A Time Of Bread And Circuses
Little doubt can remain we have arrived - arrived at the point of no return. Globalization, and the fiat currency debt based economies which the oligarchs (think high level bankers, politicians, and billionaires) and their bureaucracies have built increasingly centralized power structures on, are now stressed to the point constituencies must be distracted from the truth on a daily basis, as was the case in times of Bread and Circuses in ancient Rome, where games became a daily event at such venues as the great Colosseum, and Circus Maximus. Obviously things are more complicated and far reaching today, however in terms of the larger condition set that brought Rome down things are the same - flowing distraction is now required in order to appease the mob. Unfortunately for the status quo however, increasingly destructive policy perpetuated by Western elites is financially destroying the savings class, where a hollowed out economy and tapped out consumers are flashing a warning Globalization has topped out as more and more fall into poverty. This is what happened in Rome as the empire matured, and this is what is happening to the American Empire today.
To combat this central planners are buying the approval of the mob with increasing giveaways and games to keep attention from the true state of affairs. With households never more dependent on the stock market this means creating serial embroils (think Fiscal Cliff, Sequester, etc.) to be solved, causing shares to surge, and proving the powers that be are still in charge. Again however, you should know we are well into the destabilization process as process matures, where although things may appear 'just fine' on the surface - placating the masses - underneath macro-conditions continue to deteriorate - continue to deteriorate until the end game finally becomes recognized by all. Along this line of thinking, and as things continue to deteriorate, expect to see currency wars escalate into full-blown trade wars, and then to the real deal, which will be required to appease hostilities manifest in increasing impoverished populations. This is the point where the previously unthinkable, 'war', becomes 'a justified and logical consequence of unreasonable hostilities'.
Before all this unfolds however, expect to see present day (serial) asset bubbles continue to inflate despite growing signs of stress here as well, a condition that is both welcomed and cheered by the mob - where signs of renewed euphoria are now becoming evident once again. Unfortunately for the mob however, these increasing ominous signs appearing should neither be cheered nor ignored, meaning 'days of retribution' are to be expected, where false gods unable to support body or soul fall to the wayside. And we certainly have our fare share of pagan gods that fall into that category these days - with materialism at the top of the list - which is a function the general debasement of our society. Therein, and a topic well covered on these pages previously, currency debasement leads to the debasement of societal mores, which then manifests into people reverting back to child like creatures - or barbarians as it were - enabling the denial - and ensuring the eventual (and fast approaching) extinction of the middle class.
So, while we don't have break eating spectators watching gladiators killing in the arena for sport these days, we do have profound parallels such as (record) food stamps and the UFC, which are simply our modern day comparables. And these are not the only parallels that point to a fall of the Western World, with increasing intervention and distraction coming from the political arena to financial markets, mainstream media to apologist agitators, threats of war to the real thing, all primarily aimed at maintaining the illusion(s) for as long as possible. What's more, if you have not noticed, which most have not, America is now only one step away from an Orwellian State complete with capital controls and outright wealth confiscation, still nowhere within the consciousness of a fully distracted and delusional (think denial) populous. This can only end one way - badly - very badly.
But something tells me this might be the straw that breaks the camel's back concerning the modern day public's lack of respect for gold (and silver) (at historic participation rate lows), where even the dullest crayons in the box will eventually figure out it's better to have 100 than 90, or 80, or whatever the parasitic bureaucrats are willing to leave you with in order to keep financing their lavish lifestyles. Certainly the fundamental case for gold has never been stronger given increasingly violent currency wars, possible Fed mismanagement (think a taste of hyperinflation), and economic uncertainly (think implosions in Japan and / or Europe) that could destabilize the status quo and Western Globalization model. And this situation in Cyprus just adds to it by possibly being the spark that lights a fire that cannot be contained if contagious bank-runs do in fact manifest.
Can you say $5,000 gold if this happens? Perhaps - but if the Cyprus bank-run is contained quickly, which one would think likely given its size ($13 billion), one can never be certain. Again however, in terms of setting a dangerous precedent that will assumed to spread to other locales (even the US) if not reversed quickly, one cannot ignore the reactions in both currency and debt markets, where it will be assumed this fate also awaits the unsuspecting here too as the West continues to unravel. And then of course there's the stock market, where I would watch bank stocks in particular given their management's proclivity(s) to push these puppies higher no matter what the fundamental backdrop. Certainly an outside down reversal on the monthly BXK plot pictured below would cause for concern, especially considering it would have stalled out at the 38.2 % retracement twice. (See Figure 1)
But we have a complacent and ignorant lot to deal with in the West these days, fully distracted in all the various circuses provided for them by an all too eager machine that has one thing on its mind - survival. Because the gravy train for those in the right places these days is definitely worth fighting for, so don't be surprised if this Cyprus thingy is minimized and stock market ramped higher, where it will be made to appear all is forgotten in a week - especially in the States. (i.e. because a generally brain-dead populous has been desensitized to shocks due to all the money printing.) Yup - as long as it's the other guy - who cares right - because they would never do that to Americans. This sentiment would be reflected if stocks take out last week's highs anytime soon, suggestive the Dow is on its way to possibly completing a grand broadening top formation. (See Figure 2)
Unfortunately for the complacent and confused stooges out there however, again, by setting this dangerous precedent, not only do we have the financial repression of our financial markets, now we will have depositor repression (or account repression of brokerage accounts), and make no mistake - this will be coming to a bank near you before long. Because as Mark Grant rightfully points out, Cyprus will serve as the 'test case' (planned or not), where thieving bureaucrats around the world will take this as the 'go ahead' for full out wealth confiscation agendas, making both deposit insurance and private property (ownership) rights meaningless. Welcome to Orwell's 1984 - which is what comes after the party (think Bread and Circuses) - where the tab must be paid. You will know this is what the plan is when wealth confiscation is announced for Italy. This is when the bank-runs should spread. And one would think gold should catch a bid under such conditions (where the hell else do you put your money under such conditions?), but who knows in this surreal world of idiots and fools. Maybe people will start keeping their money under mattresses again. (See Figure 3)
Technical Note: Please not the negative dispositions of indicators (especially ROC on diamond support), and stochastics, which look to have further downside given no upward traction can be generated at this time.
