It’s Monday morning, and the “new era” of indefinitely depressed oil
prices has officially arrived. To wit, on Saturday, the
International Atomic Energy Agency validated Iran’s compliance with the
U.S.-led “nuclear deal,” enabling Iran to add 0.5 to 1.5 million barrels per
day to global supply this year. This, to a market already sporting
record high inventories, and a daily glut of roughly 1.0 million barrels, per
this commentary from a Miles Franklin Blog reader this weekend.
“I flew over the Houston ship channel on Friday. The Gulf has literally
hundreds of ships sitting out there, I am assuming filled with crude.
Easily 2-3 times more than last year.”
Subsequently WTI crude is at a 14-year low of $28.85/bbl as I write, and
Brent crude $28.55/bbl. But don’t worry, according to the modern day
General Custer, John Kerry, “today marks the start of a safer world.”
As for me, I’ll stick to my October 2014 prediction that “crashing
oil prices portend unspeakable horrors.” Such as, for instance, the
wildfire-like surge of interbank lending rates; energy-related corporate
credit downgrades; and financial institutions admitting to dangerously high
energy (and let’s face it, commodities in general) exposure. Including,
I might add, “TBTF” banks like Citibank and Wells Fargo.
Which is probably why it was “leaked” that the Dallas Fed held a secret
meeting with Texas banking institutions last week, “ordering” them to not
write down energy-related assets. You know, like the Financial
Accounting Standards Board, or FASB, did in April 2009, when it “decreed”
banks no longer had to mark mortgage-related assets to market; but instead,
to fantasy. Frankly, I’m not sure the Fed even has the authority
to make such rules; but since the U.S. government gives the Fed its
marching orders – as both Alan Greenspan and Ben Bernanke recently admitted –
I guess it’s a moot point. However, for those that think such decrees
will enable banks to “paper over” their losses, I point to the aforementioned
surge in interbank lending rates – a la 2008, as everyone starts to
fear everyone else’s financial stability.
Let alone, as none other than JP Morgan was busy lowering its 4Q GDP
growth estimate to a measly 0.1%; atop the release of extremely ominous
capital flow data, revealing that foreign Central banks – unquestionably, led
by China – sold an incredible $47 billion of U.S. Treasury bonds in the
year’s first two weeks. And yet, the benchmark 10-year rate is on the
verge of plunging below 2%. No doubt, “aided” by a Federal Reserve that
supposedly ended QE 13 months ago. Throw in the East to West
plunge in commodities, currencies, and equities – the latter, to “bear market
territory” in the vast majority of nations – and you can see how terrified
“the powers that be” are getting, that the “big one” may well have commenced.
Which brings me to today’s extremely important topic – which, per its
title, has I’m sure piqued your interest. Which, as is so often the
case, formed at the gym – whilst running on the Stairclimber, browsing the
internet for interesting articles and podcasts. In this case, I came across
Mike Maloney’s most recent video, describing four reasons why “deflation”
must arrive first, before hyperinflation inevitably “comes to town.”
Not that all items fall in price during deflation – but the vast
majority certainly do, particularly those that take down the finances of
individuals, corporations, municipalities, and sovereign nations. In my
view, Maloney is one of the most talented economists of our time, and I
essentially agree with everything he says – about both the economic outlook,
and financial market prognosis.
However, where it really gets interesting is at the end of this 30-minute video – when, after
entering your email address – you receive a link to a second, 60
minute video, featuring Maloney and long-time “Precious Metals nemesis” Harry
Dent.
To that end, I’m not here to rehash my criticisms of Dent’s ultra-bearish
Precious Metals outlook – as discussed hereand
here.
And for those still fearful that he will be “right,” keep in mind that his
two most famous – or should I say, infamous – market prognostications
were 1) his 1999 prediction that the Dow and NASDAQ would reach 41,000 and
20,000, respectively, by…drum roll please…2008; and 2) his April 2011
prediction that the Dow would plunge to 3,000 by…again, drum roll
please…2014. Frankly, as I have noted before, Dent is as talented an
economist as anyone in our field – and as Maloney points out several times,
the onlyarea where he (we) and Dent disagree is whether Precious Metals will
be a primary safe-haven asset, as they were during both the 1930s and 2008-09
deflations. In my view, Dent is one of the world’s leading authorities
on “cycle” analysis, but has a glaring “blind spot” for microcosmic financial
analysis; such as, for example, gold and silver supply/demand
fundamentals. Not to mention, the “pink elephant” that he arrogantly
chooses to ignore; i.e., the manipulation of markets that skews even the best
technical; fundamental; and heck, cycle analysis.
That said, these MUST SEE videos will unquestionably help you to realize
how dire the global economic situation has become. And subsequently, why
“Harry Dent, Mike Maloney, and Miles Franklin” synchronously believe that, as
Maloney calls it, the “Greatest Crisis in the History of Mankind” is upon
us. In a nutshell, irrespective of the impact of market manipulations
and other ephemeral factors, all long-term cycle factors are
converging bearishly – regarding economic activity, financial markets, and
demographics, and politics. Which, I might add, are doing so with such
violent, world-destroying fashion as the result of Central banks’
suicidal – and, for the first time, globally coordinated – attempts to
stave off “Economic Mother Nature” with unprecedented money printing, market
manipulation, and economic propaganda (read, data cooking).
Honestly, even I was incrementally scared after watching them; and
this, from a person who has already “prepared for the worst,” and advised
others to do so.
Basically, the “moral of the story” is that, irrespective of your short-term
market expectations, the intermediate-term outlook (which in terms
of most peoples’ finances, might as well be the long-term) is as ugly
as at any time in history. In such an environment, Precious Metals have
essentially always outperformed other asset classes; and consequently,
have been the only assets proven to preserve purchasing power
throughout the ages.
In other words, they are – plain and simple – the “once and future kings”
of the monetary realm. Which I might add, countless billions agree with
today – living in countries like South
Africa (ironically, the long-time “capital of global gold mining), where
currencies have already all but collapsed. To that end, it’s
just a matter of time before the fiat currency cancer climbs “up the totem
pole” to the world’s “reserve currency” – destroying the dollar just as all
600+ fiat Ponzi schemes before it. Perhaps, much sooner than most can
imagine – if indeed, the “Big One” has commenced.
