Category Archives: U.S. Economy

Make America Great Again: Buy Extremely Overvalued Stocks

Key Economic Data Continues To Show A Recession

The stock market assumed a decidedly bearish tone last week, in the face of apparent domestic political instability, increasing geopolitical tensions and, most important, a continued flow of hard economic data reflecting an economy that is in recession (click image to enlarge).

The SPX declined 3 out of the 4 trading days this last week to close down 1.1% from the previous Friday’s close. It’s down nearly 3% from the all-time high it hit on March 1st. Thursday’s big red bar took the SPX below the 50 dma. On all four days the SPX closed well below its intra-day high. This indicates to me that, at least for now, stock market traders are better sellers. Also of interest, for the first time in seventeen years, the stock market declined the day before the Good Friday market holiday.

The growth in loan origination to the key areas of the economy – real estate, general commercial business and the consumer – is plunging. This is due to lack of demand for new loans, not banks tightening credit. If anything, credit is getting “looser,” especially for mortgages. Since the Fed’s quantitative easing and near-zero interest rate policy took hold of yields, bank interest income – the spread on loans earned by banks (net interest margin) – has been historically low. Loan origination fees have been one of the primary drivers of bank cash flow and income generation. Those four graphs above show that the loan origination “punch bowl” is becoming empty.

HOWEVER, the Fed’s tiny interest rate hikes are not the culprit. Loan origination growth is dropping like rock off a cliff because consumers largely are “tapped out” of their capacity to assume more debt and, with corporate debt at all-time highs, business demand for loans is falling off quickly. The latter issue is being driven by a lack of new business expansion opportunities caused by a fall-off in consumer spending. If loan origination continues to fall off like this, and it likely will, bank earnings will plunge.

But it gets worse. As the economy falls further into a recession, banks will get hit with a double-whammy. Their interest and lending fee income will decline and, as businesses and consumers increasingly default on their loans, they will be forced to write-down the loans they hold on their balance sheet. 2008 all over again.  (The commentary above is an excerpt from the latest Short Seller’s Journal).

Despite the propaganda coming from the media, the housing market is in trouble.  37% of all transactions in 2016 were flips.  A flip double-counts a sale because the house trades twice before it ends up with the end-user.  I would bet that in the $300-$600k price-bucket that close to 50% of all transactions YTD in 2017 have been flips.  This is how the mid-2000’s housing bubble ended.

Today the housing starts report for March registered the biggest drop in four months.  Single family starts plunged 32% in the midwest and 16% in the west.   Both multi-family and single-family starts dropped.  Multi-family is going to be a big problem.  Prices in NYC and Miami are dropping like a rock and vacancies are soaring because of oversupply – just like in 2007.  Apartment rental rates are falling quickly and vacancy rates soaring across all the major MSA’s.   Manufacturing  output plunged in March, likely reflecting bulging car inventories at auto dealers, which are at  a post-2009 high.   OEM auto manufacturers are closing plants and laying off workers.  The latter, no doubt, will miraculously fail to register in the Governments next employment report.

Meanwhile, the stock market continues disconnect from underlying economic reality. Auto, retail and restaurant sales are plunging. The explanation for falling retail sales is simple: real average weekly earnings have dropped two months in a row. The consumer, as I’ve been suggesting, is tapped out on two fronts: disposable income and the capacity to take on more debt.

Despite the obvious intervention in the stock market by the Fed and the Government, via the Treasury’s Exchange Stabilization Fund, plenty of stocks are tanking. As an example, I recommended shorting Kate Spade (KATE) to my Short Seller Journal subscribers about a month ago at $23.50. The stock is trading at $18 this morning – 23% gain if you shorted the stock and even more if you used puts. You can get in-depth economic and market analysis plus ideas for taking advantage of the most overvalued stock market in U.S. history via IRD’s Short Seller’s Journal. For more information, click here:  Short Seller’s Journal Subscription Information.

The Military Complex Has Taken Control Of The White House

“The astonishing reinvention of Donald Trump:”  Washingtonians are still puzzling at the speed with which the man who promised to “drain the swamp” has come to bask in its approval. In the past 10 days, Mr Trump has belied many of the city’s worst fears. Having promised to launch a trade war with China, Mr Trump is rapidly abandoning his protectionist rhetoric. Likewise, having vowed to avoid foreign wars, he has acquired a sudden taste for Levantine missile launches. And having dismissed Nato as obsolete, Mr Trump is now singing the alliance’s praises. – Financial Times, April 13, 2017

It was just a matter of time before the Deep State got its meat-hooks into Trump.   The move to remove Steve Bannon from the National Security Council and replace him with two Deep State operatives who had been formerly removed from NSC was our signal that the Deep State had restored its control of the Oval Office.  Shortly after that power swap was accomplished, missiles started flying in Syria in response to false flag “gas” attack and the world’s largest non-nuclear bomb was dropped on CIA-built underground tunnels in Afghanistan.

