Back to the “wide world of horrible headlines;” let’s start with what I wrote last week of Japan’s Nikkei average languishing near multi-month lows despite yesterday’s “+5.9% GDP growth” or as I deemed it, the biggest lie in history. In “The Most Damning Proof Yet of QE Failure,” I postulated that the Fed is supporting rates for the first time in decades terrified that the world is “calling out” its tapering propaganda by betting on increased QE. Secondarily, I noted how the same thing is occurring in Japan. However, such support is occurring not in the bond markets – which was commandeered long ago – but the stock market. Specifically, the BOJ is just as terrified of the pre-Abenomics gains being lost; and thus, the world “calling out” Abenomics’ supposed success.
As you can see below, the Nikkei nearly doubled when Shinzo Abe became Prime Minister in December 2012 – under the platform of doubling the money supply to combat “deflation.” Unfortunately, the Nikkei peaked just after Abenomics commenced four months later; and since then, has clearly been “supported” at the round number of 14,000 – as following a brief blip up, the Land of the Setting Sun’s economy has entered a rapidly accelerating downward spiral; of which, its death knell was heard when the national sales tax was raised last month from 5% to 8%; ironically, under the guise of paying for Abenomics.
Anyhow, in the aftermath of yesterday’s bogus GDP print, this is how the Nikkei responded – as the benchmark 10-year Japanese Government Bond or JGB, saw its yield drop from 0.60% to 0.58%. Yes, down 1.5%, to the low end of the past year’s trading range of 14,000 to 15,000. And if you don’t think such “trading” wasn’t dominated by Bank of Japan algorithms protecting 14,000 with all their might, I have a bridge to sell you in Brooklyn.
Which, frankly, are no different than the Cartel algorithms “guarding” $1,300/oz gold and battlefield $20 silver or for that matter, Fed algorithms that after having been soundly defeated in their quest to support 2.6% on the benchmark 10-year Treasury have simply moved their “line in the sand” down to 2.5%. As was the case at 2.6%, you can bet your life the 10-year yield will experience numerous, “mysterious” spikes higher; as the Fed desperately tries to regain upside momentum just as the Cartel continues to “mysteriously” spike gold downward each time it threatens to gain traction above $1,300/oz. Of course, such manipulation schemes will ultimately lose, as they always do; just as the PPT in 2008, when it constantly created “mysterious” spikes upward in Fannie Mae and Lehman Brothers’ stocks en route to ZERO.
Next up, here’s what we wrote in December’s “Upcoming Indian Catastrophe” – regarding the ramifications of this month’s national elections; which, if not for maniacal Cartel suppression, would – in and of itself – yielded a dramatic precious metals rally. Heck, even perma-gold antagonist Dennis Gartman knows it!
Worse yet for the Indian government’s ill-fated scheme to control the uncontrollable, last week’s key regional elections were an across-the-board defeat for the ruling Congress Party. The hands down winners were the pro-business, pro-gold BJP party; and thus, the odds that its leader, Narendra Modi, will be elected Prime Minister in next May’s general election are extremely high.
-Andy Hoffman, Upcoming Indian Catastrophe, December 13, 2013
Yes, Modi was in fact elected in a landslide as inflation-ravaged Indians ousted the Federal Reserve lackeys running the country – and the Rupee – into the ground. To wit, we have long described Indian monetary policy as the equivalent of South African Apartheid. In the latter, a small group of whites constituting just 10% of the population, oppressed governed “the 90%” until eventually they were eventually overthrown. From a monetary standpoint, the same can be said for India, where a mere handful of paper-loving monetarists attempted to impose their will on more than a billion gold-loving citizens going so far as banning bullion sales at banks and imposing onerous import tariffs. Well, it appears the citizens have decisively won; as the odds are that Modi’s administration will reduce if not completely repeal said restrictions. Thus, it shouldn’t surprise anyone that the Rupee is surging; as clearly, the forex markets realize gold will re-assert its Indian dominance in the coming months.
On to Russia, where the long awaited “holy grail” natural gas agreement is in its final stages of construction likely to be formally agreed to at Tuesday’s historic meeting between Russian President Vladimir Putin and new Chinese President Xi Jinping. Frankly, it’s difficult to believe anyone but the most jaded, died-in-the-wool government apologist can’t see the writing on the wall – as China increasingly challenges American hegemony en route to the inevitable “de-dollarization” of global trade in favor of a more “East-centric” power base. Stay tuned for the historic May 20th meeting; and in its aftermath, make sure to watch less what they say, and more of what they do.
