Category Archives: Market Manipulation

Buy Into An Asset Bubble Before It Becomes A Bubble

Let’s face it, the trillions of fiat currency printed by Central Banks globally, which has been compounded by an even greater amount of debt issuance derived from the printed currency, has fomented multiple assets bubbles of historic proportions. Bitcoin is a bubble. The FANG stocks plus Tesla, among dozens of other daytrader and hedge fund momentum darlings, are bubbles. Novo Resources, for now, is a bubble.

Rather than buying into today’s bubble valuations, real money can be made anticipating the next asset bubble sector. Please note that I consider cryptocurrencies to be de facto fiat currency because they share many similar attributes with electronically produced Central Bank currency. When the fiat currency experiment fails, which it will (please see Voltaire, et al), the next bubble will form from the race out of fiat money into real money – gold and silver. The bubble will not be gold and silver. The bubble will be the derivatives of gold and silver:  mining stocks.

William Powers, of MiningStockEducation.com, invited me onto to his program to discuss the precious metals market and investing in junior mining stocks. Junior mining stocks are extraordinarily undervalued and will likely be the next great asset bubble – Bill and I discuss why and several other topics:

******************

If you are interested in learning more about the Mining Stock Journal, please use this link: Mining Stock Journal information.

The Big Money Grab Is “On” As Middle America Collapses

The stock market rejoices the House passage of the tax “reform” Bill as the Dow shot up 187 points and the S&P 500 spiked up 21. The Nasdaq soared 1.3%, retracing its 3-day decline in one day. The tax bill is nothing more than a massive redirect of money flow from the Treasury Department to Corporate America and billionaires. The middle class will not receive any tax relief from the Bill but it will shoulder the burden of the several trillion dollars extra in Treasury debt that will be required to finance the tax cuts for the wealthy. The tax “reform” will have, at best, no effect on GDP.   It will likely be detrimental to real economic output.

The Big Money Grab is “on” at the highest levels of of Wall St., DC, Corporate America, the Judiciary and State/local Govt. These people are grabbing from a dying carcass as fast and greedily as possible.  The elitists are operating free from any fear of the Rule of Law.  That particular nuisance does not apply to “them” – only to “us.” They don’t even try to hide their grand scale theft anymore because the protocol in place to prevent them from doing this is now on their side. This is the section in Atlas Shrugged leading up to the big implosion.

“When you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.” – Atlas Shrugged

Speaking of the economy, as with inflation the GDP report does not reflect the true level of real economic activity in the U.S. because the Government report is not designed to measure real economic output. Instead, the GDP is yet another Government economic report constructed with blatant statistical manipulation and outright fraudulent data sampling. How am I so certain of this? The “tell” on the true condition of the economy lies with the fact that Fed is “normalizing” neither interest rates nor its balance sheet. In fact, if the Fed were to “normalize” monetary policy, it would quickly hike the Fed funds rate up closer to 6% and it would be reducing its balance sheet and removing at least the $2.1 trillion in printed cash sitting in the banks’ excess reserve account.  The problem is that this “normalization” would pop the enormous asset bubble created from money printing.  It would also interrupt the ongoing wealth confiscation.

Elijah Johnson at Silver Doctors invited to discuss the above issues as well as the stock, bond and housing bubbles. And of course gold and mining stocks:

I’ll be releasing the latest issue of my Mining Stock Journal this evening. It will have an emerging junior gold exploration company that has been described at “Gold Standard Ventures 2.0.” You can find out more information here:   Mining Stock Journal info.

Gresham’s Law meets its Minsky Moment

There’s a reason that the Fed pursues these actions and it’s not a conspiracy theory. When unlimited cash hits a limited supply of assets, whether paper or hard, this inflationary deluge boosts taxable asset values by 100-1000%, fattening the coffers of the tax collectors. 

While it’s no secret that the Fed, along all global Central Banks, are supporting their respective financial systems by capping interest rates with “QE” (also known as “money printing”), the yield on the 10-yr Treasury has risen 36 basis points in two months from 2.04% in September to 2.40% currently. There have not been any Fed rate hikes during that time period. The yield on the 2-yr Treasury has jumped from 1.26% in early September to 1.66% currently. A 40 basis point jump, 32% increase, in rates in two months.