Trump has back-pedaled on every single “plank” in his campaign platform – about as quickly as Obama did after he was inaugurated.  Trump’s geopolitical policies now resemble the same policies endorsed by Hillary Clinton, who is a neocon dressed in drag.

When all else fails, start a war.  The opinion ratings on Trump are plunging, along with the major portions of the economy.  Auto sales are down 10% since the beginning to 2017 and JP Morgan, despite “beating” earnings estimates, disclosed a troubling spike in credit card write-offs, which rose to nearly $1 billion in Q1.  Retail sales have now declined two months in a row.  It’s no coincidence that the dismal sales report was released on Good Friday when the market was closed.  The original .1% gain reported for February was revised down significantly to a decline of .3%.   Restaurant industry sales have declined for 11 of the last 12 months in a row on a year over year monthly basis.

The economy is been fueled on money printing and credit creation for the better part of 40 years.  That artificial stimulation went parabolic in 2009.   The tech and housing bubbles have been reinflated along with every other asset class into an “everything” bubble.  Real weekly earnings have declined two months in a row. The consumer is tapped out on two fronts:  disposable income and the capacity to take on more debt.  Now comes the part where the average household begins to default on the debt it’s taken on over the last 8 years.  Hence the big jump in credit write-offs disclosed opaquely by JP Morgan last week.

Today’s Shadow of Truth discusses the role played by the Deep State in ushering in the inevitable economic collapse of the United States which will lead to the implementation of Totalitarianism and a dystopic political system:

Trump’s Political Pivot And A Weaker Dollar Drive Gold Higher

We hang the petty thieves and appoint the great ones to office 
– Aesop, 620 BC – 560 BC

Question:  How can you tell when a politician is lying?  Answer:  His/her lips are moving.  In the last few weeks Trump has become another puppet of the Deep State and his new policies suspiciously resemble the campaign platform on which Hillary Clinton ran for president – a least on the big geopolitical and economic issues.  To be sure, at least for now there appears to be some differences between a Trump White House and a hypothetical HRC White House on domestic and social issues.

Those of you who voted for Trump as a vote not to elect Hillary have ended up with “Hillary.”  Those of you voted for Hillary, and thought you lost, have ended up in many respects with a surrogate for Hillary.   It took less than 12 weeks since the inauguration for Trump to adopt the stance of a true Washington politician.   This is where the “elected” official pivots away from the public interest and toward the interests of the Deep State:  Big oil, big defense, big healthcare and, of course, Too Big To Fail Wall Street.  Congratulations Donald.  You’ve passed the Beltway Test.  Welcome to “The Club.”

Of course, you are “blind” if you didn’t think this would happen once Trump took office and let Hillary, her gang of criminals and the Clinton Slush Fund Foundation off the hook after threatening her with prison during the election debates.

Anti-gold apologists will attribute the remarkable move higher in the price of gold this week to the heightened geopolitical tensions between Russia and the U.S. over Syria plus the North Korea situation.   While this might have had some influence on the price move in gold, the primary drivers are economic, financial and structural.

By “structural” we mean the quiet implementation of a digital gold accumulation system between Shanghai, Dubai and Europe.  In China, this system will let the public buy a “digital” form of gold in tiny increments and go into participating banks and take possession of that gold.  Rory Hall has presented two important interviews on this topic on The Daily Coin that merit attention on this topic:    Gold, China, Trump and Economic Collapse, with Ken Shortgen, and China Moves 30% More Funds Into Physical Gold, with Jeff Brown.

While geopolitical and economic factors are pushing the price of gold higher, the extreme dislocation between the western Central Bank short position in gold via several different forms of paper gold and the amount of available physical gold to deliver into buyers’ hands is going to move gold in a way that will shock and awe everyone except maybe the hardiest gold “bugs.”  The two interviews posted above will help explain why.

Finally, as we presented here after Trump was elected, a newly implemented weak dollar policy will springboard the price of gold higher, which is what we witnessed yesterday after Trump affirmed that his administration favors taking the dollar lower in an inevitably failed attempt to revive the competitiveness of U.S. exports.   The Shadow of Truth explores these issues in more detail in today’s episode:

Preparing for the Reign of the First Widow

Investment Research Dynamics is pleased to present another guest post by Stewart Dougherty. I wanted to preface Stewart’s formal essay with some thoughts he shared with me in our email exchanges leading up to his latest essay:

I haven’t shared with you one of the most important tenets of Inferential Analytics … namely, that the universal human condition is addiction. Addiction comes in hundreds of forms. Two of the most powerful are to money and power. HRC is addicted to both. She simply cannot let go of her presidential ambition, or her greed.

