It’s the wee hours Saturday morning, and I have a foul taste in my mouth – as the all the goodwill of a pleasant Thanksgiving rapidly dissolved on this blackest of “Black Fridays.” A term, I might add, that since bursting onto the scene a decade ago, has nauseated me to no end (although this Black Friday clip is hilarious). To wit, just like “ultimate fighting”; reality television; and “fantasy sports”; shopping on Thanksgiving – and forcing people to work on this most festive of secular holidays – is a national blight, and an indictment on the deterioration of American culture.
Moreover, like anything that’s been done for too long, deep discounting no longer “works” – in that each year, fewer and fewer people participate. More importantly, fewer corporations profit from such schemes; like, for instance, Old Navy – the “hippest” segment of the dying Gap Stores chain – which offers all merchandise at half-price. Sure, the handful of true “door-busters” that still exist – distastefully named for a phenomenon that has cause dozens of trampling deaths, and hundreds of brawls – are capitalized on by deal-seeking zombies. But aside from the handful of $99 flat-screen TV’s that actually exist, this year’s Thanksgiving store traffic was the weakest America has seen; easily weaker than last year – and likely, the weakest since 2009. Which certainly makes sense, given we are amidst the “worst economy of our lifetimes” – both here, and overseas. And those that actually do show up to shop – even on 20 degree days as we had here in Denver – typically seeking only deeply discounted items. Kind of like what my wife does when we are sent $10 gift cards by Kohl’s in the mail – in going to Kohl’s, and buying exactly $10 of merchandise.
Of course, that hasn’t stopped the perpetual propaganda machine from immediately trying to staunch the bleeding, by claiming that retail spending – which incredibly, accounts for a whopping 70% of GDP – now occurs less on Thanksgiving weekend, in lieu of more uniform spending throughout the “holiday season.” Which, in reality, means comically unprofitable prices are being offered for longer periods of time – amidst an industry beyond “saving,” given the collapsing economy and record high inventory-to-sales ratio. I mean, is anyone watching what corporations themselves are saying? Like Walmart, predicting next year’s sales will be no more than this years’? Or the horrifying outlooks of a wide variety of retailers, amidst the “worst global economy of our lifetimes” – including bellwether chains like Macy’s, Nordstrom, and JC Penney?
Following the theme of things beyond “saving,” let’s summarize the “best of” the incredible 12 pages of “horrible headlines” I’ve accumulated since taping Wednesday’s Audioblog – demonstrating how the volume and depth of such headlines is truly going “parabolic.” Starting with an expansion of the “seminal event” that emerged two months ago, when Volkswagen’s “Diesel-Gate” permanently destroyed trust in one of the world’s oldest, most well-respected corporations. Since then, VW has pretended to cooperate with authorities, profusely apologizing for the “rogue employees” responsible for essentially every VW vehicle having nitrogen oxide emissions test-gaming software. And yet, we just learned that most VW’s have additional test-gaming mechanisms as well – such as software designed to “beat” carbon dioxide emissions tests. Which certainly doesn’t put me in a buying mood – definitely not of Volkswagen’s; and frankly, given the level of paranoia such a disclosure has prompted, anything German. No, I don’t think anything can save Volkswagen’s reputation at this point – which bodes ominously for one of the largest companies in the collapsing European Union’s largest economy; and certainly, for its roughly 600,000 employees.
Which brings me to the “unsavable” Euro – although Mario Draghi will likely do “whatever it takes” at this Thursday’s ECB meeting; ironically, by promising to dilute it further, by again expanding Europe’s unprecedented, toxic combination of negative interest rates and open-ended quantitative easing. But don’t worry, he continues to claim such programs are “working”; which somehow doesn’t gibe with three years of zero GDP “growth” (and decidedly negative growth if real inflation data were utilized); record French joblessness; exploding bad debts; unprecedented negative Treasury yields – both inside and outside the Eurozone; the “collateral damage” of currency wars with neighboring nations, like Sweden; exploding secession movements; and oh yeah, the geopolitical chaos created by the largest Western terrorist attack since 9/11. Which, it appears, will shortly be joined by the UK, as David Cameron is actively lobbying to join the U.S., Russia, France, Turkey, and others into the World War-III-in-the-making in Syria. Heck, the EU Commission’s own President, Jean-Claude Juncker, yesterday warned that the collapsing Schengen agreement – enabling visa-less European travel – may portend the end of the Euro currency itself. To wit, “Schengen is one of the main pillars of the construction of Europe. If its spirit leaves us, a single currency doesn’t make sense.”
Next, there’s the “unsaveable” collapse of history’s largest economic and financial bubble, the Communist States of China. Which, I might add, is decimating the imploding European Empire further – via collapsing shipping volumes; plunging exports; and imploding employment in the North Sea oil industry; which, given crude’s relentless decline – “oil PPT” activity notwithstanding – is about to go parabolic; likely, providing the death knell for dozens, if not hundreds, of oil producers.
