It’s early Saturday morning, and I have compiled nine pages of “horrible headline” in the past 48 hours alone; which I must condense, to summarize this week’s collapse of global trade, economic data, and financial markets – notwithstanding Thursdays half-hearted, pathetically obvious attempt to “slow the tsunami” via PPT-stock goosing and Cartel Precious Metal attacks. Which I can easily accomplish with four simple words; i.e, “well, Janet…we’re waiting.” For the “Yellen Reversal”, that is – that I predicted 15 months ago, when the Fed pretended to end QE.
And by pretend, I mean that the Fed’s balance sheet has not shrunk one iota since said “end of QE,” and who knows what it looks like when considering “off balance sheet” monetization of hundreds of billions of Chinese Treasury bond sales. Just as last month’s quarter-point “rate hike” been observed in actual money markets. Nor, for that matter, has the historic, catastrophic “oil and export price collapse” turned out to be as “transitory” as the Fed anticipated – in frankly, the worst economic prediction in recorded history. Which, I might add, they still maintained four weeks ago – in the very same policy statement in which they “raised rates!”
And by “Yellen Reversal,” I mean the pre-ordained reversal of this three-year “QE-ending”, “rate-hiking” propaganda stunt – supported by unprecedented money printing (much of it, “off balance sheet”); falsified economic data; and market manipulation. Which inevitably, will be forced to be renounced by collapsing economic activity and financial markets – at which point, Whirlybird Janet will only admit the recovery that never was is officially dead (blaming it on “outside unpredictable factors”), but take interest rates negative, and launch the largest QE round yet.
And by the way – do you know what else I published in October 2014 – when said “transitory” oil price decline had only reached $81/barrel – compared to $29/barrel today; whilst the CRB Commodity and Baltic Dry indices were still 270 and 1,100, respectively, versus 159 and 373 today? Yep, “crashing oil prices portend unspeakable horrors“. Which as it turns out, may one day be viewed as the understatement of the century, given how rapidly global trade has since collapsed; geopolitical stability devolved; financial stress expanded; stock, bond, and commodity markets imploded; and fiat currencies disintegrated, as the “final currency war” I predicted three years ago has gone “thermonuclear.” And heck, the “Big One” – I.e., the “financial crisis to end all financial crises” – hasn’t even arrived yet!
Regarding the utter collapse of commodity markets in the past 48 hours – catalyzing similar implosions of equity, high-yield bond, and currency markets from East to West – the principal catalyst was the imminence of the long-awaited removal of sanctions on Iran, which went into effect today despite a series of troubling geopolitical events that had investors, corporations, and sovereign nations the world round hoping – or better put, praying – they might be delayed. In other words, a veritable tsunami of oil will start hitting global markets this weekend – in a market where oil is already at 12-year nominal lows; and in real terms, turn-of-the-century levels. Let alone, amidst price discounting that has taken actual sale prices still lower.
As for other markets, essentially all global equity markets have not only plunged below August’s “Black Friday” lows, but high-yield – i.e, junk – credit has fallen to 2009 levels; and commodities, in many cases, to at least 1970s levels. Led by, I might add, base metals like copper, aluminum, lead, and zinc – which continue to freefall, whilst the monetary metals gold and silver have been the only assets to rise. Except, of course, Treasury bonds, which are not only discounting the end of rate hikes, but the prospect of the “Yellen Reversal.”
As for currencies, EGAD! I mean, we’re talking about the total annihilation of entire countries – from the four corners of the planet. I don’t need to tell you what’s going on in “commodity currencies” like the Rand, Real, Ruble, Peso, and countless others – in nearly all cases, at all-time lows; and in some cases, way below previous lows. However, you’d probably be surprised to hear that the British Pound is plunging, too – in my view, due to rising expectations that a “Brexit” vote in the coming 12-18 months will result in the UK’s total isolation from the European Union. I mean, the Pound is within 3% of its all-time low against the dollar – a low, I might add, that was barely touched for a few days at the height of the early 2009 financial crisis. And this, in a nation that, unequivocally, had one of the world’s highest costs of living before the pound started plunging! For that matter, I won’t even discuss the supposedly “rock-solid” Hong Kong Dollar, which had its biggest plunge ever this week, amidst speculation that the 33-year peg with the U.S. dollar will be imminently broken. Which, I might add, is exactly what occurred in Saudi Arabia as well – where the Riyal’s geopolitically pivotal “petrodollar peg,” too, is on the verge of extinction.
