Category Archives: Financial Markets

Amazon’s Shock And Awe Earnings

Yesterday ahead of earnings, AMZN’s stock dropped $60, with $30 of that drop occurring in the last hour of trading.   It’s almost as if market-makers, with their customary preview of the impending AMZN headline EPS report in hand,  intentionally took the price down to set-up a short-trap.  AMZN stock closed at $1390, down $60 from Wednesday’s close.

Shortly thereafter, AMZN’s earnings headline showed $3.85/share, more than double the consensus estimate produced by Wall Street’s Einstein Center For Earnings Forecasts.  $1.85 was the expectation.  AMZN’s stock shot up to as high as $1480 in after hours, up as much as $90 from the close.  Imagine how much money the Big Bank trading desks made assuming they bought all the shares that were sold short in the last hour of trading on Thursday.

Within the first eight minutes of today’s open, AMZN stock shot up to as high as $1495, up $105 from Thursday’s close.  As I write this, AMZN is trading below Wednesday’s close of $1450:

A round-trip to nowhere, essentially. Here’s the funny thing about AMZN’s earnings that Wall Street’s finest will never report, if they even know the truth. Embedded in AMZN’s net income is a $789 million non-cash “provisional” tax benefit for the estimated impact of the new tax law. Note that this is a somewhat arbitrarily determined number – which is why its labelled “provisional” – and it’s non-cash. This GAAP, non-cash tax “benefit,” as guesstimated by AMZN’s accountants, added $1.63 per share to AMZN’s headline EPS report.

Regardless of how you want to account for this, at face value AMZN’s stock is trading at 233x trailing earnings.  Not including the GAAP, non-cash tax benefit, AMZN stock is trading at 315x trailing earnings.

This is not the only problem with the quality of AMZN’s earnings.  I’ve dissected AMZN’s entire  financials for my Short Seller’s Journal subscribers, as reported, showing the areas in which AMZN has exploited the current highly liberalized GAAP accounting standards to generate the  appearance of financial performance that is not real.

Despite Jeff Bezos’ claim that AMZN generated $8.4 billion LTM “free cash flow,” this misleading metric was down 20% from the end of Q4 2016.  But that’s on display in the earnings slides that AMZN publishes every quarter.  On a true GAAP basis, AMZN generated an LTM cash flow deficit – i.e. negative $1.46 billion.

This is just a small portion of AMZN’s accounting abortion.  Unfortunately, until the capital markets are no longer willing to finance AMZN’s cash burning Rube Goldberg operational structure, the stock is very difficult to short.  There will come a time, however, when sand gets blown into Jeff Bezos’ elaborate gears of deception.  When this occurs, the rush for the exits by shareholder will be epic.

Is Tesla Drowning In Liabilities?

Tesla must be burning cash a lot more quickly than the rate at which its operations were burning cash in the first 9 months of 2017.  Through the first three quarters, TSLA had incinerated $570 million, or roughly $2 million per day.  Its Model 3 sales are horrifically below Musk’s bold predictions.

Now Tesla is going take part of its “leased” vehicle portfolio and attempt to raise $546 million by letting Wall St. “engineer” the lease payments into an Asset-Backed Bond (ABS) deal.  The problem with Tesla’s leases is that any of the leases issued before June 30, 2016 contain a “resale value guarantee” from Tesla.  This  is a “put option” issued to the lessee of a Tesla vehicle in which the value of the “put option” is worth significantly greater than the resale of the vehicle.  And the resale value of a Tesla is declining rapidly on a daily basis, along with value of the entire used car inventory across the U.S.

The ABS bonds are structured from leases thrown into a pool of leases – the Trust – that will be used to fund the bond payments .  One of the problems with this deal are the leases held by Tesla that contain a guaranteed re-sale value of the leased vehicle.  To the extent that cars turned in under the guaranteed value payment  are worth less than the value of the guarantee, the bond trust takes the hit.