I must admit, when I saw her interviewed the other day regarding Syria, she looked terrible. Her legs looked as if they were about explode out of her pants, which were stretched to snapping. She looked like a human sausage. I thought her doctors would have been reversing her obesity by now, but apparently not. Among her other addictions, she is addicted to food, and is a glutton [IRD: she’s also an alcoholic]. Mentally, she is a complete mess. So I could be wrong … if she cannot get her gluttony under control, she cannot get to 2020. She simply will not have the required stamina, and could croak at any time.

My assumption is that when she smells Trump’s blood in the water, she will become so galvanized that she will get the gluttony under control, even if it’s only to get through the election. They will make Obama her running mate, if that’s what’s required to get her across the finish line. Then he can effectively have a third term, while she vegetates in a food coma.

We believe the 6 April 2017 Tomahawk missile attack on Syria indicates that Donald Trump has concluded that the fiscal, economic and political situations in the United States are beyond repair, and that without continued, massive military interventionism and spending, U.S. GDP will plunge, taking all of his campaign commitments down with it. Therefore, he has capitulated to the agenda of the Deep State looters and war profiteers. Trump’s capitulation has profound personal and financial implications for the citizens of the United States and the world.

The strikingly weak March employment report issued on 7 April 2017 demonstrated that rhetoric, no matter how well-intended, does not produce jobs or growth. Only genuine confidence, conviction and belief can do that, and after eight years of Obama’s colossal and deliberate “Hope and Change” lie, the people are not inclined to believe in political rhetoric at this time. We regard it as no coincidence that the attack on Syria occurred mere hours before the release of the March jobs report, the details of which would have been available to the President and his senior advisers in advance. Trump and his team knew that the news was bad, and that a course change and distraction were needed.

Increasingly, it appears that the American people will get a 21 ½ month Trump presidency (late January 2017 through early November 2018). Republicans are backing away from the Obamacare campaign promises they made to the people by merely substituting one massive government bureaucracy and socialized redistribution scheme for another. Far more troubling, they are now signaling that while corporate tax reform remains on the table, personal tax reform might have to wait. Which is their way of saying that personal tax reform will never happen at all, or it will be a deceptive shell game where a tax reduction to the left is completely neutralized by new or increased taxes to the right. Everywhere the people turn, they see the elites being further enriched while they sink further into an inescapable financial morass.

Accordingly, the 2018 mid-term election is shaping up to be a bloodbath for Republicans, with betrayed and disgusted Republican voters staying at home in droves, or voting Democrat out of spite and revulsion against the politicians who have betrayed them yet again. November 2018 will therefore mark the end of the Trump presidency, with the Deep State firmly running the show from then on as it prepares for 2020. There is no one on the bench at this time that the Deep State can rely on as fully as Hillary Clinton, try as they must and do to widen their options.

For her part, Clinton is taking a page out of Madonna’s book by remaking herself. In a recent speech in San Francisco, gone was the campaign era, pastel-colored pant suit, replaced by a dark leather outfit reminiscent of what one would see at a bikers’ convention. Apparently, there is going to be no more Mrs. Nice Guy. She is making it clear that she will no longer even attempt to appeal to the “deplorables,” now broadened to include the “misogynists,” whom she blames for her election loss. Instead, she is now 100% focused on her traditional, high-potential, core-constituencies, while she also eyes a developing vote bonanza: the growing cohort of Trump supporters who feel deceived, are furious about it, and will be out for revenge.

Clinton’s addictions to power and control make her enormously valuable to the Deep State. They know that she will effectively advance their agenda and enforce their mandates. Her addiction to money assures them that she will do exactly what she is well-paid to do. The problem, as before, is her health. Her 6 April 2017 interview at the Women in the World conference, during which she was seated the entire time, showed that she remains obese. And her walk across the large stage to the interview site was slow and measured, undermining the credibility of her repeated comments about taking “long walks in the woods” to find solace after her election loss. Nonetheless, on several occasions during the 48 minute interview, she spoke as if she were a presidential candidate. We believe her addictions to power, control and money will overcome, at least temporarily, her addiction to consumption.

If the Deep State does, in fact, tap her for 2020, it will spend millions on her medical and psychological care throughout the election process, to ensure that she appears to the populace to be sound of body and mind. There will be no more fainting spells or mental fade-outs, and she will be buoyed up by the best doctors and drugs that money can buy. To the greatest extent possible, her campaign will be conducted electronically, to keep the wear and tear of physical campaigning to a minimum.

We expect that HRC will raise more money for her 2020 bid than was spent by every single presidential and Congressional candidate in 2016; $7.5 billion, at a minimum, which will shatter the previous, 2016 record for presidential campaign spending. Given the trillions of dollars that can be looted from the United States economy during a 4 year presidency, donors can generate an astounding Return on Investment from their contributions, which is exactly why they spend so much to buy politicians. Republican donations will collapse.

Numerous reports indicate that Bill Clinton’s health is failing. His marked weight loss is obvious, as are several other observable symptoms of decline. Unfortunately, none of us can live forever, particularly those who have led “full,” pedal-to-the-metal lives.

