Of all the things I specifically, and Miles Franklin generally, seek to
accomplish, the most important is to empower you to understand the
“enigmatic,” and at times flat out counter intuitive nature of today’s 100%
manipulated “markets.” By doing so, we will have accomplished two birds
with one stone; by not only educating of why Precious Metals are the
world’s most undervalued assets, but how you can take advantage of
“the Cartel’s” machinations to best insure your portfolio. And equally
importantly, to prevent you from fearing you have done something “wrong”; and
thus, avoid being seduced by the relentless anti-PM propaganda seeking to
scare you away.
To that end, it’s days like yesterday’s “Deutsche Bank Destruction” that
test one’s mettle “to the max.” And hopefully, you responded to it with
wise, informed investment decisions. Also, to realize that it’s one
thing to own “paper PM investments” – like mining shares, which plunged 10%
yesterday; or ETFs like GLD and SLV, which can be, and typically are, sold
during panics like yesterday, with the “click of a mouse.” And another
thing entirely to hold physical gold and silver, which fell by just
3%-5% – which unlike paper financial accounts, doesn’t disappear when
prices decline; and oh yeah, involves time and effort to sell – thus,
detracting you from making rash decisions under duress. Irrespective,
hopefully your choices yesterday were the right ones – and equally hopefully,
Miles Franklin played a small part in guiding your thinking.
As for what occurred, it was what I categorize as a blitzkrieg, “named
storm” attack. That is, a blatantly orchestrated Cartel attempt to
destroy sentiment, via a massive, egregious raid with naked shorted paper
gold and silver. In this case, I’ve deemed it the “Deutsche Bank
Destruction,” assuming the imminent collapse of the “world’s most
systematically dangerous institution” was the primary reason for attempting
to scare people from history’s best safe haven assets. Although
frankly, it could just as easily be related to one or more other potential
events, such as next month’s Presidential election, expanding military
aggression in the Middle East, plunging economic data, or anticipated
inflationary monetary policy, to name a few. Or, for that matter,
simply to push prices further from the Cartel’s “ultimate lines in the sand”
of roughly $1,375/oz for gold – representing the downtrend line created by
six 2011-13 named storm attacks; and $20.40/oz for silver, representing its
50-month moving average.
To that end, the one thing I assure you of is that it wasn’t due
to “bad news” – which frankly, no longer exists in the Precious Metal
realm. To the contrary, each day features more and more “PM bullish,
everything-else-bearish” news flow – such as the myriad political, economic,
and monetary events discussed in yesterday’s “fresh, bullish
news.” To the contrary, never in my nearly 15 years in this sector
have I seen more reasons to own PMs; and conversely, less reasons to be
“scared away.”
That said, the MSM will surely cite numerous “reasons” for the decline;
as, in Bill Murphy’s immortal words, “price action makes commentary.”
In other words, falling hook, line, and sinker for the Cartel’s propagandist
goals – like, for instance, yesterday’s speech by non-FOMC voting member
Jeffrey Lacker. Who, like Janet Yellen six weeks ago, in citing the
“case for a rate hike has strengthened” before again failing to follow
through, claimed monetary policy should be per-emptively tightened to avert
surging inflation. This, after the Fed has done not a thing during the 10
months since the core CPI rose above its 2% “target”; in a world where
the primary inflationary catalysts, medical costs, rent, insurance,
education, and taxes, cannot possibly be materially influenced by monetary
policy. Other than insurance, that is, which can only be “saved” via
dramatic rate hikes which, if implemented, would utterly annihilate what’s
left of the third longest, LOL, “expansion” in U.S. history. And oh
yeah, stock and bond markets trading at record high valuations, as we head
into what will unquestionably be the worst downturn since the Great
Depression. Only this time, debt loads across all sectors, public and
private, are at all-time highs, sporting unprecedented “leverage” via the
Wall-Street-synthesized “weapons of mass financial destruction” known as
derivatives. Of which, none other than Deutsche Bank has the largest
exposure, with “fortress balance sheet” JP Morgan not far behind.
That said, even if this were actually the reason for yesterday’s PM plunge
at, what do you know, the COMEX open, it makes little sense logically, given
that economic data has weakened considerably since the Fed failed to raise
rates last month, whilst the expanding Deutsche Bank and Monte Paschi crises
make it nearly impossible for the Fed to do anything. And oh yeah, when
interest rate fears were far more powerful in late August, following a far
more intense round of “imminent rate hike” propaganda – as if a measly
quarter point rate hike would have any negative impact on PM demand in the
first place – the lowest gold and silver prices fell to were $1,320/oz and
$18.80/oz, respectively.
To that end, why anyone would believe the Fed would raise rates a
week before the election – of which, money market “odds” are currently 24% –
is beyond me. Let alone in December, where such “odds” have been50%-60%
for the past month, given the freefall speed of economic data, and the
financial market implosion that would likely result, if last December’s rate
hike aftermath is any indication. Not to mention, the resultant surge
in the dollar’s exchange rate, which would all but destroy what’s left of
corporate earnings, after having already declined for six straight
quarters. And oh yeah, the big pink elephant in the room, of the
massive debts that would become more difficult to service – such as those of
the world’s largest debtor, the U.S. government; and the “emerging markets”
that would see their effective debt dramatically multiplied by a surging U.S.
dollar.
