The Economy Continues To Deteriorate

Trump’s trade advisor, Peter Navarro, was on CNBC today asserting that the economy was expanding at an unprecedented rate.  Either Navarro is tragically ignorant or an egregious liar. Either way he looks like an idiot to those us who study the real numbers and understand the truth.

The Global Manufacturing PMI (Purchasing Managers Index) dropped to 50.4 – the lowest since July 2016. It’s been falling almost nonstop since mid-2017. The current period of decline is the longest in the 20-year history of the index. The index includes the purchase of inputs for the manufacturing of consumer goods, investment goods (capex material) and intermediate goods (semi-finished goods used as inputs for final goods).

The pace of decline for auto sales in China, Europe and the U.S. is the fastest in at least three decades excluding the great financial crisis time period. Visible evidence of the contracting global/domestic economy is Ford’s announcement that it’s cutting 10% of salaried (white collar) workforce, about 7,000 jobs, by the end of August.

The trade war is not the cause of U.S. economic weakness. If anything, it’s nothing more than an effort by the Trump Government to manufacture a scapegoat for the inevitably severe economic recession engulfing  the system. China’s exports to the U.S. were 5% of its GDP in 1995. By 2005 exports to the U.S. had risen to 9% of China’s GDP. Currently exports to the U.S. represent just 3% of China’s GDP.  These numbers show that the trade war between the U.S. and China is not the cause of global economic weakness.

Rather, the cause is the massive misapplication of capital from 10 years of over $21 trillion in money printing and debt issuance. This artificially over-stimulated economic activity. Now that the stimulus has worn off, the major economies – especially the U.S. and China – face the problem of servicing their debt load and the consequences of a decade of misallocated capital.

Bond guru, Jeffrey Gundlach, recently asserted in a webcast that “nominal GDP growth over the past five years would have been negative is U.S. public debt had not increased.” He went on to state that analysts and financial journalists “seem to not understand that the growth in the GDP it looks pretty good on the screen but is really based exclusively on debt – Government debt, also corporate debt and mortgage debt.” I have been saying this for quite some time because it’s pretty obvious to anyone who looks more deeply into the numbers beyond reciting the headline reports.

The Fed released Q1 household debt numbers two weeks ago. It showed that total household debt grew by $124 billion in the first quarter of 2019, boosted by increases in mortgage, auto and student loan balances. That increase in debt is not translating into economic growth. Part of the reason for the increase in mortgage debt balances is the proliferation of cash-out refinancings, which are now back to 2006-2008 levels (chart sourced from bubblesbottoms.blogspot.com):

Much of this cash-out refinancing is being used to pay off large credit card balances, which does not help stimulate economic spending but it does result in larger mortgage balances per household and lets the consumer “reset” its credit balance for more debt-based consumption. Again, this is similar to what the financial landscape looked like prior to the great financial crisis except it’s worse now.

The above commentary is an excerpt from last week’s Short Seller’s Journal.  In each issue I undress the economic propaganda and provide short ideas, including options plays.  This week I’m featuring a retail-based “unicorn” stock which burns more cash every quarter.  You can learn more about this newsletter here:    Short Seller’s Journal information

Is Musk Trying To Sell Tesla’s Stock Price Or Automobiles?

TSLA had yet another bad week, closing down $19 (9%) from the previous Friday’s close. Last week every attempted bounce in the stock was shortable on a daytrading basis. Currently Tesla’s shares are trading at $188. It would likely be a lot lower if it weren’t for Musk’s repeated “leaked” emails loaded with dubious production and delivery claims, with both barrels pointed directly at short-sellers.

A second “leaked” email appeared on Wednesday, as the stock was getting ready to take another deep plunge, in which Musk asserts that the employees need to “catch up on deliveries” in order to have a “successful quarter.” Speaking of catching up on deliveries, whatever happened with the 10,000 vehicles that Musk claimed were “in transit” at the end of Q1…? This analysis posted by @boriqato is a priceless “de-coding” of the Musk emails.