Running to become both the first woman and first widowed president, HRC will uncork a vast, additive sympathy vote that will sweep her to victory. Millions of previously non-HRC voters will feel that she deserves the presidency, at long last, after everything she has been through. The people will be told that she lost her beloved husband due, in large part, to the toll taken by his profound sadness over the surprise outcome of the unfair, “Russian-rigged” 2016 election. USA!, USA!, USA! She will be cast as a brave, determined fighter who has persisted against all odds to bring the people to the Promised Land of government-manufactured utopia.

HRC’s victory in 2020 is critically important to the Deep State because the United States will be entering the advanced looting phase by then. It will be clear that the deficits are endemic and non-containable; that the nation’s debt is propulsive and non-payable; that the systemic economic drags cannot be ameliorated; that the health care system has spun out of control; that the public and private pension systems are collapsing; and that the dollar is failing, portending systemic, punishing inflation for the people. The people will be desperate for salvation, and will be putty in the hands of professional prevaricators who smother them in soothing lies.

In the fast-disintegrating economy, the Deep State’s best and possibly last opportunity to loot the nation will be to go straight for the people’s money, which they will do with a vengeance. In the process, the Crony Communist overthrow of the United States that was started by Obama and Soros will be finalized. Crony Communism is where the serious money is for the Deep State, which explains why this is the track on which the country is traveling.

As we have previously pointed out, all Life Forces seek to evolve and expand, and communism is no exception. Crony Communism is the most virulent, destructive, ruthless and evolved form of communism ever developed, exponentially intensifying the absolute worst aspects of cronyism and communism. Crony Communism will result in communistic impoverishment and misery for the people, while awarding epic wealth and power to its orchestrators and thugs.

For maximum effectiveness and control, Crony Communism requires gun bans and cash elimination. The delay in the enactment of these agendas is the primary reason why the Deep State Crony Communists are so infuriated by HRC’s 2016 loss. For them, time is big money. And delays carry risks, such as the populace finally waking up to what is happening to them, and resisting their newly perceived enemy with all their might.

Now that Trump has capitulated to the Deep State, we can expect the cash elimination engine to go full power. Gun confiscation will be more difficult to implement at present, given Gorsuch, and will be substituted by continued, massive militarization of federal, state and local policing agencies. The United Airlines customer assault shows how this process is swiftly metastasizing throughout the nation. One way or another, the Deep State will be well prepared when they launch their war against the people’s money.

On 7 April 2017, in total defiance of fiscal, monetary and economic logic given Trump’s military action plus the clear economic degradation reflected by the March employment report and the Atlanta Fed’s revised 1Q GDP forecast, which printed at an astoundingly poor 0.6%, gold closed $18 per ounce below its daily high, while silver suffered a $0.68 per ounce intra-day flash crash, and closed $0.48 below its daily high.

Taken together, the Global Market Capitalization of owned physical gold and silver was smashed down by more than $120 billion ($120,000,000,000.00) on a day when it should have surged.

In other words, $120 billion was stolen from citizens worldwide by the Deep State plunderers who operate with impunity out of Wall Street, the City in London and several dark trading posts immune to visibility, supervision or regulation. We estimate that the criminals who conducted this latest price raid netted on that day at least $900 million in profits in the precious metals futures, options on futures, ETF and equities markets. While a one day $900 million profit (much of it made in seconds) might not sound like much in today’s multi-trillion dollar financial trading world, please keep in mind that this EXACT method of crime has been perpetrated literally thousands of times over a period of 37+ years, without any criminal prosecutions whatsoever. It is a crime of historic proportions, as we explained in a previous article on the subject. (“Gold and Silver Price Manipulation: the Biggest Financial Crime in History.”)

The Deep State looters are mono-maniacally focused on regularly smashing precious metals prices for two primary reasons: 1) It provides them with a vast, recurring, no-lose, totally-illegal-but-never-prosecuted profit source; and, 2) it is an extremely effective way for them to scare everyday citizens away from metals, which is a key DS objective. If the people ever figure out, en masse, that they would greatly benefit by transferring their money into physical precious metals, as opposed to keeping it in digital bank accounts that can be seized at any time and under any pretext, the Deep State’s looting opportunity will be reduced. The Deep State works 60x60x24x365, or every second of every day to prevent the people from having that “Aha Moment” of personal financial clarity and sanity.

If the people fully understood how resilient precious metals prices have been despite the constant, multi-year, 24 hour per day, criminal, full-spectrum Deep State manipulation campaign, they would gain a new-found respect for precious metals as assets. Greed-fueled frauds always collapse in time, and when the precious metals price manipulation fraud fails, gold, silver and platinum’s reflexive revaluation will almost certainly be historic.

