The best part of my job is the “good, smart people” I meet both virtually and in person. Through Miles Franklin, the great GATA organization and five years in the mining business, I have become friendly with some of the most thoughtful, intelligent people on the planet. I truly mean that and feel privileged to actually work with them. To wit, I was honored to participate in David Morgan’s “Mastermind” conference call series yesterday, with fellow truth seekers Chris Duane (who I taped a separate podcast with last week), Turd Ferguson (who I’ll be taping a separate webinar with today), and Ned Naylor-Leyland, one of Europe’s finest Precious Metals analysts; who by the way, I met at GATA’s fantastic London conference three years ago. It was one of the finest “hours of power” I have participated in; and for those interested in capitalizing on future events, I highly recommend contacting David Morgan – one of the world’s pre-eminent silver experts – at Silver Investor.com.
The topic of discussion was the opaque London OTC precious metal market, which few people – myself included – understand. Through Ned and David’s commentary, I realized that the only available silver data comes from Jeff Christian’s shadowy CPM group, and that the market’s principal players strive to “cover their tracks.” That said, using Christian’s inadvertently admitted 100:1 estimate of paper volume to physical metal on the New York COMEX, the roughly $50 billion of annual London paper silver contracts “settled” each year would translate to a measly $500 million or so of actual metal delivered, suggesting “London” silver inventories are as precariously low as the $50 million or so purported to be held by the world’s largest physical delivery mechanism, the Shanghai Futures Exchange and the $1.1 billion claimed by the world’s largest scam, the New York COMEX.
Either way, barely any physical metal backs the massive amount of paper trading; and in the case of the COMEX, we’re quite curious as to what will occur after tomorrow’s options expiration given the record high level of silver open interest. In the meantime, we have been treated to every imaginable Cartel suppression stratagem, such as the “DLITG” or “Don’t Let it Turn Green” algorithms we witnessed Monday in gold and yesterday in silver. No matter that this week’s only “news” has been an extremely weak FHFA home price index, another decline in mortgage purchase applications, a 7% freefall in refinancing activity, the lowest German IFO business confidence reading in 17 months, a dramatic earnings forecast reduction from one of the world’s largest logistics companies citing “weak growth in Europe and the U.S.”; and oh yeah, the U.S. “going it alone” in unilaterally bombing Syria.
Generally speaking, I never “seek out” topics to write of. There are simply too many things wrong with the world; and thus, like Superman’s green crystal topics simply call me – in fact, so often, I keep my Brink’s writing pad with me at all times. Yesterday, while browsing the internet, I came across a “poster child” for the economic damage created by a more than a decade of reckless monetary policy and six years of relentless government efforts to support financial markets. In this case, it was the unbelievably short-sighted “strategy” of Bed Bath and Beyond borrowing $1 billion earlier this year to buy back stock. In the past, we have highlighted how countless companies motivated by self-serving management stock options, record low interest rates (read QE), and market volatility (read PPT); as well as vulture-like “activist shareholders,” have dramatically increased financial leverage for the benefit of short-term stock gains. Capital expenditures have simultaneously plunged not only due to the prioritization of buybacks, but the broad decline in global economic activity. And thus, with interest rates at (artificially suppressed) all-time lows, equity valuations at (artificially supported) all-time highs, the economy at multi-decade lows, geopolitical tension at multi-decade highs, and the unethical “tax inversion” machine on the verge of being shut down, corporate America has never been more financially and competitively vulnerable. Even great corporations like IBM have succumbed to this Fed-injected cancer, but seeing a retailer like Bed Bath and Beyond spending nearly four times cash flow on buying back shares – with borrowed money – “takes the cake.”
Much of what is fueling today’s historic financial bubble is unprecedented, as never before has money printing been conducted at such epic exponentially expanding levels. Nor have markets been manipulated so completely, economic data so obviously “cooked,” or the tools available to said manipulators – like derivatives and high speed algorithms – so sophisticated. Then again, some things never change like Wall Street’s unwavering, investor-endangering bias toward “hockey stick” earnings expectations, irrespective of how poor such forecasts have historically been.
However, nothing depicts the “grotesque face of irreversibly destroyed capital markets” better than the below chart, of how this time around, with equity valuations and leverage above those of the 1999 mania peak, the “99%” are nowhere to be seen – having lost their shirts in the 2000-02 “tech wreck,” the 2008-09 financial meltdown, and the Fed-orchestrated stagflation that has yielded the lowest labor participation rate in 35 years, the lowest real wages in at 40 years, and a “new employment paradigm” dominated by part-time, minimum wage, non-benefits-paying “jobs.” But don’t worry, for the “1%” privy to the Fed’s free ZIRP money with the PPT at their backs, the Cayman Islands shell of Alibaba’s highly commoditized retail business, weak accounting and all is worth $250 billion.
Saddest of all is the dumbing down of not only the population and the MSM that supposedly serves them, but so-called “financial leaders” like Federal Reserve governors. Frankly, even I was flabbergasted reading nonsense such as this in which the two leading Federal Reserve officials, Janet Yellen and (former Goldman Sachs Chief Economist) Bill Dudley not only contradict each other, but demonstrate how little they understand simple economics. Even scarier is the fact the world’s “leading” Central bankers actually collude before publishing such drivel, as this damning article proves. Yes, the Fed and ECB are literally “in this together” along with world-destroying “experts” in Central banks the world round. How civilization has declined so dramatically, so rapidly is “one for the books”; but then again, fiat money has managed to resuscitate itself hundreds of times throughout history, always yielding the same catastrophic end result.
As I write at 10:00 AM EST, the ultimate lunacy was just reported, straining the limits of even the most blatant “island of lies” economic reporting. Supposedly, “new home sales” surged by 20% in August, despite a 14-year low in mortgage purchase applications; indisputable evidence that even the “ZIRP to Infinity” inspired all-cash buying frenzy is rapidly drying up; plunging housing permits and starts and falling existing home sales. For those of you that thinking I’m “missing something,” pray tell how home sales can surge when both mortgage applications and cash purchasing applications are in rapid decline? And FYI, after such “good news,” interest rates resumed their post-FOMC decline – whilst precious metals, which had been smashed at all the typical “key attack times” surged upward. But how about that, take a look at what level the gold and silver rallies were stopped at? I’ll give you a big hint – DLITG!
Finally, no headline could better describe the aforementioned “grotesque face of irreversibly destroyed capital markets” better than this one, from – of all people, top MSM cheerleader Yahoo! Finance. Yes, even they realize the only way to boost record low readership is the publication of TRUTH. And what better truth than the antithesis of Wall Street and Washington propaganda?
Readership has never been higher, but this month’s sentiment-destroying Cartel attacks have clearly depressed the PM community. Perhaps Bo Polny was right that “only the most resolute bulls will survive” the September smack down (and bottom) he predicted; but as I wrote in “The Most Resolute Precious Metal Bulls,” it certainly takes “resolve” to hold “paper PM investments” like mining shares, but NOT physical metal. Miles Franklin continues to receive nearly all its revenues from customer purchases and swaps – as it always has and always will. And for those that haven’t yet protected themselves with the only assets guaranteed to survive the inevitable hyperinflation what better time than after gold and silver have been smashed to levels well below their cost of production, amidst the most positive economic and geopolitical fundamentals of our lifetime? And please, don’t ever stop asking questions –to David and Andy Schectman, Bill Holter, and myself are here to answer them!