide the extent of their intervention, like operating in the forward market or conducting off-balance-sheet operations, like Brazil’s currency swaps. Similarly, Russia had included its sovereign wealth funds in its reserve calculations, but they are not liquid or available.”
Yes, “by some accounting,” Venezuela may still count the gold it handed to Citibank as its own. As in, the demented IMF rules that govern Central bank gold holdings; which, incredibly, enable Venezuela to pretend it still owns gold it no longer controls. As we noted last year, “all economic data are lies.” However, most such lies are as plain as the nose on one’s face, with footprints as large as the Sasquatch. And trust us, the world’s real “smart money” – such as the Chinese and Russian governments – are well aware of this; which is why they are buying PMs at prices well below the cost of production, hand over fist.
And “below the cost of production” it most certainly is; as with each mining earnings season, it becomes clearer that the industry is on the verge of collapse. Which, in turn, is why I believe that without a significant near-term PM price surge, it’s just a matter of months before the industry throws in the white flag, and starts merging en masse – to not only cut already savaged capital expenditure budgets further, but dispose of major mine development plans entirely, and even many currently producing mines.
To wit, in February’s “initial 4Q mining earnings essentially confirm peak gold,” I espoused that “Kinross and Coeur D’Alene appear just one write-off from major financial distress.” Well, both companies reported 1Q earnings yesterday; and whilst Kinross managed to only report a $7 million loss, 5% year-over-year production decline, and 12% capital spending plunge, Coeur’s report was an utter catastrophe; featuring a $33 million loss, as the company admitted to an “all-in” cost of production of nearly $18/ounce. Better yet, CEO Mitchell Krebs – who comically said the company is “off to a strong start” for the year, crowed that “falling oil prices bode well for further cost improvement, as fuel represents approximately 7% of total operating costs.” Perhaps he hasn’t seen that WTI crude has risen from $42/bbl in mid-March to $62/bbl this morning; i.e, a nearly 50%, “oil PPT” supported surge – whilst Cartel suppressed silver prices have risen a measly 4% during this time, amidst some of the most wildly silver-bullish, oil bearish news flow imaginable. Incredibly, CDE’s net debt/equity ratio skyrocketed since year-end from 34% to 60%; and thus, it should be no surprise that its stock plunged into oblivion. To that end, like so many mining stocks, KGC and CDE are down 90% from their 2008 and 2011 highs, respectively; en route to far lower levels if the Cartel isn’t destroyed soon – or draconian actions taken, like the aforementioned mergers, capital expenditure reductions, and mine shut-ins (which, of course, will only reduce the long-term production outlook further).
As for said oil price surge – and, for that matter, interest rates – the financial world has become too complex, and manipulated, to logically pinpoint the cause. Let alone, the Euro currency, which is surging despite hideous economic data (notwithstanding the so-called “benefits” promised by the ECB, when it commenced its maniacal NIRP and QE schemes). Not to mention, the increased likelihood of a near-term “Grexit”; and fraying political situations everywhere from the UK (major, uncertain national election next week); to Spain, Italy, and France. That said, one could just as easily claim it’s not the Euro that’s “surging,” but the dollar that’s plunging. And this, despite the so-called “recovery” that’s supposed to catalyze imminent Fed rate hikes (LOL). So try to have mercy on poor old Andy Hoffman – 25-year financial analyst; CFA; and seeming expert in the fields of macroeconomics and Precious Metals. I’m doing my best to commentate on an unprecedented world of economic dystopia, fraudulent economic data, massive “off balance sheet” derivatives accumulation, and blatantly rigged markets – and that’s the best I can do.
Anyhow, as we head into this morning’s useless April ADP payroll report – which frankly, no longer has the slightest correlation to the massively rigged, “seasonally adjusted” NFP report, I’m curious to see if TPTB are dumb enough to report significantly “better than expected” results with interest rates – both here and in Europe – on such powerful upward trajectories (EDITING ALERT – it was horrible, coming in at +169,000 versus expectations of +205,000; whilst March was revised from +189,000 to +175,000, and February from +212,000 to +200,000) .