In between Musk released a report that he was gearing up to start producing the chimerical Model Y in the Fremont facility, in addition to consolidating the production of the S and X onto one production line.  Nothwithstanding the complications involved with reconfiguring the factor floor to produce 2 models on one line,  hidden behind the concept is that fact that the move would be cutting in half the production rate of each model.  Why would he do this if he’s running behind on deliveries?

Curiously absent from the news release was any estimates of the cost to retool the factory, purchase the equipment required to produce the Model Y and the manner in which the expense – which is enormous  – would be funded. Given that there’s currently 20 lawsuits outstanding filed by vendors and service providers against Tesla seeking several million dollars in claims against unpaid invoices for services provided, it would appear that the Company is cash-strapped despite the recent capital raise.  (Note: I sifted through several of the filings  – many are honest mom and pop businesses trying to make a living – it’s quite sad that Musk feels entitled to stiff the businesses which are helping him proliferate his fraud)

Regardless of the veracity of the production numbers in the “leaked” emails to employees, the new order and Q2 delivery assertions are likely Musk’s standard fraudulent misrepresentations. In fact, on Saturday I saw a report from one of the analysts who posts his research on Twitter (@fly4dat). The data he tracks for Model 3 deliveries in Norway, Netherlands and Spain – three of Tesla’s largest European markets – show a stunning decline in deliveries (the data comes from official sources which track VIN registrations).

Based on his extrapolation of Q1 and April deliveries plus the plunge in deliveries across all models globally, it looks like Tesla will be lucky to reach Q1’s 63,000 deliveries. Certainly we would have to suspect fraudulent reporting if deliveries come anywhere near Musk’s claim that Q2 deliveries could reach 90,000. Furthermore, Tesla’s Models S and X are now getting crushed in Europe by sales and deliveries (VIN registrations) of the Audi e-tron and Jaguar IPace.

Tesla was forced to slash the price of both the S and X this past week for the third time in three months. Unquestionably, the price cuts reflect the collapsing demand. More likely, Musk scripted the email and its “leaks” for the purpose of juicing the stock price in pre-market trading in an attempt to stimulate hedge fund and retail daytrader momentum chasers and trigger a short-squeeze.

The leaked email on Friday had the intended effect – for about an hour – as the stock shot up to as high as $199.60 from $181. The stock closed at $195.46. The second leaked email on Wednesday – not so much. The stock opened briefly higher but is now down over $2 from Wednesday’s close. It’s trading at a level not seen since the end of November 2017. The Musk/Tesla mystique is unraveling.

The email events, along with all of Musk’s circus acts, begs one simple question: Is Musk trying to produce and sell automobiles or is he simply attempting to pump the stock price of a failed business model?

Horrifying Comments From A Freddie Mac Phd Economist

The housing market continues show contracting sales volume. April existing home sales fell 0.4% (SAAR – Seasonally Adjusted Annualized Rate) from March and 4.4% from last April. Existing home sales have dropped year-over-year 14 months in a row. This is the worst run since the housing crisis.

Obviously from a seasonal standpoint, if the market were healthy, home sales should be increasing month-to-month notwithstanding questionable statistical “adjustments” imposed on the data by the NAR. Furthermore, existing home sales are based on closings, which mean the report measures contracts that were signed in late February to late March/early April. during this period the 10yr Treasury rate fell from 2.8% to as low as 2.35%. But lower rates are not stimulating home sales in spite of rapidly rising inventory.

This is because the much of the remaining “pool” of potential home buyers can not afford the all-in cost of home ownership in spite of lower financing costs. Almost 30% of all mortgages that Fannie and Freddie underwrote and packed into bonds last year were for home buyers whose total debt payments were in excess of 43% of their gross (pre-tax) income. This metric – the borrower’s DTI – has nearly doubled since 2015. The mortgage/housing market is headed for a repeat of 2008.

