The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, January 23, 2017.
Donald Trump is now the new President of the United States of America (USA), such as it is, where libertarians and conservatives should be rejoicing - right? Well, maybe if he's able to repeal Rule 41 and is able to right off a lot of debt without imploding the financial system (not possible) - yes - one must agree. However this is all speculation at this point - as is all the optimism associated with Trump, where like Reaganomics, Trumponomics, is expected to 'reignite' the US economy after 30-years of an aggressive hollowing out. Yup - everything will be 'wonderful' with a 'businessman' at the helm of the world's largest and most important economy. He can reverse all that damage in no time. Oh and by the way - the rest of the world - you're on your own - because it's America first with Trump - nationalism to the max.
What should be noticed by all however, and the other side of the coin to a sanguine view of the future for our collective political economy, is this sentiment, Trump's 'America first' doctrine, has not been lost on both domestic businesses or America's trading partners, with China's undoubtedly most important from a macro perspective. Thing is, from an unintended consequences perspective, because Trump is like a 'bull in a china shop', aggressive protectionist policy could bring reprisals from the Dragon, from a dragon in the 'Year of the Rooster' - circling back to remind of Trump. In Chinese zodiac, it's a year that looks to the color gold and metals for 'good luck', which ironically could end up being China's trump card to teach The Donald a lesson in diplomacy.
Heaven knows if recent comments from Trump's Secretary of State are an indication of the wild statements (and actions?) we should expect, there's every reason to think it might 'hit the fan' one day with China, where events could spiral out of control quickly. How will it start? The first shots in any war past initial aspersions are always economic, which is where China could really make trouble for Trump's Presidency if it so chooses. How's that? Well, how about unleashing the Chinese population on dwindling global physical gold and silver supplies. How about global stock market volatility spiking demand for physical precious metals rendering US (price setting) futures markets redundant, sending prices shooting higher - along with inflation expectations and interest rates. How about them apples?
Do you think this would get Mr. Trump's attention? Think maybe he might ruminate a bit more before he hangs his 'tough guy routine' on China next time? Don't get me wrong, as the globalist China agenda and their increasingly aggressive posture is 'big trouble' for the US if left unchecked at this point, however that said, diplomacy is very important in such matters. So it will be telling to watch what happens in Davos this year with the Chinese President scheduled to attend for the first time. Trump's team better pour on the charm, and attempt appeasement - or The Year of the Rooster could turn out to be a real doozy - if not sooner - later. Because as you would know from my technical work on the precious metals markets, while the first half of the year should see further consolidation in the group - after that - anything goes.
As it turns out, Xi carried on with the case for Chinese global leadership (see here and here), and threatening trade wars (see here and here) with crickets from the US. How it appears is Trump is talking currency / trade wars too, within the context of the America first meme, which shows both sides of this equation are sticking to increasingly aggressive postures, which will eventually need to blow. So the big question then becomes how does process unfold, where logically economic war should escalate forthwith. So it appears Trump's honeymoon might not last long at all, with enemies both foreign and domestic turning the screws from day one. He had a nice inauguration day celebration on Friday - but it won't last.
The only problem is it won't - the peace won't last long at all. And given just how vulnerable both sides are - America and China - the resulting war will not be pretty. The headlines tell the story(s), where in the States, despite the Trump Effect propaganda circulating, still, if you're really looking you will see the increasing unemployment (see here and here), demographic disparity and despair (see here and here), along with outright financial collapse (see here and here) evident across the American landscape. Heck, it's even hitting New York now, evidenced in collapsing real estate prices - that can only be papered over with exploding deficits moving forward. Indeed, 'America' has become an illusion; however going to war with China will test the fallacies for real before it's all over.
And although China is not better off when one looks under the hood (see here and here), still, it does have some advantages over the US that can matter in a 'dog fight', not the least of which being unparalleled economic growth over the past 10 years, and a corresponding foreign currency reserve 'war chest', top in the world. So the Chinese have quite an economic advantage over America at the moment, and could start squeezing in other ways if tensions begin to heat up, which again, appears fait accompli with anti-globalist Trump in the Whiter House now. In this regard then, it would not be surprising to see an emboldened China take surprising and bold actions that play of their economic prowess in the Year of the Rooster, which again, as mentioned above, is a year involving gold and metals.