This is not due to a “reversal” in QE. Why? Because through this past Thursday, the Fed’s balance sheet has increased in size by over $7 billion since the Fed “threatened” to unwind QE starting in October. The bond market is sniffing hints of an acceleration in the general price level of goods and services, aka “inflation.”

I wanted to post this comment from my blog post the other day because this person uses an expressive writing style to convey incisively the uneasy truth about the financial and economic system in the U.S.:

Bankers are moral lepers, the financial equivalent of hookers and blow. You can never get enough of the moral debauchery in that world.

When a shit box tiny house, half the size of my man cave, goes for $50,000 less than my entire home in Reno, the end is nigh. $2,000 a square foot for a studio? What effing moron would pay that. Don’t answer. We know someone did. I pity the fool.

Bitcoin 7000, DOW 23,500, studios for $550,000 are all a result of the Greenspan /Bernanke/Yellen  QEpocalypse.

The flood of faux FIAT creates the same Cantillion effect as the flood of gold and silver from the new world that inflated the values of assets in the old world and decimated those outside the ring of prosperity created by that effect.

And that was when gold and silver were real money. But do you think gold and silver can catch a break today? Nope, not a chance.

There’s a reason that the Fed pursues these actions and it’s not a conspiracy theory. When unlimited cash hits a limited supply of assets, whether paper or hard, this inflationary deluge boosts taxable asset values by 100-1000%, fattening the coffers of the tax collectors. No accident there.

You would think this might solve some fiscal woes at the local and state level by boosting tax receipts by a few hundred percent. Nope, not happening there either.

The states and cities created their own PONZI schemes with underfunded overly generous pension plans. Even a moron could get a better return in those funds but now they are out there with their begging bowls.

The County of Maui just raised it’s property taxes 42% to pay for pension plan deficits. A senator from Ohio wants to use funds from treasury bonds to bail out their public pension deficits.

As we see asset prices sky rocket, the demands from the public sector grow even faster than tax revenues and asset inflation will handle. Gresham’s Law meets its Minsky Moment and none too soon.

And don’t even get me started about Social Security. Just let me get mine before the whole shit show collapses.

The Size Of The Financial Avalanche Coming Grows Larger

Inflation vs deflation. The true economic definition of “inflation” is the rate of increase in the money supply in excess of the rate of increase in wealth output. Inflation is monetary in nature. Rising prices are the manifestation of inflation. Someone I follow on Twitter posted an ingenious example from which to conceptualize the true concept of inflation using the game of Monopoly:

The players all start out with reasonable amounts of money to speculate on real estate. As the game proceeds, players collect $200 by simply passing Go and use this money to speculate on real estate. By the end of the game, only $500 dollar bills are worth anything, the whole thing blows up, and most players end up destitute. In a twist of irony, an original game board sells for about $50,000.

A fixed amount of real estate and continuously increasing money supply, with “passing Go” functioning as the game’s monetary printing press. The monopoly analogy is readily applied to the current real estate market. The Fed tossed roughly $2 trillion into the mortgage market, which in turn has fueled the greatest U.S. housing bubble in history. The most absurd example I saw last week is a 264 sq ft studio in Los Angeles listed on 10/26 for $550,000. The seller bought it a year ago for $335,000. This is the degree to which Fed money printing and easy access Government guaranteed mortgages have distorted the system.

Here is monetary inflation as it is showing up in the stock market and housing markets:

The graphic above shows rampant credit-induced monetary inflation. On the left, home prices nationally are measured by the Case Shiller index going back the 1980’s. On the right is the S&P 500 going back to 1930. According to the Fed, real median household income has increased 5% between 2008 and the present. In contrast, based on Case Shiller, home prices nationally have soared 34% in the same time period.  Expressed as a ratio of average price to average household income, home prices are, at all-time highs in the U.S. This is the manifestation of rampant inflation in credit availability enabled by the mortgage “QE.” This growth rate in money and credit supply has far exceeded the tiny growth rate in average household income since 2008.

