I’m on vacation in Arizona, but had to comment on the unfathomable amount and breadth of “horrible headlines engulfing the planet – as symbolized by yet another missing Southeast Asian passenger airliner. Frankly, I cannot recall a Christmas week with so much “breaking” bad news; as typically, even the worst potential stories manage to “hold out” until the New Year. But not so this year, as the myriad tentacles of the collapsing global Ponzi scheme know no bounds – which is probably why, despite the PPT’s goosing the “Dow Jones Propaganda Average” to an all-time high Friday – amidst the lowest single-day volume in eight years – the Cartel had to utilize every capping algorithm in its book to prevent gold from taking out its nearly three month “line in the sand” at $1,200/oz.; which frankly, we believe they are defending so staunchly because if gold closes the year above $1,205/oz., it will have closed in positive territory despite historic levels of anti-gold propaganda and unrelenting massive paper raids.
Moreover, the burgeoning “story of the decade” – i.e., the energy sector collapse that will ultimately have a much more devastating impact than the mid-2000s mortgage bubble – is dramatically worsening. In fact, TPTB have become so terrified that the oil price collapse will take on a “life of its own,” they have actually started, in the last two weeks, using the same paper manipulation algorithms on oil as they do on stocks, precious metals and Treasury bonds. In fact, I last week coined the “new, new Hail Mary trade” in watching the blatant goosing of oil every day over the past two weeks – both in the early New York hours and just before the NYSE close. Unfortunately for them, on all but one of the past nine days such pathetic, transparent machinations have failed – yielding a week-ending crude oil price barely above five-year lows. But more on that in a second, as several other horrors need to be mentioned first.
First off, it’s all but “official,” the holiday season will likely end up one of the worst in memory. On last week’s year-end Audioblog, I spoke of how ridiculous the MSM’s holiday cheerleading has become – as if “strong” retail sales would “mean” anything in the first place. The fact is the 11% year-over-year plunge in “Black Friday” weekend sales was a perfect representative of the real economy and no amount of hope, hype or propaganda could change it. Reuters did its best on Saturday to claim holday sales were “strengthening” in the home stretch, but all their shallow propaganda did was make yesterday’s pathetic follow-up article that much more so. And per what I discussed about CNBC’s equally ridiculous hype of the number of packages delivered by Fedex – as opposed to the profitability of such deliveries – UPS just announced the expectation of a 15% industrywide surge in return shipments. Of course, the coup de gras will come a month from now when utterly awful retail corporate earnings are released; but in the meantime, get ready for some of the biggest “clearance sales” of our lifetimes. And once the earnings catastrophe is unleashed, the next step will be massive layoffs, store closings and commercial real estate liquidations.
Next up, is the utter “horror” that is Abenomics; which ironically, the hopelessly clueless Japanese people just “re-upped” in last week’s snap elections. This week, the Bank of Japan overtly purchased more Japanese stocks than ever before, pushing the Nikkei to a new multi-year high (albeit, 56% below the all-time high set 25 years ago). However, the nation’s economy plunged to a new multi-decade low, with debt exploding toward 250% of GDP as real wages were reported to have plunged at their most rapid rate in 15 years. Consequently, Japanese ten-year yields fell to an incredible 0.31%, as the Bank of Japan buys every bond offered, enroute to its inevitable oncoming hyper-inflation. Meanwhile, right next door in China, the PBOC again surprised the world by loosening monetary policy Friday morning – knowing full well the Chinese economy, too, is in freefall. Clearly, the PBOC recently “learned” how to manipulate the stock market like the Fed does in the States – managing to goose the Shanghai Exchange an incredible 55% in the past six months, whilst absolutely all aspects of the Chinese economy freefall. Oh well, just as U.S. stocks have never been more expensive – or corporate earnings more fraudulent – China’s market, featuring a record amount of margin account openings – has never been a larger bubble simply awaiting a pin.