The Deep State agenda is to eliminate cash as soon as possible and force the people’s money to become nothing but electrons housed in digital currency prisons euphemistically called banks. Next, they will deactivate the precious metals dealers’ bank accounts, making it extremely difficult for citizens who have not already done so to acquire precious metals. This action will be taken under the totally dishonest pretext of combatting drugs, crime, terrorism and other fake, so-called dreaded threats. When people get wind that this is coming, a precious metals buying stampede will break out, much the same way that the ammunition buying frenzy developed when rumors spread that Obama was going to sharply control, turbo-tax or even prohibit bullet sales. Time and time again throughout history, people have exhibited a passionate desire to buy the things they expect will be taken away from them. When the precious metals buying stampede is triggered, people throughout the west will learn in a hurry that the quantity of physical precious metals actually available to them is extremely limited and quickly vanishing. Supplies will completely disappear in a day or two, if not before, just as ammunition disappeared from the shelves, nationwide, during that buying explosion.

We fully realize there will be risks to metals ownership, such as possible government prohibition. But if it ever comes to that, the people will know for an absolute fact that capitalism and freedom have been murdered and will not be coming back to life anytime soon, if ever again in the citizens’ lifetimes. It will be every person for him or herself going forward from there. With physical precious metals, at least a person will have a chance; with a digital bank balance controlled by Deep State looters, a person will not. The more mainstream media propaganda you hear about the wonderful virtues of cash elimination, the less time you have to prepare, because they will be closing the window of opportunity on you.

Only a short five years ago, there was virtually no one in Venezuela who could even have imagined the total collapse of society and quality of life that was headed straight at them like the equivalent of a nuclear bomb. As we see, Maduro and his communist cronies are as rich as ever and living in sheer luxury, while citizens die in the streets and scavenge like rodents for scraps. History proves beyond any doubt whatsoever that it is NEVER any different when predatory politicians plunge a nation into communism to feed their lust for power and loot their way to wealth. And it will be no different in the United States when Obama and Soros’s Crony Communist revolution is handed off to the First Widow, for its consummation.

We believe that 2017 is a gift from God that provides thinking citizens an extraordinary, and perhaps last opportunity to seriously prepare for what is coming, and to push back with fury against the indescribably evil Deep State agenda that is methodically being crammed down the people’s throats. We urge readers to take to heart this gift of time, and use it for all it’s worth.

Stewart Dougherty
April 10, 2017

Stewart Dougherty is the creator of Inferential Analytics, a forecasting method that applies to events proprietary, time-tested principles of human instinct, desire and action. In his view, forecasting methods not fundamentally based upon principles of human action are unlikely to be reliable over time. He is a graduate of Tufts University (BA) and Harvard Business School (MBA). He developed expertise in strategic analysis and planning during a 35+ year business career, has traveled to and conducted research in over 25 countries and has refined Inferential Analytics into a reliable predictive instrument over a period of 16+ years.

Piper Jaffray, Tesla and Creative Analysis

Piper Jaffray stock analyst, Alexander Potter, in what may be the most idiotic stock research report I’ve ever read, issued a buy recommendation on Tesla (TSLA) stock that is completely devoid of any rational arguments or coherent thought:  “before investors can follow our advice and buy TSLA shares, they need to employ a ‘creative’ valuation methodology…”  Anyone who suspends disbelief and reads that report is more dumb for having done so.

Creative valuation methodology?  I had to read that 3 times before I could believe that he put that in the conclusion of his report.  That sounds like something used in conducting human investment analysis tests on stock analysts who have taken LSD.  The CIA might be interested in experiments like that.

While issuing his bullish assessment, Potter at the same time reduced his FY 2017 earnings estimate from $0.42/share to a loss of $4.83.  I shocked that this analyst was forecasting positive net income at all.  But a reduction in an earnings forecast of that magnitude would seem just too embarrassing to report.  Maybe Potter was indeed experimenting with LSD when he was thinking about his investment thesis.

As it is, TSLA uses “creative” accounting methodologies in recognizing “revenues” that would make Amazon’s Jeff Bezos blush with embarrassment.  The Company burned over $1.5 billion in cash in 2016 in its business operations.  This was covered by the most permissive credit and equity markets in U.S. history, which handed over a net $2.7 billion to the Company in  2016.

While the Piper “analyst” claims to have gotten to know the Company because he drove a Tesla around for seven months and met with Tesla’s IR team, he apparently eschewed real fundamental analysis in favor of “creative” methodologies.  The fact that TSLA’s actual vehicle deliveries declined in Q4 from Q3 was creatively removed from his hockey-stick earnings projections.

It will get really interesting  for Tesla when the  tax credits for the first 200,000 vehicle buyers expire. TSLA’s sales are being subsidized heavily by the U.S. taxpayer and yet the company has lost $1.5 billion on GAAP net income basis in which the “net income” was derived using a highly “creative” interpretation of GAAP accounting.   TSLA’s buyback guarantee, in which it has guaranteed the resale value on vehicles sold or leased up until August 2016, has already created a $2.3 billion future liability. Given the plunging prices in the used car market, it is likely that the true level of that resale guarantee is closer to $4 billion.