Wouldn't it be 'funny' if China unleashed increases percentages of its still bountiful currency reserves on gold and silver bullion, with emphasis not on the former, but the latter considering its strategic importance to America's interconnected markets. As you would know from reading my reports on silver throughout the years, silver is not just important to the maintenance of the larger credit bubble - it's everything. The entire financial repression game, with interest rates at center, depend on keeping silver subdued, because of key inter-market relationships with gold (currencies), bonds, and equities, where radical change would unhinge the derivatives markets employed to manage the larger pricing nexus.
So if China really wanted to hurt the US, all it has to do is set silver free from its COMEX shackles, the primary price-managing instrument used to keep prices under control. And there's only one way to do that - buy it all (which they could do with trillions in foreign currency reserves) - or at least make global price differentials so substantial arbitrage becomes a 'no brainer' for the billionaires of the world. Then a 'buying panic' would ensure that would accomplish the same goal - it would clean them out - even JP Morgan's stash. It wouldn't take much if a true panic to accumulate physical silver ever takes hold, where momentum would eventually bring in all varieties of funds (sovereign, hedge, pension, etc.), not to mention the public. It wouldn't take much at all once it gets rolling - especially with Trump shaking things up.
What's more, think about the positive strategic logistics for China resulting from such a move (something warring nations strive to accomplish), killing two birds with one stone by removing what little credibility the $ has left, while bolstering it's own fortunes (currency reserves) with all the gold and silver they own. All they would need to do in order to torpedo the $ after such a move is turn the focus on the bogus gold reserves the US doesn't have while prices for the metals are going crazy - where an element of truthiness would enter the formula even if this bullet is dodged (temporarily?) while this is happening - that's war. That's the kind of thing you should expect as tensions between the US and China escalate - as China continues to attempt its silent coup of the West - aimed at taking control of global finance.
This is why Xi showed up in Davos this year, and why Chinese elites are buying up Hollywood - to take full control of the American mind - just as they have done with their own people. So make no mistake ladies and gentleman - it appears things are heating up in the global chess game - and this time America will likely not come out ahead. And Obama's selling out of America to the globalists over the past eight-years will only help China in this regard, especially if Trump fails in his attempt to 'make America great again' (a pipe dream?), which is quite possible. So let's hope Trump is able to take control of the situation before it takes control of him, where there's only one way to accomplish this feat - by bringing back the rule of law. This is the only way you will avoid waking up one day having to pledge loyalty to somebody that doesn't look, think, or act like you.
In the meantime however, maintaining the $'s credibility is what the Fed will need to concentrate on moving forward from here, and if they can kill two birds with one stone too (two Roosters - Trump and China) - so be it. So don't be surprised if the Fed raises rates again next week with all the strong fake statistics to justify this suicide. But again, the Fed wants to cripple Trump if they can, and this is the first year of the Presidential Cycle (when they do their 'dirty work'), giving then justification for tightening. What's more, if not now, waiting will likely prove to be a lost opportunity. That said, it doesn't really matter for the stock market, because as you can see below it appears to very close to a top in 'risk adjusted measure'. Sure, as mentioned the other day, the Dow may need to break above 20,000 in order to engender the proper psychology for a lasting decline (invincibility), however any such strength should prove fleeting within the context of the first half (quarter?) of 2017. (See Figure 1)
Supporting this vein of thinking we are developing top in the financials right now, which is leading the broads, which in turn is being led by the money center banks. Case in point we have the long-term monthly plot for ring leading JP Morgan below showing it's hitting profound Fibonacci resonance related resistance at present pricing, where even if it were able to break higher from here (unlikely), sustainability of any such move would be highly questionable. 2016 bonuses are paid now, and the new President needs to learn who's boss (not to mention JPM has accumulated a tremendous amount of silver bullion), so don't be surprised if all of a sudden rising interest rates are no longer good for bank stocks, like they were before bonus time. So, like 2007, when then financials topped to lead the last debacle, prices could chop around for some time yet, at the same time it appears the dominos are destined to start falling soon - meaning get ready. (See Figure 2)