The stock market reflects the monetary inflation of the G3 Central Banks, primarily, plus global Central Bank balance sheet expansion. Please note that “balance sheet expansion” is the politically polite term for “money printing.” The meteoric rise in stock prices have never been more disconnected from the negligible rate of growth in nominal GDP since 2008. Real GDP has been, arguably, negative if a realistic inflation rate were used in the Government’s GDP deflator.

Inflation is not showing up in the Government CPI report because the Government does not measure inflation. The Government’s basket of goods is constantly juggled in order to de-emphasize the rising cost of goods and services considered to be necessities. In addition to the increasing cost of necessities like gasoline, health insurance and food, inflation is showing up in monetary assets. This is because a large portion of the money printed remains “inside” the banking system as “excess reserves” held at the Fed by banks. This capital is transmitted as de fact money supply via the creation credit mechanisms in the various forms of debt and derivatives. The eventual asset sale avalanche grows larger by the day.

Do not believe for one split-second that the U.S. has reached some sort of plateau of economic nirvana that will self-perpetuate. To begin with, it would require another round of even more money printing just to sustain the current bubble level. Read the inflation example above if that idea is still not clear. In 1927, John Maynard Keynes stated, “we will not have any more crashes in our time.” In the October 16, 1929 issue of The New York Times, famous economist and investor, Irving Fisher, stated that “stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.” Two weeks later the stock market crashed.

The above commentary is from last week’s Short Seller’s Journal. Speaking of the housing market, admittedly my homebuilder short positions are crawling up my pant-leg with fangs as the housing stocks have entered into the last stage of a parabolic “Roman candle” apex and burn-out. The homebuilders appear to be cheap relative to the SPX on a PE ratio basis – approximately an 18x average PE for homebuilders vs a 32x Case Shiller PE for the SPX.  However,  in relation to their underlying sales rate, earnings and balance sheet, the homebuilder stocks are more overvalued now than at the last peak in 2005.

While the homebuilders are are squeezing higher, I presented two “derivative” ideas in recent issues of the Short Seller’s Journal:  Zillow Group (ZG) at $50 in late June and Redfin (RDFN) at $28 in late September.  ZG just lost $40 today and RDFN is down to $21 (25% gain in 6 weeks). Both ZG and RDFN are “derivatives” to homebuilders because they derive most of their revenues from housing market-related ads, primarily real estate listings. Their revenues as such are “derived” from housing market sales activity. These stocks are overvalued outright. But as home sales volume declines, the revenue/income generating capability of the ZG/RDFN business model will evaporate quickly.  With home sales volume rolling over, the decline in the stock prices of ZG and RDFN relative to the “bubble squeeze” in homebuilder stocks validates my thesis.

If you want to learn more about opportunities to exploit this historically overvalued stock market and access fact-based market analysis, click here: Short Seller’s Journal info.

Gold And Silver: Something Different Is Occurring

JP Morgan, at least according to the daily Comex warehouse report, added over half a million ozs of silver to its “historic” stash of silver at the Comex:   TF Metals Report.  It would be even more interesting to see an actual independent accounting of that specific metal which would track the serial numbers on the bars to the legal owner of title.

I’ve been hedged in my mining stock portfolio since early September.  The signal for me to hedge is the reliable Comex bank “net short” position as reported in the weekly Commitment of Traders report. Since late summer, the bank net short position, and the corresponding hedge fund “managed money” net long position, has been at an extreme level.

Historically this is the signal that the Comex banks will implement what I call a “COT open interest liquidation” take-down of the gold/silver price using Comex paper to trigger hedge fund stop-loss positions.  This enables the Comex banks to cover their shorts and print huge profits. It’s also illegal trading activity but that’s for another day.

In early September, in “eyeballing” the gold chart in conjunction with the historical COT data I have set up in a spreadsheet back to 2004 , I figured that the open interest – which was in the high 500,000’s at the time – needed to come down at least 100-150k contracts. I thought it would take a price take-down from $1320 to $1230/$1240.