To that end, the only currencies not currently collapsing against the dollar, ironically, are the Euro and Yen – in both cases, demonstrating exactly why aggressive currency debauchery does NOT work. As clearly, no two Central banks have tried harder, and more blatantly, to destroy their currencies. And yet, with the European Union on the precipice of political, economic, and social, collapse; and Japan, economically, demographically, and environmentally sinking into the sea, they still can’t push their currencies down further! Heck, in perhaps the most ominous quote of the year – which of course, was picked up nowhere but Zero Hedge – the Head of the Bank of Japan, yesterday, said further Japanese QE might “threaten the bank’s finances.”
DID YOU HEAR THAT, READERS? Now that the BOJ has essentially bought up nearly every Japanese stock, government bond, and who knows what else, it literally has ran out of monetary “ammunition.” Not to mention, ran up the highest debt/GDP ratio in global history. To wit, the Japanese economy is collapsing; the Nikkei is imploding; and there’s NOTHING LEFT TO BUY! Thus, the aforementioned, geopolitically ominous statement – which, in essence, was a not-so-veiled plea to the Fed to re-take the global QE reins.
Mirrored, I might add, by the White House itself; which, in nearly unprecedented fashion, held an impromptu press conference yesterday morning – in which Press Secretary Josh Earnest (the perfect name for such a sycophantic position) read a statement of how the President is concerned about falling stock prices, and the Treasury “monitoring” their impact on the U.S. economy. Oh, and did I mention that, at practically the exact same time, none other than New York Fed President Bill Dudley said “if the economy weakens further, we would consider negative rates.” Seriously, folks – I’m not making this up!
As for economic data, my god! It’s no wonder the Atlanta Fed waited until yesterday’s market close to update its 4Q GDP “growth” estimate to a mere 0.6% – as in the prior 48 hours, the following, hideously ugly data points were released; in each case, “unexpectedly” worse than anticipated.
- Surging jobless claims
- A 1.1% plunge in December export prices, versus “estimates” of a 0.5% decline
- The Empire State Manufacturing Index imploded from December’s -4.6 to a whopping -19.4 in January
- Retail Sales were “unexpectedly” down 0.1% in December – both including and excluding auto sales and gasoline – following an equally “unexpected” downward revision of November’s data
- The PPI “unexpectedly” declined by twice as much as anticipated
- December industrial production experienced its biggest plunge since 2008, whilst capacity utilization imploded. Plus, November’s data was revised sharply downward as well.
- Business inventories unexpectedly declined, yet the inventory-to-sales ratio still remained at its highest level since 2008
- U.S. freight volumes had their first year-over-year decline in three years
- U.S. automaker credit risk surged to two year highs
- Walmart, the nation’s largest private employer, announced it will lay off 16,000 workers – mere weeks after raising the minimum wage, and forecasting that 2016 revenues would be no higher than 2015
All this, whilst all imaginable Precious Metals-related developments were wildly bullish – from being the only asset class, other than QE-anticipating Treasury bonds, to rise; to the publication of potentially dramatic 2016 silver production decline estimates from Silver Standard, Yamana, and Coeur D’Alene (to that end, get ready for Miles Franklin’s “2016 Silver Outlook Webinar” on January 27th); to the strongest first-two-weeks-of-the-year Silver Eagle sales in U.S. Mint history.
Throw in news that final 2015 Shanghai Exchange gold withdrawals, at 2,596 tonnes, were nearly as much as the entirety of global production, and you can see why Precious Metals fundamentals represent the polar opposite of all other “commodities” – as discussed in Thursday’s MUST HEAR Audioblog, “Commodity life and death – a tale of two markets.” Which, I might add, was posted just before the world’s largest miner, BHP Billiton, announced a $7 billion write-off of its U.S. shale oil assets – which, by the way, most analysts believe to be woefully too little. And if you think its energy-related write-offs are big, just wait until it – and the entire mining industry – start announcing write-downs of reserves, resources, and existing mining developments and operations in the coming weeks. Particularly copper, lead, and zinc mines – where roughly 55% of the world’s silver emanates from.
Oh well, that’s enough for today – as my mother’s in from New York, for Sylvie’s fourth birthday party this afternoon. However, let’s just suffice to say that a mere four weeks after the Fed supposedly “raised rates,” the world has been dramatically turned on its head – to the point that the billions of people (particularly, Precious Metals holders) are starting to look with piercing, accusing eyes towards the world’s “printer-in-chief” simultaneously, saying “well Janet…we’re waiting!”