To that end, said “oil PPT” is doing everything in its power to avert the “unstoppable tsunami of reality” – but decidedly failing, as WTI crude, despite last week’s comically transparent “interventions” proved. Which, frankly, are nothing compared to what the “copper and zinc PPT’s” have been attempting – to save Glencore, Trafigura, Noble Group, and dozens of other highly-leveraged commodity miners and traders. To wit, we are now seeing “miraculous” 2%-3% surges in copper every other day – including Friday the 20th; Tuesday the 24th; and yesterday, Friday the 27th. However, on each successive day, essentially all gains were lost – not only in copper, but all base metals.
Below, you can see Thursday the 24th’s copper PPT-inspired 3% surge, failing miserably on the 25th. Subsequently, they tried again on the 26th, taking prices dramatically higher in the wee Asian hours of pre-Thanksgiving trading. In fact, as you can see below, the comical 4% surge to $2.15/lb, in ultra-thin trading conditions, was so sharp, even Kitco’s charting algorithms couldn’t process them! That said, the operation again failed – as just a few hours later, nearly all gains were gone, with the CRB Commodity Index closing at a new 40-year low of 183.2. And given this Friday’s upcoming OPEC meeting, in which no change to the Cartel’s production quotas is anticipated, don’t be surprised if the commodity carnage takes another turn for the worse in the coming weeks.
And this, as the new, undisputed king of manipulated stock markets, the Shanghai Exchange, was plunging 5.5%; in a move so reminiscent of this summer’s ugly freefall, the Exchange’s regulators to put out a “warning” this weekend for traders to “be rational.” As in, don’t sell or you’ll be jailed, or something of the like. For that matter, we also learned this weekend that the PBOC has acquired an astounding 6% of the entire Shanghai Stock Exchange’s capitalization in just a few months’ time, or a whopping $240 billion worth! Heck, compared to the PBOC, the Banks of Japan and Switzerland appear to be pikers – owning just $90 billion of equities apiece; in the Bank of Japan’s case, amounting to just 2% of the Nikkei’s capitalization; and for the Bank of Switzerland, which buys international stocks as well, 15% of Swiss GDP.
Then again, now that it’s common knowledge that Central banks cumulatively own nearly $30 trillion of equities – and who knows how much more “off balance sheet” – “conspiracy theories” of market manipulation can officially be put to rest. Which is probably why, despite the worst fundamental news flow in generations – from collapsing junk bonds; to imploding corporate revenues; vanishing transportation volumes; a surging dollar; and declining GDP expectations – U.S. stocks are seemingly NEVER allowed to decline.
To that end, just as gold and silver are relentlessly attacked at “key attack times” like the “2:15 AM” EST open of London’s paper markets; and the 8:20 AM open of New York paper trading; the “Dow Jones Propaganda Average” is supported, like clockwork, by the Fed’s daily 10:00 AM “open market operations” – via the same “dead ringer algorithm” I identified four years ago. To that end, Wednesday and Friday’s gold charts look similar, huh? And in Friday’s case, by the way, the COMEX-opening plunge – with no other markets moving – was caused by (gee, what a surprise) “someone” flooding the market with $1.9 billion of paper gold contracts, compared to just $150 million of physical gold inventory available for delivery. Gee, I wonder who was so eager to put such a gargantuan “market order” out there, on the exchange’s thinnest trading day of the year.
Back to base metals, the situation has gotten so ugly, the China Nonferrous Metals Industry Association proposed that not only should the Chinese government “bail out” failing miners and traders by buying millions of tonnes of aluminum, nickel, zinc and other collapsing metals, but “malicious sellers” should be prosecuted for causing the industry’s problems. Regarding the latter, it remains to be seen if the government will attack such “criminals” with the same veracity as they did in the equity markets. And as for the former, given that China’s “national team” already owns 700,000 tonnes of copper – and who knows what else – from similar efforts to “save” base metal markets in 2009, it would seem highly unlikely that they’ll “double down” on their decidedly failed effort to usurp “Economic Mother Nature’s” immutable laws. To that end, whilst supporting paper stock markets can theoretically be achieved via hyper-inflation, physical markets like metals have actual supply and demand factors to contend with.
Which leads me to the “only markets that don’t need help” – which contrary to Cartel-ravaged paper prices, are the physical markets underlying gold and silver. Over the past 15 years – but particularly the past four, since the Cartel went “all-in” suppressing prices – each paper raid has only served to strengthen demand, eliminate inventories, and destroy the mining industries’ ability to maintain production. Heck, this weekend alone – as the aforementioned, comically blatant paper raids were occurring, news of record U.S. Mint silver Eagle – and likely Canadian silver Maple – demand hit the tape; as well as surging eBay bullion buying; exploding “silk road” gold buying; and last but not least, the exploding divergence between paper and physical investor purchasing habits.
Thus, for anyone worried that Precious Metal prices will meet the same, inevitable fate of actual “commodities” like crude oil, copper, and zinc, have no fear, as thousands of years of history are on our side. Not to mention, what is going on today, in unprecedented fashion. Ultimately, “Economic Mother Nature” will spectacularly win out in all global markets – certainly in real terms, and likely nominal as well. And nowhere more so than gold and silver, which not only “should,” but will protect financial assets as they have always done; as the greatest financial calamity in generations – and likely, geopolitical and social as well – tragically unfolds.