I noticed that the resale value of a Tesla S model is dropping like a stone they are almost giving away 2 year old models for free. Who wants to be a guarantor of that? – comment from a reader in Sweden

However, I would bet my last nickel that the residual values in the plain-vanilla leases that will be tossed into the trust exceed the market value of the underlying vehicles.  In this case the bond trust also takes a capital hit.  I have a hunch that Elon Musk is trying to pull a fast one on yield-hog bond fund managers by transferring leases with overvalued residual values embedded in them into this ABS Trust.

With so much printed Central Bank currency sloshing around the financial system, I’m sure if the underwriters dress this pig with enough lipstick in the form of a high coupon, the deal will get done.  I have to believe that this trust will have tobe  over-collateralized by a significant amount, meaning that the implied value of the leases tossed into the ABS Trust exceeds the par value of the Trust by a considerable amount.

But it  makes me wonder why Tesla is coming back to the capital markets with the equivalent of a “furniture sale” in order to raise high-cost capital given that the Company raised nearly $2 billion in August – just five months ago.  How much cash has Tesla’s operations incinerated since the end of September?  Judging from the collapse in Model 3 sales, it smells like Tesla and Elon Musk are beginning to get desperate to keep the lights on.

The Stock Market Is Setting Up For A Historic Collapse

There is no history to suggest this is sustainable. This price move remains the most extreme technical disconnect in the $DJIA ever.   – Northman Trader

The U.S. dollar has had the worst January since 1987.  There’s a lot of reasons why the stock market crashed in October 1987, but the declining dollar was one of the primary catalysts.  The rest of the world, led by China, is methodically and patiently removing the dollar as the world’s reserve currency.  The cost for the U.S. Government to fund its rapidly expanding spending deficit is going to soar. Absent the ability to print unlimited quantities of electronic dollars, the U.S. Government’s credit quality is equivalent to that of a Third World country.

Silver Doctor’s invited me to join Elijah and Eric Dubin for their weekly Metals and Markets podcast.  We discuss the issues above plus have a little bit of fun:

The cost to buy down-side protection has never been cheaper.  No one, I mean no one is short or hedged this market.  When slide starts, it will quickly turn into a massive avalanche.  You will have to be set up with hedges and short positions or you will miss the money that will be made from taking a lonely contrarian view of the market.

My subscribers who shorted my homebuilder stock idea two weeks ago are now up 17.7%. That’s if they shorted the shares. They are up even more if they used puts. If you are interested in learning how to take advantage of the coming stock market crash, you learn more about the Short Seller’s Journal here:   Short Seller’s Journal information.

Hidden In Plain View / Eyes Wide Shut

The impending economic collapse is hidden from most. People only see a rising stock market, not the negative underlying factors that will cause the whole system to crash. – Peter Schiff

The average middle class household is getting squeezed by an income that is not keeping up with the cost of living. Unfortunately, a major portion of the cost of living has become debt service. Most car buyers assume an almost insane amount of debt to buy a new car. Credit card debt is being used to make ends meet. Low-to-no down payment mortgages have funded most of the homes sold over the last few years. The problem, however, is that the financial system enables this behavior. One has to wonder if this was not intentional…

The quote above is from a recent Peter Schiff podcast. He goes on to say the it’s unclear how quickly the financial system will unravel but “it is close” to happening. I wanted to use that quote because one of the goals of the Short Seller’s Journal is to present hard evidence that brings to your attention the “negative underlying factors” which contradict the “official” narrative about the economy and financial system.

A subscriber of mine sent an article to me in which the Wall Street economist, Joe LaVorgna, was forecasting today’s GDP report to surprise everyone by coming in at 5%. I literally laughed out loud. LaVorgna is a hack who has spent his career on Wall Street preaching fairytales about the economy as a means of assisting the snakeoil salesmen at his bank in their efforts to stuff as much high-commission junk into investor accounts as possible. People like LaVorgna would sell their mother for a small commission. I know this because everyone who was above me in the food-chain in the securities division of Bankers Trust in the 1990’s was like that.

