The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, January 4, 2016.
We humans come from the jungle, and to the jungle we will return. In fact, the way some people act today, one could conclude we never left. Because people are increasingly acting like animals these days, bringing back the need to think in terms of 'survival of the fittest', as modern societies disintegrate. Evidence of this trend is everywhere. You've got a global corporatist / statist state (neo-fascist) over-riding all sovereign interests raping (financially, liberties, etc.) the citizenry in favor of those at the top of the control / wealth / income pyramids, and this trend is becoming more aggressive and ingrained. (i.e. TTIP, etc.) And then there's evolving migration / integration, ecological, and economic catastrophes that will in the end have the effect of pitting man against man (mano e mano), which ultimately will likely be manifest in formal world war. (i.e. nuclear?)
As in the jungle, order, or the lack thereof, starts from the top in the food chain, not the bottom. Societies have a tendency to mimic their leaders, with the less endowed looking for direction. So it's unfortunate for the West, led by America, our leaders are increasingly coming off as moral retards, concerned only with self-interest and ignoring the health of nation states. Because shabby behavior percolates down to the common folk, making it almost impossible to remember the moral standards our parents were raised on. But that's the problem when you give your leaders too much power, because power corrupts. Power and money are the ultimate corruptors. So the politicians 'sell out' to the psychos running our businesses, creating a cesspool of bacteria that both infects and kills the rest of us. You only need look around to see how this is playing out before your very eyes.
So you should prepare for a return to jungle dynamics in your life as our societies continue to crumble, as our increasingly desperate leaders are going to begin imposing increasingly desperate measures to protect their fortunes (as the jungle closes in on all of us), which will make it increasingly difficult to survive. And the speed at which this can unfold will astonish people, but it shouldn't because we have been living the 'big lie' for years now. We have been debasing our money, which has led to the general debasement of society, which is a general tendency of all humans because we're all hedonists by nature. That's right - everybody loves a good party. And when empowered, people will do just about anything to keep it rolling, which in the case of the proletariat, means increasing aggressive means of official confiscation - or 'stealing' in lay terms.
Increasing desperation will lead to increasingly desperate measures, which unfortunately when it comes to our leaders, who will want to hide their own greed and stupidity, will mean steering us ever loser to war. Remember, we are returning to the jungle because it's our destiny as in the end we are just 'sophisticated animals', and this is just part of the survival of the fittest thingy in terms of the big picture. How else can you explain some of the things supposedly smart people do, like putting 19 nuclear power plants into the Ukraine, a nation state that was always destined to come under fiscal / political stress to the point their operation would eventually pull a Chernobyl. Of course the optimistic view is those individuals who prepare for the trouble that's coming will do just fine through all this - the animals would be held at bay - however such a view is naïve given the scope and speed at which process has now gripped the macro.
Because, for example, it's estimated that Chernobyl killed upwards of 250,000 North Americans from cancer throughout the years. So try and imagine what the numbers would be from a couple of Chernobyl's, or from Fukushima, which is not speculation. So welcome to the jungle baby - welcome to the wars, disease, and a return to a far more primitive world that's not just another reality TV episode - because it will all be coming to a theatre near you in Technicolor during 2016 - fast and furious. Of course we may be getting a little ahead of ourselves again. First we need a noticeable global economic meltdown to really get the ball rolling, one the status quo will not be able to explain away or hide. Given the amounts of margin debt being employed in the markets today, it's only a matter of time before the herd wakes up at the cliff's precipice, which is exactly where we are today. (See here, here, and here.) So again, 2016 should be interesting to say the least. (i.e. with the biggest possible surprise being the status quo pulls it off again because of the speculators.)
Certainly for the little guy, no matter, the odds are firmly against you, meaning no matter what one does - wealth (employment, liberty, security, etc.) will be lost. So again, whether it's official confiscation (bail-ins, etc.), market collapse, or anything else that might be important to your well-being and survival (something the parasites would want to exploit) - expect it to be attacked in 2016. Europe is leading the way in this regard given its (beyond) mature political economy, which is where trouble in more 'developed economies' should show up first once the meager utilities associated with bombing in the Middle East are spent. That's why it's become fashionable to bomb ISIS, because it's good for the economy. That's why all the immigration into Europe was allowed, because it was good for low growth (including population) economies. (i.e. Western Neo-Keynesian economies need constant growth, including population growth, to justify printing more money.)