TSLA delivered 79k cars in 2016 while Ford delivered 2.6 million.  Yet the stock market creatively assigns a market value to TSLA that is about $5 billion higher than Ford’s.  It’s debatable whether or not Tesla will be able to start delivering its highly touted Model 3 before mid-2018 given TSLA’s track record of failure at meeting delivery schedules.

Quite frankly, what’s more amazing than Tesla’s ability to bamboozle investors into throwing more money at the Company’s cash inferno is the willingness of stock “analysts” like Piper’s Potter to release “creative” research reports that read more like “The Onion” than a responsibly prepared business model and projected financial analysis.

Tesla’s GAAP “book value” is listed at  $4.7 billion, or $32/share. Of that $4.7 billion, $3.4 billion is cash that will soon be burned away, leaving $1.3 billion in book value or $9/share. If we mark to market the car value guarantee, Tesla’s book value goes negative.  If we mark to market its $5.9 billion in PP&E, the book value becomes catastrophically negative.   The shorts who defy Elon Musk’s childish Twitter taunts and remain short will eventually make a fortune when reality inevitably seizes the stock market and takes “creatively” valued stocks like Tesla down their intrinsic value, which is close to zero.

Trust In The United States Was Bombed Away

Trump employing a “wag the dog” strategy, in which he highlights his leadership on an international crisis to divert attention from domestic political problems, is reminiscent of President Bill Clinton’s threats to attack Serbia in early 1999 as his impeachment trial was underway over his sexual relationship with intern Monica Lewinsky. – Robert Parry, posted on Consortiumnews.com

Robert Parry has a blue chip track record as an investigative reporter.  He broke many news stories about the Iran-Contra affair for AP and Newsweek (back when mainstream news sources were a lot less fake) and he broke the story revealing the CIA was trafficking cocaine with the Contras in the United States in the 1980’s (we’re confident the CIA has upped its drug dealing game now that it has control of the poppy crops in Afghanistan).

Despite apparent internal dispute over the validity of the intelligence that Assad’s regime unleased a poison gas attack on ISIS, president Trump bombed Syrian air force assets.   According one of Parry’s CIA sources, the gas attack was a staged “false flag” event designed to provoke Trump into reversing his recent policy pronouncement that it would not seek regime change in Syria.   It’s also been questioned as to whether or not the gas released was even Sarin.

Amusingly, the staunch neoconservative propaganda rag known as the “Washing Post” published an editorial questioning the legitimacy of Trump’s missile attack.  Even some of the war-thirsty lunatics on Fox News were questioning the decision.

The U.S. has lost its economic and political edge in the global community.   The evidence of this mounts.  Russia and China (and other eastern bloc countries) are accumulating physical gold hand-over-fist as part of a strategy to bolster their currencies and remove the U.S. dollar as the world’s reserve currency.

China and Japan, the two largest financiers of the United States’ debt-fueled consumerism and Government deficit spending, have been quietly reducing the amount of Treasuries they hold and are willing to buy.

It’s become apparent to most outside of the United States, and to some inside, that the U.S. has become one big fraud.  The stock market is artificially propped up to prevent a crash that would wipe out America’s retirement funding assets and collapse the banking system;  via the Fed,  the U.S. has orchestrated a flow of funds system by which a few of its puppet Central Banks (Belgium, Swizterland and Ireland – the value of Ireland’s U.S. Treasury holdings now exceeds its GDP) fund Treasury debt auctions;  and a propaganda-based political system has been created that would make Joseph Goebbels blind with envy.

At the root of this fraud is a fraudulent monetary system that requires the Central Bank, together with the Treasury Department, to control the price of gold for as long as possible. This is accomplished via the issuance of an unending supply of paper “fake” gold to help keep the “market” price of gold in check on the Comex and the LBMA.

At some point the demand for physically delivered gold and silver from the east will sabotage the paper manipulation operation.  That’s point at which the United States will collapse.  In today’s episode, the Shadow of Truth discusses the latest events driving U.S. politics and markets:

The Final Solution: “De-Cashing” The System

De-cashing is defined as the gradual phasing out of currency from circulation and its replacement with convertible depositsAt least at the level of major countries and their currencies, the authorities could coordinate their de-cashing efforts. Such coordinated efforts are, in particular, important in the decisions to phase out large denomination bills for all major currencies, to use ceilings and other restrictions on cash transactions, and to introduce the reporting requirements for cash transactions or their taxation. For currency areas, a single de-cashing policy would be clearly preferable to a national one.”

The above text is a direct excerpt from an IMF Working Paper titled, “The Macroeconomics of De-Cashing” (LINK).   Web-sleuthing by Rory Hall at The Daily Coin brought this to my attention. You can read his analysis here:  “De-Cashing – Soft-Selling Financial Enslavement.