Ultimately the truth will prevail but by then it will be too late. In the meantime, here’s a tell-tale indicator that criminals on Wall Street and at the Fed can’t hide:

The chart above shows the rate of return comparison between the S&P 500 and junk bonds (HYG). Historically going back at least to the 1990’s, stocks tend to move in the same direction as junk bonds on a lagged basis. That lag when I was trading junk bonds was usually anywhere from a couple weeks to a couple months. The massive Central Bank intervention has largely removed the ability of the stock market to perceive fundamental problems developing in the financial and economic system. But the junk bond market is starting to smell problems.

Morgan Stanley’s wealth management division announced right after New Year’s that it was taking its recommended portfolio allocation in junk bonds down to zero. The rationale was that, while tax cut euphoria might inject fresh momentum into “high-flying stocks, the boost may be short-lived and will mask balance sheet weaknesses” – i.e. developing credit problems. The Morgan Stanley report further explained that “credit markets figure this out before equities” and that they are preparing “for a deterioration in lower-quality earnings in the U.S. led by lower operating margins.”

I nearly fell off my chair when I saw this commentary from Morgan Stanley. In my 32 years of active participation in the financial markets I can not recall any brokerage firm ever issuing a stark warning like this about any sector of the financial markets.

At some point the fundamental problems will become too obvious for stocks to ignore and there will be abrupt sell-offs. The 360 point drop from top to bottom last Tuesday was a hint of what’s to come. Eventually the Central Banks will be unable to intervene and manipulate the type of bounce that was engineered at Tuesday’s bottom and that followed-through on Wednesday and beyond.

All of this is going on in plain view. But the sheeple are too worried about whether or not they can take out enough debt to buy the cars and homes required to keep up with everyone else. But “everyone else” is doing the same thing. Default rates are starting to soar on credit card and auto loan debt. This will soon spill over into mortgages. My thesis on the housing market was confirmed by an industry-insider – a point which I will detail for my subscribers this weekend. We’re already seeing signs that the economy hit a wall in December. It will only get worse.

My subscribers who shorted my homebuilder stock idea two weeks ago are now up 17.7%. That’s if they shorted the shares. They are up even more if they used puts. If you are interested in learning how to take advantage of the coming stock market crash, you learn more about the Short Seller’s Journal here:   Short Seller’s Journal information.

Housing Market Supply And Demand: Just The Facts

“Housing – people are insane if they think housing isn’t going to get crushed with rising rates. As you outline often, it’s already happening in ( NY, Den, etc. ) I live in LA and most of my friends/ coworkers are telling me how dumb I am to not jump in. I know to just stay quiet, but I think they are about to walk into a buzz saw (again).” – email from a subscriber

The National Association of Realtors reports that December  existing home sales fell more than the NAR led its Wall Street lap-dogs to believe they would decline.   Larry Yun, the NAR’s market elf, has been blaming phlegmatic housing sales over the last two years on low inventory. There’s only one problem with this assertion: it’s not true based on historical data:

The chart above is drawn from data that the Fed, for some inexplicable reason, purged from its FRED database.  It illustrates the inverse relationship – generally – that exists between inventory and sales.   The bigger factor driving the economics of the housing market right now is the deteriorating financial condition of any household that might want to buy a house.  The Fed and Government have largely exhausted the population of would-be mortgagees that can make a 0-3% down payment on a conventional mortgage plus carry the monthly burden of servicing that mortgage.  The tax advantage from deducting real estate taxes was stripped from the equation.

I suspect the Fed is getting worried about the housing market. The Fed’s QE holdings rose $5 billion last week. The entire increase is attributable to an increase in mortgage holdings. Not only is the Fed not reducing its balance sheet, it felt compelled to inject capital into the mortgage market.