I mean, think about it. In Europe, today’s economic data proves – as in Japan – that QE decidedly doesn’t work, unless the definition of “work” includes higher debt and inflation, and plunging capital investment and retail sales. And yet, interest rates are surging, with German Bund yields – whose QE-suppressed levels have supported German’s hideous equity bubble – having more than doubled in the past week. Meanwhile, as the Fed issues dovish statement after dovish statement – as dramatically validated by last week’s ugly GDP, and yesterday’s hideous trade deficit data; rates here, too, are sharply rising. Which, if they are not “checked” soon, could take down history’s largest debt edifice in rapid fashion.
Is the reason for the yield surges expectations of an improving economy? Not a chance – as the trend is decidedly heading in the wrong direction. And even if the economy did in fact improve, the negative impact of even a slight interest rate rise would be devastating; let alone, if an end to low oil prices no longer provide the “net positive” to the economy Janet Yellen espoused back in December. Or is the global rate rise due to Chinese government bond selling, as suggested by recent TIC reports? Perhaps. Or maybe it’s just the beginning of hyperinflation fears; or the inevitable market realization that exploding debt loads should decidedly not engender record low yields, “QE to Infinity” notwithstanding; but to the contrary, record high yields. Oh well, I guess we’ll have to see how rapidly “Economic Mother Nature” decides to unveil her grand plan.
That said, let’s move on to today’s principal topic – dovetailing perfectly with Monday’s “deflation,” and the soaring cost of living.” In that article, published less than 36 hours ago, I wrote of “inflation in the form of relentless tax increases – such as the all-time high level of U.S. property and sales tax revenues.” And lo and behold, yesterday afternoon, I received a letter from the local tax assessor – claiming that, despite my house being worth no more than what I paid for it eight years ago (I’d be thrilled if it was), my property taxes are being raised 17%.
On that note, I was struck by yesterday’s comments from one of America’s true entrepreneurs; Steve Wynn, who “back in the day” became America’s pre-eminent gambling mogul via ownership of now archaic casinos like the Golden Nugget; and continually changing with the times; first, by opening the 1990s kings of Vegas – the Mirage and Treasure Island; next, the 2000s king, which is still one of Vegas’ finest – the Bellagio; and today, the undisputed 2010’s kings, the Wynn and Encore – as well as Wynn Macau, following a significant overseas expansion.
Say what you want about the morality of gambling; but indisputably, Steve Wynn is one of the most brilliant businessmen America has produced. Now 73 years old, a major reason behind his success is his understanding of what really drives the global economy – from demographics, to economic cycles, to – yes – monetary policy. Which is why it was so refreshing to hear him speak like an “honorary member” of the Miles Franklin Blog in this interview; specifically, between the 10:00 to 11:00 minute time stamps. Essentially, he validated exactly what I wrote in said “deflation” article, of how easy monetary policy is causing massive inflation in the average person’s life – no matter how “low” such inflation is purported by the lying government.
As for his view on the so-called economic “recovery,” here’s what he said about the immediate future – following an earnings plunge, both in Las Vegas and Macau, which has cut WYNN stock in half in the past 14 months.
“If you were to ask me, since we’re making forward-looking statements, what will the second quarter look like in Las Vegas? Weak. Do you hear me? Weak. So I’m trying to lower expectations here. This notion of a big recovery is a complete dream. I don’t think Las Vegas is experiencing a great recovery. I think it’s still very patchy. Non-casino revenue was flat in the first quarter, but I’d be thrilled if it was flat in the second quarter.”
Essentially, when the world’s smartest businessmen – like Steve Wynn; and heck, analysts from Wall Street’s most entrenched establishments – like Brown Brothers Harriman; are parroting the Miles Franklin Blog, you know something’s afoot. It’s only a matter of time before said “Economic Mother Nature” has her way; and hopefully, you will have protected yourself with the only assets proven to protect you over time before she does. And if you haven’t, we hope you’ll call Miles Franklin at 800-822-8080, and give us a chance to earn your business.