But something different is occurring.  Two months is usually plenty of time for the banks to work their price control “magic.”  The hedge I am using (JDST in-the-money calls) minted money up until two weeks ago.  But the open interest has been “stuck” in the 520k area (plus or minus).  Furthermore, the ability of the banks to slam the price seems limited, at least for now.  As an example, last Friday out of nowhere around 10 a.m. EST the price of gold was slammed for $10.  There was a notable absence of any specific news event or technical signal which might have triggered the massive selling.  (click on chart to enlarge)

Unloading on the price of gold like this on a Friday, after the rest of the trading world – and specifically the physical-buying eastern hemisphere markets – has closed for the weekend, is typical.  What is not typical, however, is the reversal of the price of gold which occurred the next trading day (Monday).  Usually a shock and awe price-attack, like the one that occurred on Friday, is followed up by a few days in a row of price declines.  I thought this would be the progression which would cause open interest to liquidate in a manner the banks would use to covered their shorts as the hedge fund puked out their longs.

The open interest in Friday declined by only 4.9k contracts.  Typically a “shock/awe” hit would have removed at least 10k of open interest.  Based on the latest COT report, the bank net short position stubbornly persists at an extreme level.   Open interest as of yesterday also persists at a high level.

Another typical indicator that the banks are trying to push the price of gold lower is the repeated “false news” reports that spin out of Bloomberg News regarding India’s demand for gold (Gold Import Slump in India).  However, based on the high ex-duty import premiums which correlate with India’s level of import demand, India’s legal importation of gold in October was at least normal for the month. It also followed an extraordinary level of importation in September.  YTD through the end of October, Indian gold imports are up 91% vs the first 10 months of 2016 (I track import premiums in India via John Brimelow’s Gold Jottings report).

I am still hedged.  As I asserted to my subscribers in last week’s Mining Stock Journal, although I still am mentally braced for one more aggressive attack on the price of gold that will enable the Comex banks to book profits on their collective net short position, I’ve started evaluating the possibility that the precious metals could start to launch higher in spite of the large bank short. In other words, it might start to get interesting in this sector.

Another signal for me that something unusual is occurring is the fact that junior miners have started popping in price again at the release of positive drilling results. For instance, yesterday one of the juniors I feature in my Mining Stock Journal jumped 17%. This is behavior coming from the juniors that has not occurred since last summer and mining stocks do not exhibit bullish trading behavior if the market is anticipating another leg down in gold/silver prices.

Something different – at least for now – is going on.  Maybe it’s related to smart, big money knowing that the world is on the cusp of rampant, uncontrollable price inflation after the unprecedented money supply inflation of the last 9 years. And, in reality, the money supply inflation began with Greenspan in the late 1980s/early 1990’s. The U.S. money printing has been going on since Nixon closed the gold window and it went semi-Weimar in 2008-2014. The U.S. exported its inflation with the strong dollar policy and reserve status of the dollar. That has changed. The BoJ and the Peoples Bank of China have been printing money the last few years like a meth addicts on steroids. The ECB is a close third.

This monetary inflation was contained when it was just the Fed and maybe the BoJ printing in volume.  Now the world is drowning in printed fiat currencies of every flavor.  Price inflation is on the cusp of breaking out furiously in all currencies.  This will translate into a furious break-out in the price of commodities, especially physically deliverable gold and silver bullion.

True economic inflation is defined as the increase in money supply in excess of wealth output. The supply of money exceeds the supply of “widgets.” Eventually the price of  widgets has to go higher. We are at that point. I’m talking about parabolic price increases, which have already been manifest in global stock and real estate prices.

The graphic to the left suggests that the global economic system has reached a “tipping point” at which rapidly accelerating price inflation is about to emerge.  That price inflation, combined with inexorable and severely negative real interest rates, functions as precious metals rocket fuel. Currently commodities are extraordinarily undervalued relative to the Dow. In fact, going back to 1917, there were only two prior periods when commodities were extremely undervalued vs. the Dow – the late 1920’s – early 1930’s and during the 1960’s. Both of those times, the U.S. dollar was significantly devalued vs. gold. In November 1934, FDR revalued the price of gold by 75% vs. the dollar, from $20 to $35. The market forced the devaluation of the dollar vs. gold after Nixon disconnected gold from the dollar in 1971.