One thing to keep in mind. A large percentage of homes purchased and financed with 0-3% down payment mortgages in the last couple of years are underwater. When a buyer puts almost nothing down on a mortgage-financed home, the transaction costs all-in are about 10% of the value of the home. These homes are underwater at closing. Except in certain bubble areas, homes have not appreciated in value enough to make up for the amount that low down payment buyers are underwater when they closed. When the stock market eventually tanks, it will take home values down at least 30-40%, and possibly more.

Just like any market bubble, I believe the housing market is reaching the point of exhaustion. As households continue to get squeezed financially, there will be a lot of homes put on the market hoping for last year’s price. As I’ve mentioned before, when home prices are rising quickly, there’s an oversupply of buyers. When home prices start to drop, the buyers disappear. When prices are rising continuously, it’s very easy to sell a home. When prices begin to fall, it becomes difficult to sell a home. It’s been very easy to sell a home for the last 5+ years. I believe it’s going to start to become difficult to sell a home at current general price levels. The smartest sellers will price their home to move. This will begin the process of “re-pricing” the market lower, which in turn could trigger a flood of flipper homes to hit the market – just like 2007/2008.

Greenwich, Connecticut housing values are down 20%. Greenwich would be the “poster child” for the high-end housing market. NYC values are starting to get hammered. For taxpayers who itemize, the new tax law limits the deduction for State, local, sales and property taxes to $10,000. This will hammer the high-end market, which in turn will put downward pressure on everything below it.

The commentary above is an excerpt from the latest weekly Short Seller’s Journal.  If you are interested in learning how to make money from the most overvalued stock market in U.S. history, visit this link for more information:  Short Seller’s Journal subscription information.

The Gold Cartel, Sex Scandals and GATA

The point is going up against the rich and powerful is known to be a losing proposition … for most, but not ALL, of the time, The tide has now turned when it comes to serious sexual harassment issues. The scandal took decades to surface. And, in my opinion, the same is going to be the case for the biggest financial market scandal in US history, that being the wrongful suppression of the gold/silver prices

Bill Murphy’s speech at the Vancouver Resource Investment Conference is a must-read. The truth about the Central Banks and Government intervention in the precious metals market is out “there” for everyone to see. But the public prefers to keep its eyes wide shut. Those elected or appointed to positions to prevent illegal market interference are well-paid by the banks to look the other way. The suppression of gold/silver prices is designed to hide horrifying truths about the U.S. financial and economic system. Truths that most do not recognize and most of the rest prefer to pretend don’t exist. But, you can ignore reality but you can’t ignore the consequences of reality. Then the reality hidden by gold price suppression can no longer be ignored, 99.5% of the populace will have no chance to protect themselves – the prices of gold and silver will be out of reach….

Hello Everyone

It is much fun having the opportunity again to make a presentation here in Vancouver on behalf of The Gold Anti- Trust Action Committee … in order to expose the manipulation of the gold/silver markets by The Gold Cartel.

My first trip here was 19 years ago for an arranged meeting at the airport with Normandy Mining Chairman Robert Champion DeCrespigny on his way back to Australia. After flying all that way from Dallas, this arrogant man refused to see me. GATA went all that distance to help his firm, the gold industry, and the gold market … and he could have cared less about those issues and our effort. Little did we know back then this type of reception would become much the norm, as not.

What a journey it has been all these years.

What we have learned over this period time is how all encompassing the market manipulation schemes really are. Initially, we realized that various bullion banks (such as Goldman Sachs and JP Morgan) were collectively suppressing the gold price to keep it below $300 an ounce. Eventually we realized the manipulation extended to silver also AND included the Fed, The Treasury, Exchange Stabilization Fund, BIS and other central banks.

Over the many years it became apparent the market rigging extended even further to other financial markets … including acknowledged intervention in our bond market and clandestine operations in our stock market, marshaled by the infamous Plunge Protection Team. One of the first people to acknowledge the magnitude of it all was my colleague Chris Powell, who at GATA’s 2008 conference outside of Washington, D.C. came up with his great line, “There are no markets anymore, just interventions.”