And before commencing today’s principal topic, I feel it imperative to discuss this morning’s pathetic U.S. economic propaganda data dovetailing beautifully with yesterday’s “biggest lie in history.” Yes, “housing starts” were professed to have surged from 946,000 in March to 1,072,000 in April above expectations of 980,000. And by the way, never mind the dismal consumer sentiment number published thereafter; as in the world of market manipulation, “bad news” is ignored and “good news” invariably is either fabricated or misleading. So yes, aside from the fact that housing starts always rise when the winter abates, one must realize this “surge” occurred in the worst possible segment. That is the multi-family sector, which is exploding in size as speculators bet on the end of home ownership and the commencement of the Wall Street owned government managed “renter nation.”
To wit, since home “affordability” peaked in 2005 the percentage of young (under 34) adults living at home has skyrocketed from 27% to 31%. Whilst the “1%” afforded free Fed money have looted the nation’s assets using historic levels of leverage under the explicit notion they are “too big to fail, “the 99%” have been reduced to serfs. And thus, I’ll defer to the miserable consumer sentiment numbers; not just from the public but the National Association of Homebuilders themselves – whom just yesterday, reported plummeting sentiment to a new 12-month low. For the record, whilst housing starts for multi-family structures hit a new all-time high last month, single family starts barely budged – at levels nearly 50% below the 2007 highs.
As for the “ultimate safe havens,” I’m pretty sure you know where I’m going. Reading Dmitri Speck’s “Speck-tacular analysis” of how gold has been manipulated to react during crisis situations, one needs to look no further than yesterday’s farcical “trading.” First, recall Wednesday’s action, when “Cartel Rule #1” – i.e., “thou shalt not allow PMs to surge whilst the Dow plunges” – was violated; albeit, in typical muted fashion as gold, of course, was held to an exactly 1.0% gain, while the Dow Jones Propaganda Average’s losses were capped at “PPT limit down level #2” (i.e., exactly 100 points). Clearly, the catalyst was plunging Treasury yields, as the world was clearly discounting Yellen’s comment that “a high degree of monetary accommodation remains warranted.”
And thus, when rates plunged further on Thursday and gold was on the verge of turning positive whilst stocks sat at the day’s lows, it shouldn’t surprise you that at exactly the 12:00 PM EST “cap of last resort” gold suddenly plunged for no apparent reason. Not to mention, following today’s bogus housing starts “beat” – irrespective of the aforementioned commentary, the horrific consumer sentiment data or that interest rates remained mired at the week’s lows.
However, the point of this article is not to focus on gold manipulation but instead, the coming end of TPTB’s safe haven “playbook” of herding investors into Treasury bonds to be usurped by their ultimate resting place in the only assets proven to provide safe harbor over the centuries, gold and silver.
To wit, the primary goal of ZIRP, QE, and the “PPT” is stabilizing confidence by supporting financial markets and minimizing borrowing costs by not only purchasing Treasury, Mortgage, and all manner of fixed income securities, but creating an implicit “Yellen Put” (i.e., an assumption the Fed will deem all bondholders “too big to fail”). This in turn has created a Pavlovian investor response to buy Treasuries when crises emerge; and conversely – care of the Cartel – the avoidance of “volatile” precious metals, which always seem to have early crisis gains erased by subsequent, “mysterious” plunges.
In fact, various overt QE programs have been so pervasive that Central banks like the Fed and Bank of Japan have monetized nearly all Treasury issuance and then some. Not to mention, covert programs like the Fed’s ongoing “swap agreement” with European banks – in which it secretly funds them with zero-cost capital but doesn’t account for it as money printing given such transactions are characterized as not loans but “swaps.”
Just last night, the benchmark Japanese 10-year government bond declined to a near record low 0.58% yield; as despite the lie that was its 1Q GDP data, the nation’s economy continues to sink to new multi-decade lows. Of course, at such historically low yields – amidst historically high debt and inflation – there’s only so much “blood” that can be extracted from the Treasury safe haven “stone.” In fact, Japanese investors are no longer buying Treasuries at all per last month’s news that for a shocking 36 hour period, not a single Treasury was purchased. And thus, the BOJ has for all intents and purposes, become not only the buyer of last resort but JGBs’ only buyer.
As “QE to Infinity” takes hold of the global mindset – with the ECB likely to join the party next month, and the Fed later this year – it’s only a matter of time before all sovereign debt is eschewed. And when it does – and subsequently, all markets become devoid of non-Central bank buyers – the upward pressure on precious metals will be unprecedented. Throughout 5,000 years of history, gold and silver have been the “ultimate safe haven” assets; and given today’s historic mad experiment in global fiat currency, there’s not a chance the ultimate outcome will be any different.
My favorite graph is the Nikkei 225. How much longer can government manipulations possibly go on? Talk about watching a pot boil!