Since 1971, the dollar has lost 80% of its purchasing power vs. a generic basket of goods. In 1971 it took $35 to buy 1 oz of gold. Today it takes $1271. That’s a 97% decline in the purchasing power of the dollar vs. gold. Here’s the funny thing about the dollar’s eventual fall to zero (per Voltaire and history), the last few percentage points before a fiat currency completes its collapse will produce the biggest nominal price rise in gold. Just look at Weimar Germany as an example. In January 1922, an ounce of gold was worth 1,000 German marks. By November 1923, when the mark collapsed, an ounce of gold was worth 100 trillion marks.

A portion of the above commentary comes from the latest issue of the Mining Stock Journal.  This subscription service presents in-depth market analysis/commentary as well as mining stock investment ideas.  I try to find junior miners before the “crowd” discovers them but I also incorporate relative value ideas in the large cap mining stock space.  You can find out more about this service here:  Mining Stock Journal.

Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom

Stewart Dougherty returns with unique insight into the powerful Deep State forces behind the relentless manipulation of gold and silver. He also presents a searing look at Jim Rickards’ deceptive role as the Deep State’s grifter.

“There are crooks everywhere you look now. The situation is desperate.” Final blog entry by Daphne Caruana Galizia, 53, renowned Maltese investigative reporter who specialized in exposing state corruption; posted on 16 October 2017, one day before she and her vehicle were blown to bits by a car bomb in Bidnija, Malta

In 2011, gold pulled a “Bitcoin” before anyone even knew what Bitcoin was: its price went vertical to $1,900 per ounce. Inflation-adjusted, the price was still far below its 1980 all-time high, and from all indications, it was going to keep heading north toward its free market print.

In surging, gold blurted out the Deep State Central Planners’ strategy for dealing with the Great Financial Crisis: the hyperinflation of bond, equities and real estate prices via the hyperinflation of both official and totally clandestine, off-the-books money supply, in order to create the hyperinflation of tax revenues desperately required by the government to forestall its fiscal collapse. Gold’s exposure of the Deep State Central Planners’ secret strategy was absolutely unacceptable to them, and had to be stopped.

Worse, gold’s price breakout interfered with the continuation of the largest and most profitable financial crime in history: gold price manipulation. As we have outlined in previous articles, including “Gold and Silver Price Manipulation: The Biggest Financial Crime in History,” from its commencement in 1980, this crime has netted its perpetrators more than $1 trillion in criminal, Mafia-style profits. The epic scale of this crime is exactly why it continues unabated to this day. (While the gold price rigging crime is virtually identical to the manipulation of silver prices, in the interests of brevity, we will solely focus on gold in this article.)

The weapon used in the gold price manipulation crime is paper, or, better stated, electronic gold in five distinct forms: gold futures; gold options on futures; bullion-bank controlled, deliberately audit-proof gold ETFs; gold EFPs (Exchanges for Physical); and the equities of bullion bank-controlled major mining companies. (The major miners serve the bullion banks, not their shareholders, and have actively participated in gold’s price destruction for years, starting with the “hedging” campaign that handed guaranteed profits to the banks and pitiful share prices to the stakeholders.)

These electronic (in other words, non-physical and unreal) gold products are used by Deep State financial insiders to misdirect funds intended by investors to flow into gold, away from gold. Those who “invest” in electronic gold are, in fact, aiding and abetting the exact financial criminals who are stealing from them. The Deep State financial elite is laughing itself sick that suckers still fall for the electronic gold scam nearly four decades after they first hatched it and after already having stolen $1 trillion from their marks. Proof that many people in our world never learn.

