Ah, the “short squeeze”; i.e., the epitome of what’s wrong with Wall Street-polluted, derivative-dominated “markets.” The bane of capitalism, it allows people to “borrow” what they don’t have, for the purposes of pushing prices down. Like everything else Wall Streets’ cancerous derivative machine peddles – particularly since 1999’s elimination of Glass-Steagall – shorting is often done illegally, and always on leverage. I, for one, believe the deleterious impacts shorting has on capital formation, market volatility, and economic perception far outweighs the positive of “liquidity” and speculative alternatives. Moreover, more money is lost on “short squeezes” – particularly when catalyzed by overt or covert “intervention” – than any other market phenomenon.
Currently, we are amidst the quantitatively largest “short squeeze” of all time; as highly leveraged speculators – as always, on huge leverage, typically with other people’s money – are being “targeted” by algorithmic programs aimed at the “most shorted” stocks, commodities, and currencies. To that end, it should surprise no one that one of the “most shorted” commodities is oil – amidst the worst fundamentals in its century-old history. Not to mention, “Dr. Copper” – or as I deemed it two years ago, when it was still $3.00/lb, “Dr. Death.” Or heck, the “granddaddy of oversupply” itself, iron ore – which yesterday alone, was “short-squeezed” by 19%; joining oil, copper, and the rest of the oversupply kings in a brief, PPT-orchestrated moment in the sun. To that end, stocks are now more overvalued technically than at any time in the past 12 years; and fundamentally, more than any time EVER. Unless, of course, one anticipates hyperinflation – which in real terms, will destroy equity values regardless of what nominal prices do.
Conversely, gold and silver – bull market re-emergence and all – NEVER have short squeezes, despite the most bullish fundamentals imaginable (check out these Indian demand figures); the most “oversold” condition in its history (check out this long-term chart); and more naked shorts, amidst a global price surge, than any other commodity! That said, recall what I wrote yesterday, of a dramatic change in a multi-year trend.
“In what is, in my view, a clear signal of incremental Cartel weakness, they failed to prevent PMs from surging at the “2:15 AM” open of the London paper pre-market session for the third straight day – after doing so at the “sixth sigma” rate of 610 of the previous 696 sessions. Unquestionably, this is the first such three-day streak.”
Well, guess what? Today makes four straight “2:15 am” failures. Which, utilizing Cartel statistics, is an “eight sigma” occurrence! True, as you can see below, they still attacked at all other “key attack times” around the clock – just as they did yesterday. However, clearly something is not right in gold suppression land.
Furthermore, per what I noted in yesterday’s “Admiral Sprott rides again” – of the exploding institutional demand that threatens to overwhelm the Cartel in short order – the premium on Sprott’s PSLV silver fund surged an entire percentage point yesterday, to nearly 4%. Which, in my view, is right on the cusp of the level at which a Cartel-busting secondary offering is feasible. To which I can only add, stay tuned – as the mother of all “short-squeezes” may be awaiting the “white metal” market.
That said, the principal reason I’m so comfortable holding physical Precious Metals, instead of fraudulent, naked-shortable paper proxies – like the IAU ETF, which oversold the amount of gold in its portfolio with unregistered shares – is that fundamentals are more powerfully positive than at any time in history. “Dead cat” bounce notwithstanding, nearly all currencies are near, at, or below previous all-time lows; whilst some, like the Egyptian Pound, are freefalling as we speak. Let alone, the fact that we are just two days from what might be a major Euro-destroying policy decision by the ECB. Not to mention, the increasingly lunatic calls for “helicopter money” – i.e., rained down on the masses – from jurisdictions as supposedly “first world” as Switzerland and Ontario, Canada.
However, NOWHERE is the “final currency war” more evident than in China, where the initial devaluation of the Yuan I first predicted in last April’s “ugliest economic data I’ve ever seen” – not to mention, 24 hours before it actually occurred, in “the upcoming, cataclysmic, financial big bang to end all big bangs” – is about to commence its “second phase” in the coming months.
Last April, said “ugliest economic data I’ve ever seen” – that prompted my prediction of a Yuan devaluation – was a 15% year-over-year decline in Chinese March exports. And in August, when I wrote the “upcoming, cataclysmic big bang…” article, it was following an 8% year-over-year decline in Chinese July exports. Well, last night’s data was so bad, it was actually worse than those two reports combined; as February’s Chinese exports were reported to be…drum roll please…down 25% year-over-year, and 13% year-to-date. In other words, making the Chinese government’s claim two days ago that its economy grew 7% last year, and will do the same this year, even more incredulous. And subsequently, dramatically escalating the odds that China will step up its currency war participation in short order – whether due to outright easing, such as last month’s “surprise” reserve requirement reduction; further growth of its already exponential “lending” activity to the “private” sector; or otherwise. To that end, last weekend’s official government plan to grow the money supply by 13% in 2016 was borderline hyperinflationary before this data was published. So if you think the “dilution” of the world’s largest economy’s currency is going to slow down any time soon, I’ve got a bridge in Brooklyn to sell you.
As I said yesterday, tomorrow’s “horrible headlines” will always be worse than today’s. And I assure you, the “ugliest data we’ve ever seen” is about to get a lot uglier. Which, conversely, will make the fundamentals for physical Precious Metals ownership become more attractive, for more billions of people, with each passing day.