In short, the IMF is now publishing working papers papers advising Governments how to “de-cash” their system in a way that produces the least amount of resistance from the populace:   “In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash. A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks.”

“De-cashing”  is a “politically correct” term for “remove freedom from the pockets of the citizens by imposing on them a digital currency system.” The  Paper presents the standard New World Order arguments against cash:  “tax avoidance, terrorism financing and money-laundering.”  Of course, all of those business endeavors are an integral part of the Too Big To Fail Bank business model.    The benfits outlined in the paper are entirely unprovable:  increase “financial inclusiveness?”; reduce illegal immigration; improve the environment (LOL, but I’m not kidding – that argument is in the paper).

The bottom line is buried in the paper: “Carrying cash is a human right and is written into constitutions, which therefore have to be changed. Social conventions may also be disrupted as de-cashing may be viewed as a violation of fundamental rights, including freedom of contract and freedom of ownership.”

With the passage of the Patriot Act, the Government ushered in its final solution to removing individual freedoms and imposing Totalitarianism.   Taking cash currency away – and replacing it with a digital currency system is the last step required for the Government to take complete control over your life.  If the IMF is publishing manuals suggesting the steps to take in order to “de-cash” the system, it means the implementation of such a system is right around the corner.

My guess is that the majority of the public will go along with the removal of cash from the U.S. financial system with less protest than when the Patriot Act was implemented and habeas corpus was removed via the Detainee Bill, which Obama converted into an official legislative act.  Most Americans have become dumbed down to the point at which they don’t understand the implications of de-cashing the financial system.   It’s like watching a barnyard full of chickens cheering at the appearance of Colonel Sanders.

The Biggest Stock Bubble In U.S. History

Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).

We talk about the tech bubble that fomented in the late 1990’s that resulted in an 85% (roughly) decline on the NASDAQ. Currently the five highest valued stocks by market cap are tech stocks: AAPL, GOOG, MSFT, AMZN and FB. Combined, these five stocks make-up nearly 10% of the total value of the entire stock market.

Money from the public poured into ETFs at record pace in February. The majority of it into S&P 500 ETFs which then have to put that money proportionately by market value into each of the S&P 500 stocks.   Thus when cash pours into SPX funds like this, a large rise in the the top five stocks by market cap listed above becomes a self-fulfilling prophecy. The price rise in these stocks has nothing remotely to do with fundamentals. Take Microsoft, for example (MSFT). Last Friday the pom-poms were waving on Fox Business because MSFT hit an all-time high. This is in spite of the fact that MSFT’s revenues dropped 8.8% from 2015 to 2016 and its gross margin plunged 13.2%. So much for fundamentals.

In addition to the onslaught of retail cash moving blindly into stocks, margin debt on the NYSE hit an all-time high in February. Both the cash flow and margin debt statistics are flashing a big red warning signal, as this only occurs when the public becomes blind to risk and and bet that stocks can only go up. As I’ve said before, this is by far the most dangerous stock market in my professional lifetime (32 years, not including my high years spent reading my father’s Wall Street Journal everyday and playing penny stocks).

Perhaps the loudest bell ringing and signaling a top is the market’s valuation of Tesla.  On Monday the market cap of Tesla ($49 billion) surpassed Ford’s market cap  ($45 billion) despite the fact that Tesla deliver 79 thousand cars in 2016 while Ford delivered 2.6 million.    “Electric Jeff” (as a good friend of mine calls Elon Musk, in reference to Jeff Bezos) was on Twitter Monday taunting short sellers.  At best his behavior can be called “gauche.”   Musk, similar to Bezos, is a masterful stock operator.   Jordan Belfort (the “Wolf of Wall Street”) was a small-time dime store thief compared to Musk and Bezos.

Tesla has never made money and never will make money.  Next to Amazon, it’s the biggest Ponzi scheme in U.S. history.  Without the massive tax credits given to the first 200,000 buyers of Tesla vehicles,  the Company would likely be out of business by now.

Once again the public has been seduced into throwing money blindly at anything that moves in the stock market, chasing dreams of risk-free wealth.  99% of them will never take money off the table and will lose everything when this bubble bursts.  And only the biggest stock bubble in history is capable of enabling operators like Musk and Bezos to reap extraordinary wealth at the expense of the public.   The bell is ringing, perhaps Musk unwittingly rang it on Monday with hubris.  The only question that remains pertains to timing…

If you are looking for ideas to take advantage of the inevitable stock market implosion, try out my Short Seller’s Journal.  It’s a weekly subscription newsletter delivered PDF form via email that drills down into the latest economic data and presents short-sell and put option ideas.  You can find out more and subscribe using this link:  Short Seller’s Journal information.