For nearly 20 years Chris has been documenting the evidence of the intervention in the gold/silver markets by The Gold Cartel. It is all there on GATA’s website ( www.GATA.org) for anyone who wishes to get a grasp on how real and massive the intervention really is.

One of the most telling bits of evidence of what The Gold Cartel is all about emanates from one of the ringleaders of the scam, the Bank for International Settlements, which can be found at their own website. Regard what it explains to the investment world as one of their products.

And yet, incredibly enough, despite the obvious there are very few in the gold world who will touch the subject … THE most important one of ALL to those with any interest in the precious metals.

My role has been to chronicle the day to day activities of this cabal on my LeMetropoleCafe website, which many times are so blatant even a caveman could spot them. Our colleague James McShirley, a lumber company CEO with decades of experience in the futures market, has been invaluable in that regard. No other markets in history have traded the way gold and silver have … over, and over again, sometimes in the most absurd of fashions. The latest of which is the astonishing and unprecedented rise in the gold open interest on the Comex with The Gold Cartel doing the selling, and the hideous punishment of silver each time its price rises to $17.25.

Course many of you in this audience understand this and know of our efforts of nearly two decades to expose what will eventually become the most infamous financial market scandal in U.S. history.  As part of that effort…*We have held 4 international conferences – in South Africa, Alaska, Washington D.C., and London.

At our 2005 Dawson City conference a senior economic advisor to Russia’s President Putin, Andrey Bykov, showed up and said it was the finest conference he ever attended. The price of gold had been comatose. Two days later the gold price began to take off.

NINE months after GATA’s conference in Alaska, the gold price had risen 70%.  *We have been to Washington numerous times to meet the likes of the Speaker of the House; Ron Paul; Monetary Committees, etc. *Organized letter campaigns to Congress. *Been on various cable TV financial shows. *Presented at conferences, such as this one, etc.

YES, it has been some journey…*Most gratifying of all has been the terrific people we have met over the years, such as yourselves … many of whom have financially supported our efforts.

*Unfortunately, we learned the industry as a whole will never do anything about dealing with the most important factor in the gold/silver world. Yes, to do so would mean dealing with some permitting issues by governments and financings by bullion banks. Yet, any other industry would form an organization to deal with, or correct, the problem, so they could not be individually blamed. Not this one, which has The World Gold Council refusing to do anything about this devastating issue. The situation is so bad that when Chris, John Embry and I went to see their acting CEO in London in 2010 we had to sign a waiver of sorts saying we were never there.

Huh?  The World Gold Council’s CEO today is Randall Oliphant, who actually aided The Gold Cartel’s operations when he directed Barrick Gold’s massive hedging operations at the turn of the century.  GATA’s confrontation of Barrick Gold as an arm of The Gold Cartel back then, and for some years to follow, is a presentation all in itself. Just a few key points:

*In lawsuit proceedings Barrick Gold confessed that it and its bullion banker, JP Morgan Chase & Co., were the direct agents of the central banks in the international control of the gold price … that the central banks, having what is called sovereign immunity against suit, simply could not be included in the suit; and that the suit therefore had to be dismissed.  The suit was not and was settled out of court.

*It is no fluke that past Barrick Board members included George Bush, Brian Mulroney, the notorious Adnan Khashoggi, etc. All rich and powerful men. – and something to keep in mind for the rest of this presentation. Barrick was connected directly to the bullion/central bank rigging operations.

*Those gold rigging operations came to an end with Barrick taking something like an $8 billion dollar loss when its ludicrous gold hedges were forced to be lifted. The Barrick shareholders paid the price for that firm’s complicity with The Gold Cartel operations.

*Despite being the world’s largest gold producer, its share price today is less than when gold was below $300 and GATA came into being. What goes around come around in that regard.

