The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, September 25, 2016.
The party's over for the neo-liberal deep state, more commonly referred to as the 'status quo', and we will all pay a heavy price in the aftermath. Because all the money printing in the world will no longer work. Sure, the printing presses will continue to spit out ever-increasing fiat currency digits in order to maintain the illusion for as long as they can, however as with all deceptions, the truth will be known in good time, and this time might come a lot sooner than just about anybody thinks. Just ask the people in Venezuela how this works, where they wake up to ever-increasing prices every day (hyperinflation) as central planners continue to destroy the currency in a completely hollowed out economy now devoid of any growth.
As Ron Paul points out in his latest, this is the path America (the West) is on as well, where he puts the blame for our dwindling fortunes squarely on the shoulders on the money printers, that being the Fed and all the appendages it serves. He warns, the welfare state is in the process of collapse, and he is right in spite of all the fraudulent data authorities may publish to the contrary – don't kid yourself – because these people massage the statistics and are bold-faced liars. American families are not better off today than they were even just a few years ago – there's no way – take a good look around. (See here, here, and here.) The real economy, the one that doesn't reflect the fortunes of the top 1% and their minions (the bubble economy[s]), is tipping over again.
In fact it would likely not be a stretch to predict the present debt based monetary system's – days are numbered – and that we have been living on borrowed time – literally.
And the debt will continue to rise. The most optimistic projections put Federal debt some $10-tillion higher 10-years from now, but this is a pipe dream, because unless central planners can reverse the laws of physics, it will be much worse unless debt based money is scrapped. Of course this will never happen as long as the Fed has their way. They would rather impose increasingly draconian policy right to the end, with the last card to play that being hyperinflation. This will come after negative rates, expanded QE (including corporate debt, stock, etc.), and lastly helicopter money. That's when people will finally get their hands on some of that freshly printed money the bankers and their buddies have been hoarding for themselves, which will send money multipliers, and general price inflation, spiraling upward as its circulated in the economy.
It's either that, or go the other way and bring in a sound money system. But I can assure you, this will never happen voluntarily, because all the bubbles would collapse instantaneously. No, first we get hyperinflation as the 'powers that be' attempt to stave off such collapse, then we get a sound money system later once economies are completely destroyed and there is no alternative. You can see it now. The acceleration of decentralization of Globalism is the first sign process is now formally turned in this direction. Sure, Trump will cut taxes next year if (when) he gets in, and this will breath some life back into the economy temporarily, but make no mistake, the damage is already done, and it's bigger than any policy measures at this point, making any such measures nothing more than a band aid solution stretched over a gaping wound. Clearly – America (and West) is in decay – and the party is over.
You don't need look far to see it these days. From German exports down 10% (along with their banking problems), to Japan's catatonic economy, to America, where the US economy has become nothing more than a twisted episode of the Twilight Zone, so far out in 'left field' (due to neo-liberal rule) that if it were not for the rigged markets (everything) and political folly to keep people distracted, it would (will?) be suicide central of the world. As David Stockman warns however, something we have been doing for weeks now, come election time, and into next year, the stimulus induced zeppelin markets that continue to levitate higher are set to pop in conjunction with the political cycle – the Fed's (and Wall Street's) penchant to place Hillary in the White House. After last week's 'jam job' in stocks little doubt can remain the status quo is worried about Hillary's chances now given her health and credibility concerns, however with market rates on the rise, their loyalty could change quickly once she's out of the picture.
Thing is, the charts support such a view, as it appears while tech stocks could certainly run higher for some time yet in an accelerating blow-off, possibly into next year (with a Clinton win?), a top appears to be in the works right into a possible 'seasonal inversion' with higher highs in September (and October?). At least that's the way status quo price managers, led by the Fed, attempted to 'paint the tape' into Friday's close in stocks. They tried to get the CBOE Volatility Index (VIX) down on the day, but were unsuccessful. Most of the day saw both stocks and the VIX down simultaneously, which shouts 'intervention' on the part of status quo price managers. So who knows – the selling could also start this coming week with a poor showing by Clinton in the debate tonight. That's my bet. The party might finally be over for sociopath Hillary – thank God. In looking at the monthly S&P 500 (SPX) / VIX Ratio, it appears to be testing the 'sine fan' breakdown, poising for further losses. (See Figure 1)
And the chart pattern in the Dow / XAU Ratio also supports this view, seen both attached here in the daily, and below in the monthly. The daily shows an 'inverse head and shoulders pattern' now fully formed that could release to the upside at any time. Of course it could also take longer to form up if Hillary takes enough drugs Monday to keep her looking good enough to raise the animal spirits of 'the party' again, however my experience with such things (after taking care of sick people in her situation) is – don't bet on it. Once somebody is as fundamentally depleted as she is, they can hold it together for short periods of time if there's no stress, however under 'high stress' situations, any measures taken to bolster her energy levels will vanish quickly. Apparently the debate rules will give Hillary no way to hide her true condition if it appears within the 90- minutes, which might as well be 90-days to her. If this assessment proves accurate, then stocks, bonds, and the rest of the bubbles could tumble this week as Trump's prospects for the White House are solidified. (See Figure 2)
Again, that's the message in Figure 2. It needs to retrace higher given the oversold condition in several key indicators as the result of a record crash this year. It's still at recent lows essentially. A turn higher is a 'deflation signal' as money rushes out of the 'inflation trade'. What does this mean for precious metal stocks? Are they part of the bubble complex and inflation trade? Answer: Yes and no. Gold stocks are definitely part of the inflation trade. In fact they lead it. But if their respective commodity prices could rise (if the neo-liberal establishment did not attempt to manage their prices lower), they would not have any 'air' in their prices at current levels. In the big picture, the current situation is more akin to the year 2000's bubble top in the NASDAQ than any other time, with sentiment chief amongst them (that's what you get with neo-liberal democrat with New World Order (NOW) aspirations running the country for 8-years – too many people living in La La Land – no offence to the new movie). It's the deleveraging that takes everything down in tandem until central authorities announce measures to re-inflate the balloons. (See Figure 3)
So, with margin debt levels never higher, as was the case in 2000, the deleveraging process could come 'fast and furious' under the right conditions, which are in fact present as we speak. All we need is the pin to prick the bubbles and it could be all over but the crying by Christmas (sooner?), which again, makes Hillary's performance Monday, and how 'the party' deals with it, critically important. One foul up – one mistake – and the dominos could start falling. The real economy has never been more hollowed out, and never more fragile. (See here, here, and here.) And this could spill over into the trade at the wrong time, like four-weeks from the next ETF options expiry, meaning a minimum of algo related support exists for stocks at the moment. It's important to realize this is normally time in the monthly options cycle when the price managers watch their P's and Q's as to not unset the apple cart because of this, especially with futures markets so vulnerable.
This makes what happens to night very important indeed, because the circumstances could spin out of control quickly. Word is, if Hillary duffs tonight she's getting the boot. And it doesn't look good for Hillary based on the defections and (deserved) disrespect that keeps piling on at the moment. She will need to summon all her powers tonight if she's to pull another rabbit out of wherever. Again, with any luck, we will be rid of the Clinton's and their ilk after tonight. The Dems will be frantic to replace her, but it will be too late for them as well. It will be a long time before anybody with at least a sense of proper morality trusts those clowns again. For what it's worth, The Donald isn't going to have an easy time of it in the White House given present circumstances, not the least of concerns being a hostile Fed (that may need to go), which raises the specter of 'the death of the two-party system' in America, especially with Millennials on the rise.
See you next week.