Who's Kidding Whom?

By: Captain Hook | Mon, Jul 6, 2015
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The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, June 22, 2015.


If using bad language, it would be 'who's kidding who' - right - something one would say to someone who is lying to you. Most of the time, this saying is used within the context of a lie that's not an affront, something less serious and not considered personal (something that will affect you directly) by most people. By no coincidence, much of the economic data published from official sources these days falls into this category, with employment data coming out of the Bureau of Labor Statistics (BLS) perhaps the most profound perpetrator in terms of believability. Because I mean 'who's kidding who' sirs (and madams), there ain't no way the unemployment rate is really going down.

What's more, to think you are really fooling people publishing such data is a frontal attack on the public's sensibilities, given you are winning if the goal is disinformation and confusing the public with thought police like tactics. Yes, you have been winning with a fully corruptible financial community who play 'make believe' the first Friday every month when the data is released; where again, we are suppose to believe the Unemployment Rate was 5.4% in April. This of course would be funny if it were not so serious, where it's so because a lie like this is accelerating the demise of our society - because it tells everyone you can't trust a damn thing anymore.

Apologists would counter, yes, but it's a 'white lie', justified because the economy is weak. This, of course, raises the questions, 'if the economy is weak, how could the Unemployment Rate be 5.4%?' And, 'if this is true, that telling a lie is suppose to make the economy better, why is this practice not working? And, 'does this thinking justify all the other lies (both official and not), market rigging, and scandals; which again, appear to be accelerating the more general debasement of our society? Isn't this how fascists justify their actions to the dupes they manipulate and dominate? Does this mean we live in a neo-fascist backdrop hidden by denial and distraction? It makes you wonder.

Well, at least a few are wondering, because most have taken the blue pill, and live in a stupefied state of unawares and ignorance. Yes, but what about opposition to the new Trans-Pacific Partnership (TPP), which is another official scandal of the highest order (the term 'crony capitalism' does not do justice); doesn't growing opposition to this (or anything like it) indicate a 'sea change' in this regard, that the public is becoming 'self-aware'? I don't know about that, however I do know if the American public votes in Hillary just because she's a woman, after what those two did the last time around, the fallout from the carnage they will unleash this time will never be repaired.

Of course this might be the idea all along. The elites / parasites like the neo-feudal / fascist world they have built because the lower classes are now too weak to fight back, both financially and intellectually. The bureaucrats fully embraced this concept now and are turning the screws on the public every chance they get - taxing, regulating, and brainwashing the slaves with calculated precision. It's the pigs and dogs from Animal Farm at work. Compliance is mandatory. Opposition to the status quo is handled with increasingly draconian penalties - including death. And it will continue until we are all dead apparently, where some version of catastrophe is our collective destiny if these characters are allowed to continue their rampage.

The Russians know this, which is why they are being forced to increasingly play the intimidation game - welcome to Cold War II. The sad part of all this is the bureaucrats don't do anything of value. Their job is to devise increasingly devious and arcane methods of confiscating public wealth. Have the politicians done anything good for the people lately. They work with the oligarchs and plutocrats as collusive partners. Public service is not public service anymore - it's vertical networking. They create nothing but hardship and ruin for the working classes, thinking atonement is something that happens only to the sacrificial lambs and idiots.

Speaking of idiots, that's what the powers that be think of the public, which is a large part of the reason they continue to do anything they please to confiscate public wealth. The passing of a watered down version of Obamatrade demonstrates such thinking, however cracks in the armor are now appearing. Failure to ram through increasingly aggressive policy would show that the jig is up for the status quo boys, so watching how they handle Greece will be instructive. The Troika should cave in again in coming days after using the threat of default as leverage to rape Greece of its good assets fails. Greece is pivoting towards Russia for real now with the signing of this gas deal, so the West is losing coercion power increasingly in the periphery if this is to be taken as the test case. (i.e. what will Spain, France, etc. do when its their turn.)

It's important to realize however that this does not necessarily mean Western controlled markets will properly reflect such a reality right away. As you know from previous discussion, we are still expecting higher stocks and lower precious metals prices before it's all over. And if the closes last week can carry through to month's end, where for example the S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio can break above 170 and hold, we should be in the blow-off stage of this trend, with a move higher to previously discussed targets this summer / fall. (i.e. 220 to 250.) So it's all about the monthly closes now, where a strong one, measured as a close in the SPX / VIX Ratio above 170, which could happen over the next week, would likely mark the beginning of a multi-month blow-off that could take us all the way into fall.