*One final note, I made another trip up here to Vancouver in 2006 on behalf of the Nova Gold CEO, who, at the time, wanted GATA’s help to stave off an unwanted Barrick bid back then. We did what we could, but eventually those two companies got together and we never did receive any thanks from the CEO.

So, here we are all these years later and so what? Why carry on when the industry refuses to deal with its most important issue and let’s themselves get mugged by a corrupt operation? The answer is quite simple.

For Chris and I, “It is the life we have chosen” … a term appropriately taken from an old Mafia movie. Most importantly, major scandals in the past have taken many years to come out in the open. They include Enron, who was voted the US corporation of the year 5 years in a row by a major US financial magazine … and who can forget the Bernie Madoff scandal, one in which no one would listen to whistle blower Harry Markopolis for nearly a decade, despite the overwhelming evidence he presented to the authorities. Insiders at Enron who tried to expose the truth were fired.

How hard is it to get the truth out there? Last summer GATA spent many hours sending some 50 emails to a Wall Street Journal reporter doing a front page story on the Fed and its gold. We introduced the reporter to a number of those in the GATA camp.  But guess what? When that story surfaced, everything in there from GATA, or Chris Powell and myself, was cut out. YOU HAVE TO BE KIDDING ME! But were we surprised? Nope

But why carry on is best exemplified by what occurred this past year regarding the sex scandals in the U.S. A sexual harassment horror show by rich and powerful men in the U.S. praying upon women was an ongoing fact of life for many decades, but was kept on the down low. Finally, it all really began to surface with some 50 women accusing one of my childhood heroes, Bill Cosby, of date rape.

One or two could be a misunderstanding. But FIFTY? (Which is the equivalent to the sort of evidence GATA has on The Gold Cartel.) While that was more than unsettling, Cosby still has not been convicted of anything yet. However, it surely set the stage for the Hollywood Harvey Weinstein revelations…

The sexual harassment accusations against this famous Hollywood big shot were so outrageous and over the top that it sent out reverberations throughout the media/political world. Senator Al Franken has resigned, as have media giants Matt Lauer of NBC and Charlie Rose of PBS Broadcasting. Good grief! Within just months of Weinstein’s outing! Seems to me those reverberations are unprecedented in terms of speed.

The point here of this presentation is that these were hideous provocations just waiting to be exposed, which is just why GATA stays on the manipulation of the gold/silver markets. The reason so many of the coerced women were silent for so long is because they were going up against the MOST POWERFUL and RICHEST people in their field. LEGENDS in many cases. Who was going to believe them against who they would be charging? Most importantly, in terms of the GATA issue, they might get fired, or face retribution, for even making such charges.

I know exactly what I am talking about here. My very young sister Kris back then was a successful model in New York City in the 1980’s. She went on an interview with Harvey Weinstein in a New York hotel suite and he had her dress up in a Teddy outfit with high heels on. So scared, she ran for the hills, but did tell my brother Tim at the time exactly what happened.

The point is going up against the rich and powerful is known to be a losing proposition … for most, but not ALL, of the time, The tide has now turned when it comes to serious sexual harassment issues. The scandal took decades to surface. And, in my opinion, the same is going to be the case for the biggest financial market scandal in US history, that being the wrongful suppression of the gold/silver prices.

Its time will come when your average Joe and Jane is devastated financially and wants an explanation of, “HOW COULD THIS HAVE HAPPENED?”

Which brings me to a critical point of my presentation for all of you here who are interested in the gold and silver markets. Because of what The Gold Cartel has done, the gold and silver prices are the most undervalued assets in the world … by a hefty margin. GATA realizes we are not wanted in certain circles in the precious metals arena because of what we have to say … that the richest and most powerful people in the world are preventing them from making money, going against them. So why bother to go there? Keep GATA out of sight and out of mind is their thinking. Nothing could be more out of whack in a big picture sense.