Simplified, the gold price rigging scam works by the orchestrators allowing natural market forces to increase the price in roughly $50 – 100 increments, whereupon they unleash massive, synchronized, simultaneous, shock-and-awe-style naked short sales, unbacked by any physical gold they actually own, that take the price right back down by $50 to $100 in a matter of minutes to a few days. This forces the price-attacked longs to dump their losing positions, enabling the shorts to cover at an illegal profit. Each such large-scale price raid produces hundreds of millions of dollars in profits for the criminal orchestrators, not just from the futures market, but from the companion options, swaps and equities markets, all of which act in unison, and in a price-predictable up or down manner. This identical wash, rinse, repeat cycle has occurred literally hundreds of times over the past 38 years, with no serious investigations or prosecutions whatsoever in that this is official, state-sponsored, for-profit corruption.

For any one of hundreds of reasons, gold should be in a raging bull market at this time. Given that its price remains lackluster and greatly disappointing, rich gallows humor has emerged as a form of therapy for those attempting to deal with the irrationality of it all.

One gallows joke that made the rounds was that if nuclear war were declared, gold’s price would go down and the DJIA would go up. While this was a funny take on the absurdity of the situation, it seemed a bit far-fetched.

In an October 20, 2017 podcast interview, Mr. James Rickards, a leading public commentator on gold, stated that he had spent the previous day in an extremely exclusive national intelligence planning session overseen by CIA Director Mike Pompeo and National Security Advisor H.R. McMaster. Rickards reported that Pompeo told him, categorically, that military action will be taken against North Korea within 5 months, or by March 20, 2018. Rickards also reported that the group was informed that the assassination of Kim Jong Un is one U.S. military option officially on the table.

In the trading days after Mr. Rickards made that public announcement, the price of gold declined and the DJIA hit record highs.

CONTINUE READING (it’s worth it)

The United States Is Melting Down Under Extreme Corruption

I have fond affection for my sense of right and wrong – morally, spiritually and legally.  But it’s becoming increasingly difficult to behave responsibly as a citizen given the thorough corruption which has engulfed nearly the entire population of elected officials and business leaders.  Fraud, corruption, grand-scale theft and remarkable dishonesty is endemic to Wall Street, DC and across corporate America.

Every single elected official at the Federal level, and at most State levels, is a paid servant of  big banks, corporations and wealthy families/individuals.  Obtaining a House or Senate seat is worth $10’s of millions.  Getting into the Oval Office is worth $100’s of millions.  For those you who still harbor disillusions of Obama’s integrity, recall that he campaigned aggressively on a platform in 2008 that promoted “cleaning up Wall Street” as a high priority.  Not only did he not clean anything up, he enabled the same fraudulent business activities that sunk the financial system in 2008 to become even more grand in scale and stealth.  Now he’s greedily pocketing $1 million speaking engagement with the banks he bailed out in 2008 with $800 billion in taxpayer funds.

Anyone who believes their vote matters has their head buried in sand.  Even though he must believe his vote still matters, James Kunstler has written must-read commentary on the current plight of the U.S. political system:

What America might want to know right now is: how come Hillary Clinton doesn’t have any legal problems? Why aren’t DOJ investigators examining the financial records of the Clinton Foundation? You would think somebody would want to find out how over $120 million of Russian “charitable donations” ended up on its ledgers around the time that Secretary of State HRC approved the Uranium One deal — compared to which, Bill Clinton’s $500,000 payment from a Russian bank for giving a speech around the same time just looks like walking-around money…

…Watergate begins to look as quaint and simple as a game of Chutes and Ladders compared to RussiaGate. Not only are both parties implicated one way or another in multiple nefarious schemes, plots, and intrigues, but the Department of Justice and its subsidiary, the FBI, look culpable in a range of cover-ups and mis-directions. If the DOJ becomes disabled, how does any of this get resolved?

The whole extravaganza is heading toward a constitutional crisis that might clean out the system like a Death Wish coffee enema. Sentiment may arise for Mr. Mueller to step aside, if President Trump doesn’t make the rash decision to simply fire him. The latter would certainly foment a constitutional crisis that could include an effort to run Trump over with the 25th amendment. In the event, we’ll be in a new kind of civil war.