But again, once all these measures are exhausted, expect to see increasingly war like conditions enter the picture in Europe as the decentralization process accelerates, which will act to accelerate much of the same on a global basis. What's more, increasing tensions in the world will eventually lead to renewed sovereignty movements (protectionism), and then trade wars, and finally formal war(s). The dominos are already falling in this regard. The fences going up in Europe, tariffs on China, more aircraft carriers (for China), and increasing territorial tensions are just a few examples. And again, process in this regard is accelerating, which will eventually lead to a complete breakdown in the current Globalization trends, Western Model, and America's grip on the world via the Global Corporatist State (corptocracy). So, say goodbye to the 'West', the New World Order, American Empire, and power of corptocracy, where 2016 should be the beginning of the end of the 'status quo' as this becomes evident to even the delusional and deniers. (See Figure 1)
This is what the chart of the Dow / XAU Ratio pictured above is telling you below in approaching significant Fibonacci resonance related resistance seen below. It's telling you we are very close to a reversal of fortunes for the paper pushers, with the corptocracy, and their share buyback schemes, at the top of the list. Because from an interventionist perspective, and above all other means (including prop desks, central policy, etc.), no other factor in the financial engineering formula has been more important than buybacks, and the access to cheap credit for corporations (to fund the illusion), in keeping stocks levitated these past years, which is evidenced in both Figures 1 and 2 (stocks against commodities), showing the true state of aggregate demand in the global economy. But again, as in Figure 1, we can see in Figure 2 this party is living on borrowed time, literally, because with administered rates and the bond markets making it more expensive to finance buybacks, the trend is in severe jeopardy. (See here, here, and here.) (See Figure 2)
So make no mistake about it, you cannot get an accurate picture of the true state of the global economy by looking at developed country stock markets, which are essentially at record highs because of buybacks, speculator betting practices, etc. on increasingly narrow participation. A better representation of the global economy is gleaned by looking at commodities, and the countries that export these commodities, periphery economies (especially periphery Europe), and emerging markets. That being said, and as measured in Figure 1, which is the Dow against the gold world, the two ultimate measures on each side of the most important relationship to man (man made constructs verses the reality of the physical world), the big message right now is we are very close to a swing back in favor of real world constraints, as measured by the 'maxed out' and profound Fibonacci signatures. And while it appears the topping process will be drawn out, taking us (well?) into 2016, at the same time, the important thing to realize right now is while more pain is likely ahead for precious metals, commodities, and their dependent economies, we are talking about relatively small increments in the big picture. (See Figure 3)
This condition is reflected well in Figure 3 above, the XAU set against gold, showing the profound Fibonacci signature target that should stop relative strength losses of the shares against the metals is very close. Does this mean losses in precious metals should be minor moving forward? No, it does not mean that at all on new money. If you rode prices down from much higher levels, then yes, on a relative basis, losses on initial invested capital would be (relatively) low, however newly invested capital could still be halved before precious metal shares find a bottom. Lest we forget that ETF precious metal speculators are the most bullish they have ever been (see here), and that this 'sentiment conundrum' must still be driven from the trade before prices will rise if faulty and fraudulent US markets are to continue setting global prices. Certainly this will be the case for the shares, and therefore share ETF's, which again, in turn have a dramatic effect on global price setting.
If the bullish speculators (think idiot hedge fund managers) are ever exhausted, US price managers would need to find some other angle to keep precious metals suppressed, assuming the primary bullion price discovery mechanism remains under American control. So it's a new year, but the same old story. Precious metals remain suppressed via idiot paper precious metal speculator betting practices operating within sentiment driven (via algos, HFT, etc.) faulty and fraudulent markets completely devoid of fundamental mechanism. And again, the most frustrating aspect of all this is it appears to be embedded in the trade. Most people would be afraid having taken a two-by-four across the forehead so many times in a row. Not these guys (hedge funds gambling away other people's money who are now being forced to close). They are Einstein's definition of an idiot to a 't', coming back month after month, year after year, thinking their luck will change. (i.e. they are not good speculators, but idiot gamblers.) Eventually they will be cut off from capital, likely sometime this year if the charts are any indication - possibly sooner rather than later - so remain vigilant.
And make no mistake about, once change comes, it will come fast and furious because precious metals are severely hundreds, if not thousands of percentiles. Right now the wealthy continue to play in the paper markets almost exclusively, however once it becomes evident to them this wealth is in jeopardy, they will go to gold only to discover they cannot buy in size, which will cause rapid and dramatic price discovery consistent with the fundamentals. Michael Burry (think The Big Short) went from having a negative balance on his 'credit default swaps' to making a $300 billion profit in less than year once the price fixers (think Goldman, etc.) in New York were betting the same way as him. The same kind of move could happen to gold at the right time because there are a lot of stupid people out there who will be compelled to 'buy-in' at any price. So while it's true may see more downside as all the dominos need to fall in order, still, it's important to know where the real money is to be made over the next five-years and not sweat the small stuff. Burry was early too as Wall Street tried to pull a rabbit out of its ass concerning the housing market, just like the situation in precious metals right now.
It's price fixing by nefarious means - which m.eans it can't last because the jungle will consume the foolish no matter how big they are.
In the meantime unfortunately, and as alluded to above, the powers that be still have a few cards to play in attempting to preserve the status quo in the markets, not to mention the help they are getting from the speculative community - outlined above. So if you think one can just sit this one out with your money in the bank you're wrong, because make no mistake about it, the banksters will move from NIRP / ZIRP to bail-ins in a heartbeat. They will get your money somehow if you're not careful. This is why it's likely better to be a little early in terms of making sure you are properly diversified than too late, because bank holidays will come overnight to prey on the weak-minded and foolish. So again, make sure you don't have too much money in one institution, asset category, or locale, as the wheels are coming off the bus - make no mistake about it.
It's just a matter of time - and 2016 looks like it could be the year later characterized as - the beginning of the end. What's more, and in the American tradition, it could be 'three strikes and your out' this time around (the speculative / credit crashes of 2000, 2008, and 2016?), where things won't come back so fast (if at all) next time around for various reasons. (i.e. the Fed out of bullets, consumer tapped, etc.) So what transpires over the next five-years is likely a lot more important than most people think, as there's probably no coming back for a now broken American middle class. Moreover, many are now waking up to this reality - the reality they have a one-way ticket back to the jungle - no fooling.
But hey - that's what you get when animals have more common sense than humans.
Welcome to 2016.