It’s Tuesday morning, and before I get to today’s highly thought-provoking topic – and sigh, “horrible headlines” – it’s time for another “Miles Franklin Book Review.” In this case, from one of the truly good guys of the Precious Metals newsletter community, Gary Christenson; who “deviated” from his typically forensic chart work – fitting, as his website is deviant investor.com – to write a “mystery” titled “Who Killed Doctor Silver Cartwheel?” “Cartwheel” is a slang term for 90% silver content silver dollars coins, before they were de-monetized by the U.S. government in 1964. In other words, what we today refer to as “junk silver.” In its brief 160 pages – I read it in just three hours on the Stair Climber this weekend – he spins an entertaining tale of a private eye detective tasked with solving the mystery of who “killed” U.S. silver currency, expertly entwined with his unparalleled charting skills to determine what silver should trade at five years from now. I won’t tell you what that price is – other than that it is higher than today – but highly recommend you read it, as I’m sure you’ll enjoy it.
OK, let’s return to the reality of the fundamentals that all but assure his prediction – certainly, directionally speaking – will be correct; perhaps, far sooner than the five-year time frame in “Who Killed Doctor Silver Cartwheel?” Starting with a topic I don’t generally spend much time on, but is as potent a fundamental factor as anything else, when determining whether – and how – to protect oneself from upcoming financial calamity. Or, if you live in one of the dozens of countries whose currencies, stocks, bonds, and economic livelihoods have already collapsed, is occurring as we speak. Which is probably why, contrary to the historically blatant suppression of paper Precious Metals, physical gold and silver are experiencing record worldwide demand.
In October 2014’s “crashing oil prices portend unspeakable horrors,” I predicted that the upcoming oil implosion (WTI crude was $81/bbl at the time) would not only be decidedly not “transitory” – as Janet Yellen still believes – but would catalyze worldwide financial, geopolitical, and social tensions not experienced since World War II. And of course, economic and human rights-destroying draconian government policies. Only this time, the world is bankrupt beforehand – just as the “worst global economy of our lifetimes” is starting to really implode to the downside. Throw in the terrifying fact that the entire world is tethered to a fiat currency Ponzi scheme in its final, cancerous stage – as evidenced by the exploding worldwide “final currency war” – and the table has never been more “set” for destruction. Which is probably why this weekend’s headlines were dominated by the growing drumbeats of war; and why this year’s embarrassingly expansive list of student-athlete exploiting “bowl games” – 42, to be exact, including three sporting teams with losing records – features blatant government recruiting efforts like the “Air Force Reserve Celebration Bowl”; the “Military Bowl, sponsored by Northrup Grumman”; and the “Lockheed Martin Armed Forces Bowl.”
To that end, OPEC took the prospect of said “unspeakable horrors” a giant step closer to reality on Friday, by not only NOT lowering its production quotas, but raising them 5%. Which, I might add, I vehemently predicted a year ago; not to mention, in Thursday’s Audioblog, espousing “for any (nation or corporation) hoping OPEC will save them with production cuts, I suggest you save your prayers for something more likely – like pigs flying.” Which is probably why yesterday’s article was titled “forget the Fed, OPEC just sealed the global economy’s terrifying fate” – and why this weekend’s “horrible headlines” were chock full of social unrest, terrorism, and military escalation stories, per below. Topped off, of course, by Obama’s first prime time national address since 2010’s “we’re leaving Iraq” address – to discuss the growing “war on terrorism,” mere days after troops were after not only sent back to Iraq, but Syria as well.
- Britain started bombing ISIS mere hours after voting in favor of airstrikes
- Greece loses last trace of sovereignty, after EU takes control of its borders
- ISIS makes major move, assassinates Aden’s governor and two dozen Houthis
- Turkey detains Russian ships in Black Sea, blasts Moscow brandishing rocket launcher
- Putin accuses U.S. of ISIS oil cover-up
- Jordanian screaming he wants to join Allah tries to open Lufthansa airplane cabin door
- Terrorist in London subway slashes man’s throat screaming “this is for Syria”
- Father of San Bernardino shooter: Son supported ISIS
- Iraq may seek direct military intervention from Russia to expel Turkish troops
- Netherlands pressed by France, U.S., own lawmakers to join bombing of ISIS in Syria
- Assad slams U.S. bombing of government troops as Turkey accuses Russia of violating Montreaux Treaty
Not to mention, the most important story the MSM won’t dare tall – which frankly, few such “journalists” even understand. Which is, the massive victories of Marine Le Pen’s “National Front” party in this weekend’s French regional elections – which not only positioned it to take over France’s Parliament in the coming years, but nearly guarantees Le Pen’s ascendancy to the Presidency. Which, when it occurs in 2017 – likely, amidst an economy far weaker, and geopolitical and social tensions far more chaotic – will all but assure France’s independence movement explodes; very likely, from the European Union and Euro currency.