Click here to read the rest: SWAMP-O-RAMA

By the way, this is in no way a defense of Trump.  I have not voted since 1992 (I wrote in “Ron Paul” on my ballot) – I back my views with action, or non-action as it were.  Trump is in the business of casinos and real estate – specifically NYC-area real estate.  Both of those endeavors are tightly connected to criminal activities on every level.  If you are wondering why Trump rolled over so quickly to the command of the Swamp/Deep State, just imagine the thick folder of bribe material they have on him…

A Conversation About Tesla, Amazon and Gold

Allegedly (note: emphasis on “allegedly”) Craig “Turd Ferguson” Hemke was awarded a Nobel Prize for his weekly A2A podcast.  If true, the award is more legitimate than the Nobel Peace Prize given to Obama and the Nobel Prize for Economics given to Paul Krugman.  Perhaps those latter two folks should have been awarded the Nobel Price for Charlatanism.

Craig invited me onto his show this week to discuss a variety of issues, including the economy, Tesla and Amazon and, of course, the precious metals market.  I explain why I think there’s one more “shock and awe” attack by the Comex paper bandits on the gold market before the precious metals make a stunning move higher.  I also discuss a couple of my favorite mining stock ideas and the head-scratching market cap of Novo Resources

You can access the podcast here:  TF Metals A2A Conversation

In my latest issue of the Mining Stock Journal I feature a $27 million market cap gold exploration company that I think will eventually be worth at least $100 million.  If you would like to find out more about my Journals click here:  Mining Stock Journal  and Short Seller’s Journal.

Will The New Bitcoin CME Futures Contract Benefit Gold?

The Chicago Mercantile Exchange (CME) announced a plan to launch Bitcoin futures by the end of the year. The price of Bitcoin surged to a new record in response to the announcement.  It was reminiscent of the dot.com era, when a dot.com stock would jump 10% if Maria Bartiromo merely whispered the name of the company on CNBC.

Ironically, the cheers for this new contract from the Bitcoin faithful could turn out to be analogous to chickens in the barnyard cheering at the appearance of Colonel Sanders.

GATA released an article about the new Bitcoin futures contract titled “So Long Cryptos.” I’m sure that editorial stance puzzled most Bitcoin price-momentum chasers.  Crypto aficionados, for now, overlook the fact that CME futures are used aggressively to push around the dollar-based Comex gold and silver futures contracts.

As GATA points out, the ability to manipulate precious metals futures contracts by the official entities motivated to suppress the price of gold is reinforced by the volume trading discounts given from the CME to Governments and Central Banks who trade on the CME.

If there any reason to assume that the same volume discounts will not be extended to the Bitcoin contract?  Another curious feature of the Bitcoin contract is that it will be settled in cash.  I would point out the original intent behind futures contracts was to enable producers and users to agree ahead of time on a price that would be paid for the delivery of the underlying commodity associated with the futures contract.  Futures were a financing tool intended to facilitate the production and distribution of the underlying commodity product.

The Bitcoin futures contract is settled only in cash – U.S. dollars.  To wit, does this not theoretically sabotage the intended purpose of Bitcoin, which is to provide an alternative to fiat currencies?  Why would you want to receive fiat dollars rather than delivery of the underlying?

Technically this is not a bona fide futures contract. It’s a derivative of the “index” price of Bitcoin but it does not facilitate the production and distribution of Bitcoin.  As such, it’s an instrument of pure speculation. By definition, this opens the door to manipulation by the entities who might be motivated to control the price of Bitcoin. Oh, by the way, those entities can buy and sell the contracts at a price advantage to the speculators by virtue of the volume discounts.

At least with gold and silver contracts, the contract enables the contract owner to take delivery of the actual physical commodity connected to the contract. To a limited extent, this mechanism serves to prevent the complete unfettered manipulation of gold and silver via the Comex futures contract.

With the Bitcoin futures contract, the contract owner is paid cash.  The absence of a requirement to deliver actual Bitcoins enables the issuance of an unlimited number of fiat dollar-based paper Bitcoin contracts which can be used to drive the price lower by increasing the supply of the contract relative to the demand.  So much for the idea that Bitcoin supply issuance is firmly capped. This could  actually be quite entertaining to observe

It’s also quite possible that Bitcoin futures could divert hedge fund trading volume away from gold and silver futures. This would be a blessing in disguise if this occurs.  The price-momentum chasing hedge fund algo trading enables the Comex bank manipulation of Comex futures contracts.  Remove this source of volume and it will remove to some degree the ability of the banks to push the price around by exploiting the hedge fund algos.