Concern over the fate(s) of precious metals moving forward in spite of circumstances that are the definition of why people buy them definitely has a surreal feel to it, but never the less is very real. Market intervention and the psychology associated with making an entire society financially ignorant will have lasting and profound effects on behavior, and we are seeing these effects today. Wake up calls occur one at a time until events propel the collective into a crisis, like that in Cyprus. Initially in a crisis shorter-term liquidity related concerns will carry the day, which is why precious metals may suffer further losses before catching a 'capital preservation bid' afterwards. So with the possibility of bank-runs spreading if the Cyprus situation is not handled correctly, one should be aware of why precious metals might fall in reaction to what may appear to be ideal conditions - it would be because of liquidity related concerns. You should know that for whatever reason liquidity related concerns may arise moving forward, if not Cyprus, some other reason (think falling stocks), the monthly silver chart shown below highlights the possibility of a plunge below $25, which would be an exceptional buying opportunity. (See Figure 4)
Notice such an outcome would see RSI finally hit long-term support, along with allowing present stochastic trends to complete. In terms of probabilities based on investor sentiment, as measured by open interest put / call ratios on key ETF's and stocks (think SLV and AGQ), conditions improved post expiry last Friday, but deteriorated based on COT related betting practices, leaving things neutral. So unfortunately silver prices could in fact fall further if liquidity conditions deteriorate any time soon as the Chicago speculators remain too optimistic given the backdrop. What's more, this means any rally approaching $30 should be faded. Speculators remain excessively greedy in this space, which is why prices could still fall considerably.
The sentiment situation for gold is better, but still not good, where the again the benefits of rising open interest put / call ratios for GLD, GDX, and NUGT (including the shares into the bigger picture) are offset by increasing bullishness in Chicago (think COT), which in spite of increasing physical deliveries of late, will unfortunately not make a difference in pricing. (i.e. as with all US markets that employ HFT and derivatives, pricing remains sentiment dependant.) So again, unfortunately past the possibility of knee-jerk reactions to possible perceived (or real) bank run related contagion later this week (after Cyprus banks reopen on Thursday) future prospects for precious metals continues to appear tenuous, still looking to flush the ever-increasingly stubborn speculators out of the gambling parlors. Until this happens, or by magic, they go bearish, which may just happen once a deflationary mindset grips the macro, the prognosis for precious metals remains the same (again - past knee jerk rallies) - and that's bearish.
Jim Sinclair was out the other day saying the Russians would retaliate because the Cyprus levy is effectively a tax on dirty KGB ill begotten money from the 'good old days' back in the USSR. (i.e. think Putin and his buddies.) But that's not likely to scare Western aristocratic sociopaths in the least, which means ole Vladimir might actually get pissed off enough to do something radical, like pull a China and ban gold exports. Such a move would tighten the screws on the West's gold cartel, and bring forward the day of reckoning in the physical market. Such an outcome would have a lasting effect on prices given time.
With a Fed decision out this Wednesday, it's not difficult envisioning surprising strength in stocks until then, as the boys don't want the public thinking they are not the all powerful 'Oz' anymore, followed by a more meaningful swoon afterward. But who knows, we should also get a relief rally after the Cyprus banks reopen on Thursday - right? Answer: Not if key open interest put / call ratio trends persist, where importantly it should be noted that VXX shot way up post expiry, more than doubling, meaning speculators see no reason to buy insurance, which means expect increasing trouble the closer we get to expiry if this condition does not change. What's more, it should be noted that the ratios for the OEX, NDX, QQQ, XLE and most recently XLF have all plunged as well, which will put the onus squarely on the shoulders of buy side hedge fund managers, prop desks, etc. to keep stocks levitated, potentially proving to be a daunting task if the Fed were to appear increasingly hawkish on Wednesday. (i.e. which is the rumor.)
So, the risks of being long stocks, bonds, commodities and / or precious metals appears to be untenable at present, leaving only debt reduction as the logical place to channel liquidity.
This doesn't happen very often - and could mean real trouble post the Fed meeting / Cyprus announcement latter in the week.