On Friday afternoon, the pathetically impotent “oil PPT” did everything in its power to protect the key support level of $40/bbl on WTI crude, amidst the historically bearish OPEC decision. They managed to close it at just about that level; but this morning, the “floodgates” have been opened, with oil down to $38.60/bbl as I write – potentially, en route to Goldman Sachs’ $25/bbl prediction by early next year. And with it, the CRB Commodity Index, to a fresh 40-year low. Which is probably why – pathetically disingenuine “Fedspeak” of a “recovering” economy notwithstanding – Citigroup’s forecast of a 65% chance of recession in 2016; JP Morgan’s of a 76% chance; and mine, of a 100% chance – are far more likely than what the Fed prays for, and propagandizes daily, with the help of manipulated economic data like Friday’s historically doctored employment report. Heck, in her Atlas Shrugged inspired speech Thursday, Whirlybird Janet had the cajones to tell Congress of her staunch belief in “continuing GDP growth” – two days after the Atlanta Fed’s “GDP Now” forecasting model slashed its 4Q “growth” expectation from 2.3% to 1.4%! I mean, if that’s not perjury – for the entire world to see – what is?
Speaking of economic implosion, how about the Finnish government announcing the ultimate in hyperinflationary policies this week – in taking George W. Bush’s one-time economic “booster shot” concept of February 2008 one step further, by offering a “helicopter drop” of the equivalent of $900/month of Euros to every citizen, every month, indefinitely! Sadly, this is par for what the entire world’s “course” is about to be; which heck, even Citigroup itself predicted three months ago – when its Chief Economist espoused “only helicopter money can save the world now.” That is, if “save” is defined the way “Goldman Mario” Draghi defines it; i.e., doing “whatever it takes” to increase currency-destroying inflation.
Which is why even the concept of a Fed “rate hike” next week is so comical. Let alone, if they are stupid enough to actually go through with what I three months ago deemed the “only financial event as potentially cataclysmic as a significant Yuan devaluation.” Not to mention, as said Yuan devaluation – which I not only predicted in April, but the day before it was announced in August – is quietly being expanded (to a new 4½ year low this morning), whilst China continues to overtly increase its gold holdings. And oh yeah, as the ECB is simultaneously extending its suicidal NIRP and QE programs; following Japan’s decision to essentially extend Abenomics “to infinity”; whilst essentially all global Central banks are amidst their own hyper-inflationary monetary policies, despite essentially all currencies trading at or near all-time lows. Which I probably why headlines like these are flooding the internet this weekend, which I whole-heartedly agree with.
- BIS warns, a Fed rate hike may unleash the biggest dollar margin call in history
- The Fed doesn’t get it – a rate hike means people will be carried out on stretchers
Which brings me back to Precious Metals; which despite the aforementioned litany of ultra-bullish factors; not to mention, China’s announcement this morning that in November alone, it bought five times more gold than the entire registered inventory of the 300:1 paper-to-physical-leveraged COMEX; and “counter-intuitive” surges following Thursday’s “disappointing” ECB announcement, and Friday’s “explosive” NFP jobs report and “deflationary” OPEC announcement; the terrified Cartel went right back to the well, with its 124th “Sunday Night Sentiment” raid of the past 129 weekends, 564th “2:15 AM” “cap and attack” of the past 642 trading days; and of course, the ubiquitous COMEX-opening waterfall decline we have all come to know and hate.
That said, the aforementioned, wildly bullish fundamentals that have spawned record global demand are clearly putting the physical market at risk of exploding to the upside – as evidenced by collapsing above-ground inventories, such as on the COMEX and the GLD ETF.
However, no chart tells the story of where prices are likely going better than this one – based on data I have diligently updated weekly for the past decade. Which is, the so-called “commercial” traders of the COMEX – in reality, “bullion banks” like JP Morgan and Goldman Sachs – on the verge of going net long the gold futures market for the first time in 14 years. That is, for the first time since the gold bull market commenced at the turn of the century. To wit, as reported in the weekly “COT” report Friday afternoon – said “commercial” short position was reduced to a measly 2,911 contracts, worth a measly $314 million, as of last Tuesday (just before Thursday’s and Fridays’ “counter-intuitive” PM surges); completing a manic five-week short covering binge entailing 162,937 contracts, putting their cumulative short position at the lowest level since December 2001, when gold was just $277/oz.
No one is more distrustful of such data than myself – particularly given the “disclaimer” conveniently added to COT data two years ago; i.e, that such data is only for “informational purposes” – and thus, not necessarily accurate. That said, there is no reason I can imagine that would explain why such data would be rigged so “bullishly”; particularly when all related data – such as COMEX, GLD, and Shanghai and Mumbai demand and supply reports – suggests the exact same thing. Not to mention, the periodic shortages we have seen in numerous physical markets – such as the retail silver market this summer. Which is, expanding physical Precious Metals tightness the world round – which charts like this would only encourage global investors, corporations, municipalities, and sovereign nations to “get ahead of.” Throw in the fact that this chart incorporate 16 years of data – and thus, is far more difficult to manipulate than shorter term charts – and it becomes increasingly difficult to believe this chart doesn’t mean something wildly bullish, likely in 2016.
To that end, I’ll simply leave this chart for you to digest – not to mention, the countless hundreds of pages of related commentary the Miles Franklin Blog and others have published over the years, and let you decide if it has meaning. And if so, what meaning?