If the percentage of open interest in gold and silver Comex futures contracts becomes skewed toward the users of these contracts who actually take bona fide delivery of the underlying physical gold/silver bars because the non-delivery-taking users move over to Bitcoin futures, it could  mitigate the ability of the banks to price-cap the price of gold/silver.  

In this regard, investors who prefer to keep their wealth stored in physical gold and silver rather than fiat dollars or fiat Bitcoins will indeed welcome the new Bitcoin futures product.

As A Dog Returns To Its Vomit, Stock Jockeys Return To The Ponzi Stocks

Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. – Sir John Templeton

I’ve always admired John Templeton. Not as the “father” of the modern mutual fund but because I considered him to have been one of the most intelligent thinkers in at least my lifetime (55 years). In 2003 he gave an interview from his retirement “perch” in the Bahamas to one of the financial media organizations. He stated at the time that he would not invest in the U.S. housing market until “home prices go down to one-tenth of the highest price homeowners paid.” Imagine what he would say today…

“As a dog returneth to his vomit, so a fool returneth to his folly” (Proverbs 26:11). That proverb is particularly applicable to today’s “everything bubble,” especially stocks and housing. The current en vogue is to compare today’s market to 1987, when the Dow crashed 22.5% in one day. Honestly, I don’t think it matters whether you use 1929, 1987,
2000 or 2007. By just about any conceivable financial metric, the current stock market is the most overvalued, and thereby the most dangerous, in U.S. history. The other “vomit” to which analysts “returneth” are the attempts to explain why today’s extreme valuations are “different” from the extreme overvaluations at previous pre-crash market tops. I find the “interest rates are record lows now” to be the most amusing.

On Friday, the momentum-chasing hedge funds and retail daytraders couldn’t get enough of the FAANGs (FB, AMZN, AAPL, NFLX, GOOG) + MSFT. AMZN’s stock ran up $128, or 13.2%, which was still less than AMZN’s biggest one-day percentage jump of 26.8% on October 23, 2009.  AMZN’s stock price has been highly correlated with  amount of money printed by the “G3” (U.S./Japan /EU) Central Bank money printing machine.  But since July, AMZN’s stock began to diverge negatively from the growth path of G3 money supply. The FANGs in general had been losing steam starting in June. AMZN was particularly weak after it reported that big loss in July. It took one absurd headline “beat” for AMZN to “catch back up” into correlation with the growth line of G3 money printing (FYI, the Fed’s balance increase slightly in October, despite the announcement that it would be reduced by at least $10 billion in October).

The stock market will head south quickly sooner or later. The “curtain” is being “pulled back”on stock Ponzi schemes one by one. The truths about Tesla (TSLA) are beginning to emerge in public finally. Eventually the stock market will take a hard look behind the Amazon (AMZN) curtain. Ponzi schemes can flourish during periods of bubble inflation. But when bubbles deflate, Ponzi schemes fail. It’s no coincidence that Bernie Madoff’s Ponzi scheme fell apart in late 2008 (he admitted guilt in December 2008). It began to become unmanageable during 2007, when the stock market started to head south. Eventually it will become impossible to cover up fundamental facts from the investing public. Fundamental facts about the economy, corporate earnings and the financial system. That’s when the rush toward the exits will commence.

The above commentary/analysis is from the latest issue of the Short Seller’s Journal. In that issue I review AMZN’s Q3 financials in-depth. This includes excerpts from the SEC-filed 10-Q used to demonstrate why Jeff Bezos’ LTM “Free Cash Flow” of $8.05 billion is a Ponzi number and the true GAAP Free Cash Flow is -$3.9 billion. AMZN is a cash-burning furnace and I prove it. To find out more about this and other ideas for shorting this bloated stock market, click here: Short Seller’s Journal information.