The Comex Is The World’s Most Corrupted Market

While no additional silver was put on deposit at the Comex during the [past] week, The Banks sold contracts for 120MM oz.  This is fraud.  -@TF MetalsReport

If you were to poll the public about comparing the investment returns  between gold, silver and stocks during the first quarter of 2017, it’s highly probable that the majority of the populace would respond that the S&P 500 outperformed the precious metals.   That’s a result of the mainstream media’s unwillingness to report on the precious metals market other than to disparage it as an investment.

In reality, among silver, gold, the Nasdaq 100 and the S&P 500, the S&P 500 had the lowest ROR in Q1.  Silver led the pack at 14%, followed by tech-heavy Nasdaq 100 at 11.1%, gold at 8.6% and the S&P 500 at 4.8%.  Put that in your pipe and smoke it, Cramer.  Imagine the performance gold and silver would have turned in if the Comex was prevented from creating paper gold and silver in amounts that exceeded the quantity of gold and silver sitting in the Comex vaults.

As an example, as of Friday the Comex is reporting 949k ozs of gold in the registered accounts of the Comex vaults and 9 million ozs of total gold.  Yet, the open interest in paper gold contracts as of Friday totaled 41.7 million ozs.  This is 44x more paper gold than the amount of physical that has been designated – “registered” – as available for delivery.  It’s 4.6x more than the total amount of gold sitting on Comex vaults.

With silver the situation is even more extreme.  The Comex is reporting 29.5 million ozs of silver as registered and 190.2 million total ozs.  Yet, the open interest in paper silver is a staggering 1.08 billion ozs.  1.08 billion ozs of silver is more silver than the world mines in a year.  The paper silver open interest is 5x greater than the total amount of silver held in Comex vaults;  it’s an astonishing 37x more than the amount of silver that is available to be delivered.

This degree of imbalance between the open interest in CME futures contracts in relation to the amount of the underlying physical commodity represented by those contracts never occurs in any other CME commodity – ever.   Historically, when the amount of paper exceeds the amount of underlying commodity that is available for delivery by more than 20-30%, the CFTC intervenes by investigating the possibility of market manipulation.  But never with gold and silver.

The Comex is perhaps the most corrupted securities market in history.   It is emblematic of the fraud and corruption that has engulfed the entire U.S. financial and political system. The U.S. Government has now issued $20 trillion in Treasury debt for which it has no intention of every redeeming.  It’s issued over $100 trillion in unfunded liabilities (entitlements, pensions, etc) for which default is not a matter of “if” but of “when.”

In today’s episode of the Shadow of Truth, we discuss “The Big Lie,” which is also known as the “Comex,” and explain why those looking to protect their savings should be buying physical gold and silver now:

Gold And Silver Are Potentially Explosive

Gold and silver are acting differently right now. Usually when the open interest in the paper gold (Comex) net short of the bullion banks becomes overweighted, it’s a signal that they are getting ready attack the price of gold by triggering massive stop-loss selling by the technically-driven hedge funds.

And through last Tuesday, per the latest COT report, the Comex banks had piled heavily into the short side, feeding paper shorted to the hedge funds. And true to form, the market was attacked aggressively this past week starting Tuesday with the expiration of Comex options. Interestingly, the banks had to wait until after the Comex floor trading closed on Tuesday in order to take advantage of a thinly-traded electronic “access” market that is open for about another 90 minutes after the Comex closes in order to push down the price of gold enough to trigger automated hedge fund algo stop-loss selling.

The attacks on the price of gold persisted through Thursday, resulting in what appears to be a record weekly percentage drop in Comex gold open interest. But this attack resulted in a shallow price decline.  And if you trace the build-up in the bullion bank short position over the past couple of weeks, it appears that the banks were willing to sustain losses on those shorted contracts in order to cover them.  Bill “Midas” Murphy at Lemetropole Cafe first pointed this pattern out to me and I confirmed his theory by tracing out the rise in the commercial short interest with the movement in the price of gold.

At the same time, there has been a massive amount of silver – as reported – moving in and out of the “registered” accounts at the Comex silver vaults.  The silver in the “registered” account is the silver designated to be available for delivery.   On the last two days of this past week, for instance, nearly 30% of the silver held in the registered account was moved into the “eligible” account. The “eligible” account is the account in which silver is allegedly “safekept” for the owner of that silver.

Finally, although the mainstream financial media and the fear porn oriented alternative media has been making a lot of noise about the sudden fall-off in the sales of minted bullion coins, I heard a report from a large bullion dealer who said that, while retail coin sales are slow, his company has been receiving very large orders from very connected quite off the radar types purchasing large quantities of physical silver. The recurring theme from these buyers is a desire to move money out of electronic fiat currency bank credits and into privately safe-kept precious metals in bullion form.

Eric Dubin (The News Doctors) and “Doc” invited me to join them on their weekly Metals and Markets podcast to discuss the latest developments which point to possibility of a big surprise move to the upside in gold and silver that is driven by the physical market: