"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 5 hours The Trillion Dollar Space Race
  • 1 day The FANG Stock Investors Should Avoid
  • 2 days Is This The Death Of The iPhone X?
  • 2 days Is London Still The Financial Capital Of The World?
  • 2 days Is Gold Staging A Comeback?
  • 2 days The $200 Million ‘Golden Parachute’ For Rupert Murdoch
  • 2 days Bitcoin’s Breakout Is Not As Bullish As it Seems
  • 2 days Farmers On Edge As Trade War Hits U.S. Grain Shipments
  • 3 days Is Silver Poised For A Massive Break Out?
  • 3 days Meet The Hedge Fund Billionaires Club
  • 3 days The Next Housing Crisis Could Be Right Around The Corner
  • 3 days Cartel's, Pirates And Corruption Cost Mexico $1.6 Billion Per Year
  • 3 days Africa’s Fastest Growing Economy
  • 3 days The Blockchain Boom Hits The Utilities Sector
  • 3 days Why Smart Money Is Selling Off Right Before The Bell
  • 4 days Tech Giants Rally Ahead Of Earnings Reports
  • 4 days Global Debt Hits 225% Of GDP
  • 4 days The World’s First Trillionaire Will Be A Space Miner
  • 4 days How Student Debt Could Cause The Next Real Estate Crisis
  • 4 days This $550 Billion Industry Is Betting On Bitcoin
One Commodity Set To Soar On Russian Sanctions

One Commodity Set To Soar On Russian Sanctions

The recent sanctions on Russia's…

Oligarch Risk: The New Red Flag For Investors

Oligarch Risk: The New Red Flag For Investors

Investors are scrambling to diversify…

Investors Bullish As Earnings Season Kicks Off

Investors Bullish As Earnings Season Kicks Off

The first round of earnings…

Mission Impossible

Ethan Hawk is not one to avoid danger, but he would never take this mission. He wouldn't take it because it's impossible. Because no matter how clever or how many gadgets he employs it won't be enough. The job is too complex and formidable - too big even for the most optimistic of thinkers. What job am I talking about? Saving the human race. A mission to Mars. Getting the sociopaths in charge of 'the system' to do the right thing. Of course not. Only one of those things is possible. No, I am referring to saving our economy of course, because that's what I write about; that and the financial markets. It's the economy, and in turn, financial markets that are impossible, with most people either in denial about it or gaming them, or both - making the prognosis terminal.

And along this line then, in case you have not been following current events, things are unraveling rapidly around the world, which is becoming increasingly difficult to hide. This is certainly already the case in Europe; China's manufacturing engine is only running on three cylinders; emerging market economies and markets are collapsing; and even though the status quo will never admit it, even the great US of A is crumbling from within, which will be evident to all sooner rather than later. The positively spun, but fraudulent, Employment Report for June is just the latest chapter in the establishments bullshit (BS) story that the 'economy is strong' in America, allowing for stocks, the dollar(s), and demand for debt (even though rates are rising) to keep rising.

The most profound consequence of all this has been to embolden the delusional into actually believing their own BS, with Bernanke apparently at the top of the list, not considering the unintended consequences of stringent policies applied to a completely hollowed out economy. What will happen eventually is both the BS stories and mechanisms by which the bureaucracy's price managers keep the system going will meet reality (fiction and fraud will meet reality), and house of cards will come down. This is why Ethan would never take this job - because he's 'plugged in' and is not falling for the BS. What he's doing instead is buying gold and silver bullion and not telling anybody. True, this is not the 'American way', but who's to say a bunch of the bureaucrats, politicians, and bankers that are screwing us aren't doing exactly the same thing.

Because even the idiots in the belfries that have not had their own bells rung to the point they can't think anymore know at some point the BS is not going to be enough to save their BS jobs, BS economy, and BS markets - which will leave those wishing to preserve their wealth with only one logical alternative - and that's precious metals. What's more, it will come fast when its happening and catch most people off guard with everything from crashing stocks, to bail-ins, to increasing violence of every variety. Because you can't have decades of serial bubble blowing, with bonds the latest example, and not have something very nasty happen at some point no matter what central banks attempt to do in avoiding the inevitable. And just about everybody reading this article knows what that means these days, that being printing money - lots of money while at the same time having you believe the opposite.

The upshot of all this is if money supply growth rates are going up in order to pay for a deteriorating global economy (because it's mission impossible), at some point this will need to be reflected in precious metals prices. Because of diminishing returns, currency debasement rates will need to be higher than previously witnessed to produce any illusion of inflation the next time things are so bad an expansion needs to takes place, which is a fact not lost on the Fed. So, you should know this would likely happen, with the Fed (and its international counterparts) increasing not only the quantities of existing QE programs, but also the scope of recipients. The thing about hollowing out an economy is in the wake of such an exercise you leave increasing numbers across increasing industry groups unemployed the longer loose money policies are allowed to proliferate. So, if the oligarchs and bureaucrats don't want a revolution, they must find a way to feed the increasingly destitute, which is evidenced in actual rising core unemployment and food stamps program.

What's more, the present QE will not be enough to prevent a bloated and increasingly inefficient system / markets from imploding soon (because of diminishing returns), which is what will eventually spark renewed interest in precious metals. Along this line of thinking, gold is definitely oversold and showing signs of bottoming, but may need to make trip towards $1100 if our studies hold water, so one should be looking to accumulate on any further spike lows if not doing so already. Because all this should gradually develop into a mania in precious metals, being the next in a chain of serial bubbles characterizing our decaying fiat currency economies, where it should be understood no mania in precious metals has yet taken place, making this a high probability based on the fundamentals and washed-out participation rates in the sector thus far.

Moreover, if the Fibonacci signature in the long-term monthly chart of retail stocks (thought to representing the ultimate reflection of sentiment in American consumerism) pictured below has any merit, both the stock market and economy (one and the same) should be topping out soon, which will bring a bid back into the inflation trade after liquidity / deleveraging jitters associated with the initial stages of a lasting sell-off sucks the air out of bubbles which have re-inflated since the 2009 lows. You should know retail stocks have not been rising not because retailers have been strong, or prospects for consumption (or consumerism) robust, but because of an almost inexplicable combination of complacency and pervasive denial that has gripped the masses (and money managers unfortunately) juxtaposed with dimwitted short-sellers (who view themselves as part of the few sane people remaining), setting the stage for a truly profound short squeeze, propelling prices to present heights. It's an exercise in mass foolishness on both sides of the ledger. (See Figure 1)

Figure 1

Naturally, this squeeze is bound to end at some point, and from a 'measured perspective' we are definitely in 'the zone' given counter-trend moves have hit multi-year intervals, meaning secular (long-term) trends should reassert themselves soon, perhaps as early as this summer. Therein, and in what would come as a big surprise to most undoubtedly, the negative correlation between stocks and gold is set-up for such a reversal, where all we need is for speculator exhaustion to 'set-in', which would end the short squeeze in stocks. And if stocks begin to fall impulsively the need for speed in currency debasement rates will reassert itself, which would eventually benefit gold (precious metals) after initial liquidity / deleveraging / fear reactions, triggering the impending reversal. So, could such a reversal happen this summer at prices not far from present levels? If technical signals present in the S&P 500 (SPX) / Gold Ratio are any indication, the answer to this question is 'yes'. (See Figure 2)

Figure 2

There's only one problem however, that being too many bearish speculators are still selling the rallies in the broads (buying the dips in precious metals), meaning open interest put / call ratios are still rising (and low for precious metals), which in turn means cyclical corrections (stocks up and gold down) now multiple years old are likely to continue. Of course the amount of time process is taking in setting the top in stocks (lows in precious metals) is telling you this is likely the most important climax you will witness in your lifetime - quite possibly the 'Big Kahuna'. So, this is very important because it would mean the next system crash would make apparent 'the great unraveling', where the Western economic model of centralization / colonialization accelerates it's demise, with indications / realizations in this respect already picking up speed. You should realize this sequence is already in play, with bail-ins for example, undeniable evidence process is picking up speed in this regard.

This is why although the Dow / Gold Ratio may need to vex the 233-month exponential moving average (EMA) at 14.6 presently before reversals are marked, however once this occurs the resumption of secular trends should involve violent moves as increasing numbers rush to protect themselves from the wealth confiscation risk, which includes not only bail-in risk, but also accelerating currency debasement risk that will be unleashed in an attempt to save the dying dinosaur. Technicals associated with this vein of thinking have been discussed thoroughly on these pages over the past few months, including last week, where you may remember we are still looking for the Dow to vex approximately 16,000 and gold $1100 before reversals should be expected. With technicals for gold now showing early signs of bottoming (see below), yielding the largest (weekly) gain since 2011 last week, it's always possible 14.6 on the Dow / Gold Ratio is not touched prior to a reversal, however I would not underestimate Western greed. (See Figure 3)

Figure 3

What to do? Answer: Watch the key open interest put / call ratios for exhaustion signals. We are getting some such signals already in the SPX and SPY contracts (and XAU looking at the inverse), but because the derivatives universe is so broad there continues to be enough pessimism exercised in the trade that the machines still have rubes to squeeze, bolstering the likelihood the Dow / Gold Ratio reaching our target, if not beyond. Who knows, maybe it will take the bond market blowing up and triggering a flash crash to break this vicious cycle, because it seems the news is so scary that speculators will not stop betting / buying protection on some group of stocks at various times. (i.e. there's always a reason for some group of speculators / hedgers to have a feather up their collectives.) And the bureaucracy's price managers know this, which is why the ETF's and derivatives are allowed to proliferate. (i.e. so that hair brained speculators can consistently bet wrong and support the perpetual short squeeze.)

Of course this will all end one day, perhaps in the manner discussed above, but again, in the meantime, expect the same cyclical tendencies to be maintained - that being stocks (and select commodities) higher and precious metals lower. That's what the gamblers in the options market are telling us to expect, where it would take a 'sea change' in put / call ratio post expiry this Friday to alter this view. This would mean stubborn speculators are either emotionally or financially exhausted, or both, which is what it will take for secular trends (stocks down and precious metals up) to return to the forefront. Again, such an outcome is bound to occur at some point - the only question is when.

For the rest of the story, you will need to come and see us at Treasure Chests.


Back to homepage

Leave a comment

Leave a comment