Back to precious metals, and how this all ties together, again, if we look at silver set against any of the subsidized sectors (real estate, fixed income, stocks), at present we have an 'unnatural picture' (see below), where increasing financial repression spread out over the past thirty years or so has created such great 'systemic risk' that once the Silver / S&P 500(SPX) Ratio does break higher, bailouts will become moot in very short time frames. So it's important to realize there won't be a repeat of the last ten years this time around. Once the ups and downs of what is coming finishes chewing through the masses, we could be left with a future that will make the 1930's look like 'good times'. This means for whatever reason, economic war with China, whatever, one should be stocking up on physical silver right now to guard against what is coming - that's for sure - just look at the relative value captured in the picture below. The status quo has been kind enough to keep silver in a holding pattern to allow intelligent observers to do just that - so don't blow it - because this opportunity will not be available at some point - perhaps quite soon. (See Figure 3)
What's more, besides gold and silver being 'political metals', inviting speculation they may soon be drawn into potential 'economic wars' moving forward (Bitcoin too), it's important to understand that it's also likely that one way or another Trump's policies (the other Rooster) will increasingly play hard on the $ ignoring all other factors, so again, don't be caught short. While 'conventional charting' of paper precious metal pricing patterns are suggesting to remain cautious right now, still, at the same time strong core positions are the prescription based on knowing how things are heating up, not to mention the $ chart, which is decidedly bearish. So somebody is lying to you here, either the precious metals charts, which are suggestive the larger degree corrections that started in 2011 are incomplete, or the $ chart - oh yes - and the fundamentals - you know - that cumbersome 'stuff' that doesn't matter in the financial markets today.
Thing is, the false narratives put out by the fake media (CNBC, etc.) has been going for so long now the degree of damage that will occur in the next fall out may be unfixable, where you will literally not be able to recognize the US 5 years from now even if America is successful in fighting off the globalists, the silent invasion, etc. - where the United States of America won't be so united anymore. In this regard, it's important to realize the markets are stretched like never before, whether you want to look at either micro or macro data points (see here, here, here, here, and here), meaning the next time the big bubble comes under stress - the credit bubble - it might pop for good - which would change everything on a fundamental basis. (ex. no more last minute delivery [no warehousing today] supply chain - which depends on credit, no more consumer, no more economy.) So if you think economies have turned inward today - you haven't seen anything yet.
This is why you need to be your own sovereign, your own manager, and liquor (credit) control board. Because if one doesn't watch your credit consumption and dependence moving forward, where far too many don't these days (individuals and corporates alike), you would be consumed under such conditions. No, it's important to realize you will likely never be 'rich', and that protecting what you have should be of paramount importance to you, not dreams of grandeur. So again, this is likely why you will be able to look back on 2017 as the year everything changed - where the system finally cracked - evidenced in the 'crack-up boom' under way right now. And again, even though the charts suggest further losses are likely on the way for precious metals in the intermediate term, which may in fact occur, still, despite this risk, there's the risk a change in 'fundamentals' make the message in these charts 'fake' too - so not having strong 'core positions' in physical metals is a 'fundamental error' in terms of portfolio planning.
It never changes in the investing game - the few cannot pay the many - the many must pay the few. Right now, it's 'trendy and popular' to have paper stocks, bonds, and even precious metals. My big prediction for 2017, the Year of the Rooster, is that by the end of this year, you will look back and say this was the year of paradigm change, where the vulgarities of fake popped paper bubbles become apparent to all, and physical possession of wealth becomes of ultra importance as the last vestiges of trust in central planners (fascists, liberals, etc.), and unfortunately for Donald Trump, the 'big state', is damaged irreparably. It may not become apparent on the surface to all, however if physical precious metals are able to break the shackles of the COMEX control structure, anything is possible. And again, as alluded to above, if this needs to occur because the physical settlement market for precious metals in China starts building in premiums the boys in New York can't deal with - then so be it.
2017 will go down as the Year of the Rooster in the history books - as it were.
See you next time.