Geez! I haven’t even mentioned the continuing collapse of global currencies – or as MSM propaganda will deem it, the “strengthening dollar” (LOL); nor record high French unemployment; the Ukrainian government cutting off electricity to the Crimean peninsula; China extending its financial support of Russia, whilst Vladimir Putin signs a new “military doctrine” naming the U.S. and NATO as enemies. Or the unbelievable fraud that was U.S. “third quarter GDP”; an utterly catastrophic New Home sales report Thursday morning – validating the prior week’s equally horrific Existing Home sales report; and oh yeah, the fact that today, the Greek Parliament will probably mandate an early 2015 “snap election” – which may well commence a new far more devastating PIIGS crisis. Which, we assure you, will not be reversed by simply promising to do “whatever it takes.”
Sadly, despite all the aforementioned, none will hold a candle to the cumulative impact of the global energy collapse, which must dramatically worsen until all the world’s high cost production is driven into permanent “mothball”; and with it, the trillions of high-yield finance underlying it. Frankly, even I was taken aback by the sheer speed of the price implosion, mirroring 2008 nearly exactly thus far. However, this time around the “oil patch” is dramatically more leveraged, global demand is dramatically lower, and global Central banks will be helpless to stem the tide by simply publishing propaganda, printing money and manipulating financial markets.
In our view, today’s collapse is nearly entirely a financial phenomenon created by Federal Reserve-led money printing and Wall Street lunacy. As we wrote in “2015 Shale Oil = 2008 subprime mortgages,” suppressing interest rates, propping the stock market, and allowing Wall Street to do whatever it wants was the principal cause of the worst real estate bubble of our lifetimes – which, sadly, is just getting started. And given the unstoppable acceleration of the “final currency war,” all global Central banks followed suit, creating similar housing bubbles the world round. This time around, as most real estate markets continue to deflate, the Fed inadvertently created a “serial bubble” in global energy production – which ominously, involves significantly greater leverage, overcapacity and geopolitical ramifications. If you don’t believe me, read this terrifying article about what’s going on in Brazil; i.e., one of the “BRICS” supposedly leading the 21st century economic world.
Frankly, the pace of the worldwide, industry wide energy collapse has been breathtaking – which is probably why Saudi Arabia and numerous other low-cost nations, are actively preparing for prices as low as $20/bbl. As I write, an incredible one trillion dollars of oilfield capital expenditures are on the verge of cancellation – including one-third of S&P 500 capital expenditures and corporate revenues. Amazingly, both the GDP and employment contributions of energy have been well above the total U.S. levels reported. In other words, without energy, even the government’s best economic data cookers would have reported negative NFP jobs and GDP numbers – which is exactly what’s on tap for 2015, both in the U.S. and overseas.
In fact, it’s not just crude oil but all energy products in freefall – and based on historical correlations, crude should be well below its current price as I write. Of course, the only reason it isn’t is the aforementioned paper games TPTB are playing whilst they “pray” for a miracle. However, just as gold and silver cannot be held below their respective “equilibrium prices” forever, oil will not be able to be supported as the gaping global supply/demand gap widens. To wit, global crude oil inventories hit their highest November level ever this week, whilst natural gas prices plunged 15% in the past two days alone; in the latter case, during the time of year they typically surge. And the scariest number of all – again, reported by the great David Stockman, is that at current prices, 2015 OPEC oil revenues will decline by an incredible $500 billion – a number, of course, that excludes a roughly equal plunge from non-OPEC nations like the U.S., Russia, Norway, Brazil and Mexico. In other words, the biggest “deflationary” shock of our lifetimes – which in a world of historically high debts and stock valuations supported by historically low interest rates can only yield an exponential increase in Central bank money printing – inevitably, yielding the global hyper-inflation that destroys nearly five decades of economic and financial lunacy.
Well, that’s enough for now – so I can get back to my vacation. However, as we head into what could – and likely will – be a historically “horrible” 2015, keep in mind that global physical gold and silver demand will close 2014 at record levels – with no end in sight to such growth and a likely PM production cataclysm that could last for years.