Think about it. Assets of all kind have soared over the past years, including stocks, art, real estate, etc. Incredibly low interest rates have enhanced all of them, but not the two markets which should have gone up the most with all the paper money hoarded into the financial market system. The orchestrated suppression of the gold/silver prices was put into play by The Gold Cartel to deflect from what the powers were doing … inflating the system, and perhaps very dangerously so.

As a result, the gold/silver prices have been forced to retreat to artificially LOW prices which will not stand. They will catch up to and go way beyond what most other assets have done these past years! IMO, understanding what The Gold Cartel has done is THE most important reason right now to be in the gold/silver markets.

Which brings me to a topic of conversation surely to be a part of many at this conference, the Bitcoin/cryptocurrency phenomenon.

One year ago I presented at a Jeff Berwick conference in Acapulco. The conference focused on precious metals and crypto currencies. The crypto folks were ecstatic back then as Bitcoin had risen to the same price of gold at $1240. Even then, the crypto crowd was bubbly as could be. So upbeat compared to the gold/silver crowd, which included myself, because of the nauseating price suppression. Can you imagine what that convention will be like this year with Bitcoin having reached $19,000 not long ago? Good for them.

Which leads us to another key issue for our camp. The crypto geniuses realized the advent of a technological way to put money outside of the traditional financial market system … for a myriad of reasons. The win for those who bought in prior of Jeff’s conference has been astronomical, the most phenomenal in all of recorded history. What has occurred exemplifies just how much the outside of the fiat money system gold and silver prices have been suppressed these past many years … which many of you are already too aware of.

But while what the Bitcoins have done has been a short term negative in the west regarding current interest in the precious metals, it is likely to be a boon of all booms once these undervalued assets begin to take off. A reason is that there are now a number of momentum traders around the world who have made so much money in various markets, they will not be afraid to pour into gold and silver investments as they really begin to REALLY move. This will be a force The Gold Cartel has not had to deal with before.

It is only a matter of time before the physical supply needed by the cabal forces to keep the gold/silver prices at such ridiculously low price levels dries up. The momentum traders will pounce all over this new, delicious opportunity. The Gold Cartel will be forced to retreat.

So, for what it is worth, this is what I see for the rest of this year…

*The gold and silver prices really get going, and they keep on going. The cheapest assets on the planet won’t be by the end of 2018.

*Gold will launch towards new all-time highs in the not too distant future.

*Once the price of silver, the cartel’s krytonite, takes out $21 it goes bonkers and eventually trades akin to what Bitcoin has done. The efforts by the JP Morgan forces to hold the silver price down at levels which are 2/3 less where it managed to trade 38 years ago are the most obvious and onerous I have even seen in 40 years. Silver has been so ludicrously depressed, Newton’s Law of Equal and Opposite Reactions, will finally take hold. $100 silver should be achieved faster than most anyone can imagine right now.

*Many of the beat up junior/exploration stocks will trade in Bitcoin fashion too and repeat the returns they made after the turn of the century, which were extraordinary to say the least.

Gold Set Up For Big Move This Year – What About Cryptos?

Gold and silver had a sharp run-up in the last two weeks of 2017.  However, the abrupt move in gold has been accompanied by a rapid rise in the gold futures open interest on the Comex. Furthermore, based on the last COT report the banks have dramatically increased their net short position and the hedge funds have gotten, once again, extremely net long.  I don’t like the looks of the COT report right now plus I anticipate a possible brief “relief” rally in the dollar index.

But what about cryptocurrencies?  Over the past few weeks the largest and most actively traded cryptocurrencies have been massacred in price.  This follows on the heels of the news that the founders of Bitcoin and Litecoin sold 100% of their holdings.  Nothing like insider selling as a signal about the value of what was sold…

Phil Kennedy invited me on to his podcast to discuss precious metals, cryptocurrencies and the U.S. dollar. We engage in a friendly (I want to emphasize “friendly”) debate on the merits of cryptocurrencies:

The bottom line for me is that gold has been declared a Tier 1 bank asset by the Bank of International Settlements. This means that gold is considered the highest form of bank asset. I believe there’s a good chance gold will move toward and over $1400 this year. As for a price prediction for the cryptos – it depends on the degree to which the fear of losing money overwhelms the fear of missing out on gains for the momentum-chasing speculators – most of whom are Asian-based. We may be approaching that point of no return:

“Mother Of All Blow-Offs?”