People may wonder why I follow stock to precious metals ratios religiously in analyzing future prospects for these groups. The reason is, in this world of smoke and mirrors, distraction and deception, in order to truly see what is happening one must watch 'real measures' factored against anchored benchmarks. And in terms of adhering to this criterion, no other benchmark can match gold. It's still the ultimate real world pricing benchmark. Silver, because it's the Western status quo's 'whipping boy', does not throw off the same signals as gold because it more intensely manipulated, however this does not make it useless in this regard. In fact, as you may know from previous analysis, it can actually be effective in projecting extremes. (See Figure 1)

Figure 1


In this respect, most watch the Gold / Silver Ratio for general signals, where a move above 70 is considered a 'sector buy signal' simply by virtue of the understanding even highly manipulated markets have their limits. And as you can see above, we are in fact above 70 right now. However based on the fact a bull flag has been forming since the beginning of the year (which is a measure of the status quo manipulating markets in their favor), where in a perfect world this would see values resolve higher at some point, it's difficult buying into the hypothesis a major turn higher for the group is in the cards until this happens. The ratio does not need rise to all time highs above 90 again (see here), last witnessed at millennium's turn, however a move back to the 2008 highs seems very likely at this point - liquidity event or not. (See Figure 2)

Figure 2

Moving onto a less popular measure in this regard, one that could in fact measure the 'real extreme' of the present moves in these markets, this hypothesis is supported by the technical appearance of the SPX / Silver Ratio, where we are using a Fibonacci resonance projection grid to turn the screws on this understanding, attempting to identify the end point of the cyclical corrections in these markets currently underway. (See above) And while the move in the SPX / Silver Ratio could extend further than 167 before its all over, the thing to recognize is at 167 you have 'extreme value in silver against stocks, where again, even if the moves run further, at some point within the intermediate future, never mind the long-term, fading the former in favor of the later will likely be viewed as a wise decision. (See Figure 3)

Figure 3

And this hypothesis, is in turn supported by the technical message in the above, where we have the New York Average (NYA), the widest measure of issues traded in the city, even including fixed income structures. (i.e. fixed income ETF's, etc.) In knowing this then, it's interesting to note that NYA / VIX Ratio is already some 26 percent off its 2014 highs, and is unlikely to better those highs even if the highly followed SPX / VIX ratio does in coming days, which would throw off an important bearish divergence. What's more, one should note the fact the NYA / VIX Ratio also hit the dominant Fibonacci resonance signatured resistance target at the highs back in 2014 as well, making this a very important hurdle in terms of the natural flow. A failure here, corresponding to the head and shoulders pattern (not annotated on chart - call me superstitious), would have this measure down in excess of 60% from the highs at some point. In fact, if you really understand what is happening here, a breach of last years lows at just below 400 would call for a move back to the 2009 lows, which would have the NYA cut in half again, along with the SPX of course.

What could cause such a break? Some would say it's going to take a break in the belief the Fed is 'all powerful' in manipulating the markets, which is true no matter how you look at it. As Peter Spina points out in his latest, it's the perception the Fed Fund Rate will remain below 2 percent on infinitum that keeps the hopers happy, and status quo in charge. That being said however, if the Fed Funds Rate were to breakout to the upside, this would come as not only a big surprise to the status quo boys, but it would also mean the US, and much of the rest of the world, would be operationally insolvent. So you can count on Western central authorities to continue throwing everything they have at this problem (corner) they have backed themselves into. And you can count on the Troika cutting a deal with Greece as well because of this - WHO's KIDDING WHO.

In the end, they will of course fail in this regard, because eventually the monetization of everything (when stocks and bonds begin crashing) will simply unleash so much inflation into the system it will be out of control. And again, who's kidding who? If the inflation has been going into the stock and bond markets via all the money printing (QE, etc.), then shouldn't this be accounted for in potential future real world inflation (think commodity inflation) at some point down the road as well? This inflation may not have made it into official money supply statistics; however just one look at Figure 2 above along with the realization some $60 trillion in new currency (debt) has been created since 2007 should give one pause in this respect. Just wait until the Dow / Gold Ratio turns lower again, on its way to unity (see here) - who's kidding who - how are central planners going to keep the Fed Funds Rate below 2 percent without sending the prices of real world goods to Pluto?

The answer is they can't - short of hyperinflation in real world prices.

Then, try and wrap your head around this one. The total global debt to GDP ratio is currently at a whopping 313 percent. Who's kidding who here, once the bullshit story that's keeping everybody distracted, that the US economy is strong, wears out, the money printing will go Zimbabwe shortly afterwards and it will be all over for the perpetual debt economy. Interest rates could skyrocket as global bond markets crash. Stocks may not crash initially, because of money coming in from bonds and new money printing, but they will eventually. They will because of the fact all new money must be borrowed into the system in one way or another right now, which will eventually cause financials to implode when this system is abandoned.

So I hope these bankers are buying a few ounces of gold (and silver) while its low here - because the days of having your way are numbered.

Good investing is possible in precious metals.



Captain Hook

Author: Captain Hook

Captain Hook

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests.

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