Numerous MSM commentaries suggested gold and silver’s plunge were
catalyzed by a “surging dollar” – when in actuality, its modest rise, of
roughly 0.3%, wasn’t even statistically significant; particularly as it was
focused principally on two currencies, the Pound (which plunged to a 31-year
low, following the announcement of a formal BrExit timeline); and the Yen,
which fell 1% because Japan is, for lack of a better description, a basket
case. The Euro, warts and all, didn’t even rise significantly when the
fake rumor, already refuted, of the ECB considering “tapering” QE hit the
tape, and most other currencies were essentially unchanged.
The dollar index – which by the way, has had no material correlation with
PM prices for the past decade – has traded between 92 and 100 for the past 12
months. Thus, yesterday’s close of 96 is right in the middle of that
range, refuting the ridiculous notion, promulgated by no less than Zero Hedge
itself, that it “surged.” And oh yeah, when it’s last interim peak of
97.5 occurred in late July – just before July’s “imminent rate hike”
propaganda was refuted – gold and silver were trading at…drum roll
please…$1,320/oz and $19.50/oz, respectively.
And then there’s Deutsche Bank, which surged Friday following a moronic
rumor of an impending DOJ settlement, despite the fact that DB executives
have yet to even address the matter. Not to mention, if they in fact
were to settle for $5.4 billion, would likely be a disaster, given that
essentially every Wall Street firm, just last week, suggested a
settlement of just $3-$4 billion would wipe out most of its reserves.
Well, yesterday’s “rumor” that DB is considering a capital raise should tell
you all you need to know about its true, imploding financial situation; and
irrespective, if a mere $5 billion is enough to make or break a company with
more than $200 billion of assets, consider just how ugly its “off balance
sheet” financial situation actually is. Clearly, the IMF has done so,
in deeming Deutsche Bank the world’s “most systematically dangerous”
institution; just as FDIC Vice Chairman Thomas Hoenig did three years ago, in
deeming it “horribly under capitalized.” And trust me, if Deutsche Bank
actually does a major capital raise – which likely, could only get done if
Central banks covertly fund it – it would massively dilute the stock.
Likely, pushing it below $10/share in the U.S. – and certainly, €10/share in
Europe; triggering the equity conversion of $5+ billion of “CoCo” bonds,
which would cause the price to plunge further.
As for the PM attack itself, arriving simultaneously with the U.S. cutting
off diplomatic ties with Russia, and horrific economic data like the below
chart of collapsing
…it represented the fourth time in the past two weeks that
massive paper sell orders – quite obviously, naked shorts – were unleashed at
the 8:20 AM EST COMEX open, as capture by these damning screen shots.
By day’s end, gold was down $42/oz, and silver $0.95/oz, despite no other
market materially moving. In other words, a perfectly executed named
storm attack.
That said, it caused both metals to become severely “oversold,” for what
it’s worth, at levels well above their respective 200 day moving averages of
$1,254/oz and $17.05/oz – which just happen to be where they were trading
prior to the BrExit vote. In other words, nearly all the post-BrExit
gains were erased yesterday, despite the fact that its hideous political and
economic ramifications are playing out just as feared. To that end, I
ask you to determine if PM prices can possibly trade below those
levels for long, given all that has occurred since, and all that appears like
in the coming months.
That said, my firm belief is that, whatever the “reason” the Cartel had
for launching such an egregious paper raid – which, by the way,
resulted in one of Miles Franklin’s busiest days of the year, due to
investors buying the gift from heaven dip – it will unquestionably
be met as all such raids have since the financial crisis. Which is,
with massive physical buying, just as occurred in 2008, 2013, and
2015. This, at a time when demand is already hovering around all-time
high levels; with production actually declining; above ground,
available-for-sale inventories paper thin; and oh yeah, the world’s
political, economic, and monetary fabric tearing apart. In other words,
such a blatantly obvious raid will have its own, self-perpetuating
ramifications; in my view, in very short order. That is to say, if
anything, the time “they” bought with yesterday’s raid will likely be
extremely fleeting – and the sentimental impact, amidst a massive, global PM
bull market, extremely ephemeral. So please, my friends, look at the
situation as objectively as possible, and make the correct decision
how to proceed.
P.S. As I’m about to hit print, the ADP September employment report came
in way below expectations, at 154,000 versus the expected 170,000. Keep
in mind, Friday’s “most important ever” NFP report has a current consensus
estimate of 168,000, compared to the 120,000 estimate by Markit, the company
that puts out the U.S.’s (abysmal) PMI manufacturing and service
reports. If it’s the disaster it should be – election-related
data-goosing notwithstanding, all hope of a December rate hike will
instantaneously die, never to be re-animated.
