Four months ago, amidst the U.S. stock markets’ worst – and Precious Metals’ best – ever start to a year, I opined that a swirling confluence of devastating political, economic, and monetary events made it unlikely the world would escape 2016 without a catastrophic financial market event. Fast forward to today, and I feel stronger than ever about this outlook, now that “the powers that be’s” best efforts to manipulate worldwide markets and economic data have fallen flat on their face. Not to mention, the Cartel’s last ditch gambit to put Precious Metals “back in their box”; as following the past week’s spirited, albeit blatantly capped, rallies, gold and silver have recouped three-quarters of their post “FOMC minutes attack” losses; just as I predicted in May 18th’s epic, 42-minute, must listen Audioblog, titled “the Fed’s desperately pathetic FOMC minutes attack will miserably fail.”
To that end, late yesterday afternoon’s COT report (I’m writing this Saturday morning) revealed that the Cartel “went for broke” last week, in shorting 29,000 more gold contracts – worth $3.6 billion – through Tuesday afternoon; putting its historic (naked) short position not far from last months’ all-time high level, just before prices surged $30/oz on Wednesday, Thursday, and Friday. In other words, they yet again lost a major battle, putting the date of their inevitable Waterloo that much closer. And heck, it’s not even gold, but silver where the biggest potential fireworks lie, in light of the fact that COMEX registered inventories last week plunged to an all-time low. Which is probably why Indian silver imports hit an all-time high last year; U.S. silver imports, an all-time high last month; and silver bullion sales an all-time high in the first quarter. And why, to that end, I penned, just two days ago, the “upcoming, historic silver shortage.”
As for said confluence of of devastating events, how about commodity prices renewing their death spiral declines this month – like “Dr. Copper,” for instance; and god forbid, “oil PPT”-supported crude oil? Or the “commodity currencies” backed by them, which are also back in free-fall mode – causing Precious Metal prices to surge in nearly all currencies? Heck, even British Pound-priced gold, one of the world’s most historically suppressed markets, is within 24% of its all-time high, following yesterday’s news that “Brexit” surged ahead of “BrEmain” in the polls, by a whopping 55% to 45% margin. To that end, I continue to believe June 23rd’s Brexit referendum – one day before Miles Franklin’s FREE Chicago Q&A Rap Session – will potentially be the “most important, and Precious Metals bullish, vote in history” – as this may be Britons’ last chance to maintain their long, storied national identities. I mean, just how negative will the ECB take rates after the UK votes to “leave?” And how many corporate bonds will it buy – let alone, the junk bonds it is monetizing as well?
Then there’s that “small matter” of the PBOC actively devaluing the Yuan, with the official “onshore Yuan” falling below August’s lows this week, whilst the unofficial “offshore Yuan” plunged even further? There’s a reason why I last August deemed a significant Yuan devaluation the “upcoming, cataclysmic, financial big bang to end all big bangs”; which we saw a small dose of then, when a mere 6% devaluation precipitated a massive, worldwide equity, high yield bond, commodity, and currency plunge. And now that a far larger devaluation appears imminent my guess is it won’t be long before the entire world realizes just how cataclysmic it will be.
And by the way, in September’s “only financial event as potentially cataclysmic as a signficant Yuan devaluation,” I wrote of how suicidal it would be if the Fed raised rates. Which is exactly what occurred in December, nearly destroying the financial world in the process; and exactly what will NOT occur this Wednesday, when the Fed not only doesn’t raise rates, but is forced to publish its most dovish statement yet! Likely, on a day when not only are U.S. Treasury yields challenging their all-time lows, but global sovereign yields are at all-time lows, with the vast majority trading in negative territory.
As for today’s principal topic, how apropos could it be that two days ago, German Bundesbank President Jens Weidmann and Financial Minister Wolfgang Schauble warned of a “sudden surge” in European risk premiums, care of the ECB’s unfathomably dangerous forays into mega-negative interest rates and limitless, broad-sweeping quantitative easing? I mean, not 24 hours later, Germany’s – and Europe’s – largest bank, Deutsche Bank, which has been the subject of liquidity fears for years now, saw its stock plunge 6% to $15.74/share; 89% below 2007’s all-time high of $138/share; 17% below its 2008 low of $19/share; and mere pennies above its $15.51/share low this February, one day before – LOL – it supposedly bought back $5 billion of bonds, catalyzing a “dead cat” bounce to $20.50/share. To that end, the reason I mock the supposed February 12th bond buyback, is that most likely, DB either 1) didn’t buy back anything, but simply lied about it; 2) they bought the bonds back, but compromised their teetering liquidity further by doing so; or 3) bought the bonds back with newly – covertly – borrowed funds, making its debt burden even worse. I mean, buying back $5 billion of bonds when you have $700 billion of on balance sheet debt and the world’s largest derivatives book, has about the same practical efficacy as the Titanic bailing out a few buckets of water. Not to mention, demonstrating just how desperate your management is, to “kick the can” a few more months, in the – subsequently failed – “hope” of a government or Central bank bailout. Or, to put it squarely in Titanic terms, an “absolution that would never come.”
Since February’s stock plunge, I have deemed Deuschebank the “Lehman of Europe” – most recently, at last month’s Miles Franklin Q&A Rap Session in Houston. I mean, DB’s stock plunge – amidst an environment of cascading bank stock prices across Europe – sticks out like a sore thumb; as clearly something is very, very wrong there. In my view, the “powers that be” are for some as yet unknown reason, distancing themselves from DB – just as was the case with Lehman in the States, as its competitors were serially deemed “too big to fail.”
I mean, the current, rapidly growing list of lawsuits and allegations against Deutscheban is utterly staggering – including its admission of manipulating Precious Metal markets for the past 15 years – to the point that clearly, this massive European crime center is not far from total, and irreversible, implosion. Only this time, the ramifications would be dozens of times uglier than Lehman, given that its derivatives web is so large, it would likely entangle every financial institution in Europe – as well as countless non-European corporations, institutions, and sovereign governments. Not to mention, seven years after the Lehman crisis, the global banking sector is far less liquid then ever, amidst the worst worldwide economic conditions since the Great Depression. Not to mention, an unprecedented, worldwide debt edifice nearly twice that of 2008’s level, with Central bank balance sheets so bloated – and credibility so thin – there is no chance they could “bail out” the world again, unless they resort to outright hyperinflation. Which unfortunately, the sad, sordid history of all fiat Ponzi schemes guarantees.
On Tuesday night, Jim Rickards is giving a special presentation from Switzerland, to discuss the upcoming “zero hour” when gold prices go parabolic, and offers non-existent. Whether he’s right about the – in his view, imminent – timing remains to be seen. However, I couldn’t agree more that it’s coming soon. And frankly, if Deutsche Bank does in fact prove to be the “Lehman of Europe” – which I strongly suspect it will – we may well be looking at the zero hour’s catalyzing event, right in front of our faces.