People who look for easy money invariable pay for the privilege of proving conclusively that it cannot be found on this earth. – Jesse Livermore

Boeing’s stock has gone parabolic. It’s doubled since April 2017:

The stock now trades at a 31x PE ratio, for whatever that’s worse. I’m sure if I went through the numbers closely, I could find numerous accounting manipulations which added a copious amount of non-cash income to BA’s numbers. BA’s revenues on a trailing 12 month basis are flat. From 2015 to 2016, its revenues declined 1.7%. On a trailing twelve month basis vs. 2016, its revenues have dropped 3.2%.

Historically paying a nose-bleed PE ratio for a company with deteriorating revenues and an enormous amount of debt does not produce a good result. Chasing the price-momentum higher and waiting for a bigger idiot to buy shares from you works well until the music stops. Then everyone gets hurt.

The Dow moved up an average of 120 pts per day in the nine trading days since the end of 2017. This includes one day in which the Dow dared to close 12 pts lower. That one day felt like a bear market. Over this entire period the Dow has appreciated 4.4%. Since the election, including the 1,000 pt plunge in the Dow futures that occurred when it was apparent Trump would win, the Dow has soared nearly 50%.

What’s driving this? Since late August, the public has literally thrown money blindly into passively managed ETFs which automatically distribute the cash inflow by market cap weighting into the stocks in the index that underlies the ETF. This means that most of the gains are concentrated in the stocks in the Dow/SPX with the largest market caps, which then drives the Dow/SPX higher. For instance, last Friday, the Dow was up 0.89% but AMZN was up 2.2%, Netflix was up 1.8%, GOOG was up 1.5% etc.

There’s no telling how much longer this can persist without some type of accident. Judging by the data on cash in customer brokerage accounts at the big online brokers , I would have to believe that this last push from the retail investor is nearing its completion. Data from the fund industry has shown a massive migration of investor cash moving out of actively managed mutual funds and into passive index funds. This would include money managed on behalf of individuals by registered investment advisors.

Most investor sentiment indicators are showing extreme levels of bullishness – historically unprecedented levels.  The short interest on the NYSE has melted down nearly to zero.   The Acting Man blog has written an excellent post which details the sentiment indicators flashing bright red warning lights – I recommend a perusal:   Mother Of All Blow-Offs

For now, the raging bulls chasing momentum conveniently ignore  the deterioration in “new orders” and “employment” numbers in deference to the statistically manipulated headline reports that purport to show economic growth. Most of the bullish reports are overweighted with “sentiment” and “hope” metrics that offset declining real economy statistics.  Credit card and auto loan delinquencies – both subprime and “prime” –  continue to increase a double-digit rates (see WFM or COF’s latest quarterlies, for instance).  As for the “prime” credit rating designation of 2017, it’s not your mother’s “prime” credit rating.

At this point I don’t want to speculate on how much longer that Dow/SPX/Naz can go straight up. Historically this is the type of market behavior which has marked the blow-off top of speculative manias and has preceded serious market accidents.

Is this the “Mother Of  All Blow-Offs?” Probably.

Part of the commentary above was excerpted from the last issue of the Short Seller’s Journal. Believe it or not, there’s 100’s of stocks that declining or have set-up short-sell opportunities.  Long term puts are historically cheap and shorting certain companies is a no-brainer.  I had my subscribers short Sears at $12.   Last week I presented homebuilder to short that is down 6.7% on the week, so far.  To learn about about this newsletter, click here:  Short Seller’s Journal information