New home sales also showed a drop from March. But the March number was curiously revised significantly higher – an upward revision to 723k SAAR. The number is so much higher than any number reported for any month in the last 12 months that it looks comical in the data series. John Williams (Shadowstats.com) referred to the report as “regular nonsense monthly volatility and lack of statistical significance.”   In fact, the jump in new home sales tabulated by the Government does not remotely correlate with mortgage purchase application data released by the Mortgage Bankers Association, which shows a decline in purchase applications that would correspond to April’s new home sales data

NOTE:  new home sales are based on contracts signed.  90% of all new homebuyers use a mortgage. Therefore declining purchase apps would translate into decline new home contract signings.  New homebuilders, for the most part, have been reporting declining new home orders (see Toll Brother’s latest earnings release from last Monday, for instance).

This brings me to an exchange between Texas real estate professional, Aaron Layman, and the deputy chief economist at Freddie Mac – Lawrence Kiefer. It seems that this Freddie Mac executive could not understand by lower interest rates were not translating into higher home sales. This economics Einstein was puzzled that the large pool of millennials were renting rather than buying. It’s pretty clear that this ivory tower dork is clueless about the amount of student debt held by the millennial demographic.  Kiefer suggested to Aaron that higher student debt levels could possibly be net positive for the housing market if it leads to higher incomes. The Twitter exchange between Aaron and Mr. Kiefer has left me speechless. You can read more here: Aaronlayman.com

Perhaps studying this chart might help Freddie Mac’s Mr. Kiefer better understand the basic problem:

In my weekly Short Seller’s Journal, I present detailed analysis of the housing market, pulling back the curtain of lies used by industry pimps to hide the truth. In addition, I provide specific short ideas along with suggestions for using options to short stocks synthetically. You can learn more about this newsletter here:  Short Seller’s Journal information

Every Bounce In Tesla Stock Can Be Fearlessly Shorted

Elon Musk sent out an internal email to employees on Thursday in which he makes the highly dubious claims that the Company has 50,000 new orders for the Model  3,  the Company has a “good chance” of exceeding Q4’s record deliveries and the production of the Model 3 is close to 1,000 per week.

Regardless of the veracity of the production numbers, the new orders and Q2 deliveries assertions are likely Musk’s standard fraudulent misrepresentations.  From all of the data that can be gathered from official sources which track deliveries and VIN registrations globally, sales of all three Tesla models are falling off a cliff.  The recent price-cuts announced confirm the sales reports (eventually the Law of supply/demand/price prevails).

More likely, Musk scripted the email and its “leak” for the purpose of juicing the stock price in pre-market trading trading on Thursday morning in an attempt to stimulate hedge fund and retail daytrader momentum chasers and trigger a short-squeeze.

The leaked email had the intended effect – for about an hour – as the stock shot up to as high as $199.60 from $181.  The stock closed at $195.46.  This morning, the bubble-promoting financial media transformed lies embedded in the email into reports that Tesla was on track for record deliveries in Q2.  The stock ran up in pre-market from $196 to as high as $203.71.  As I write this the stock is trading below $191.

Elon Musk is obsessed with fighting the shorts rather than running a business and proving the shorts wrong. The funding secured debacle was more than a mistake – 1) it reflected desperation 2) it was highly illegal but our Government no longer prosecutes the crimes committed by billionaires.

The “leaked” email is another example of Musk using social media in an attempt to manipulate the stock price and punish short-sellers.  He’s emboldened by the fact that SEC has made it clear that it has no interest enforcing securities laws on Musk.  The public is on its own –  those for whom the laws are meant to protect (unsophisticated daytraders and the investors in  recklessly managed public mutual funds like ARK) are the ones who get hurt the most.

The problem faced by Tesla is that, in order to generate sales, Musk is unable to charge a high enough price to cover the all-in cost of designing, producing and delivering his cars to the end user. That’s why TSLA bleeds so much cash – it’s that simple.  Furthermore, he should have never issued debt to bridge the funding gap until it was guaranteed that the business model was truly profitable. It’s the same problem all these unicorn businesses face (NFLX, W, CVNA, LYFT, UBER, etc ad nauseum).

Tesla is now headed toward “zombie” status as both its business and its stock price limps toward and off the cliff.  As evidence, all of the stock analysts at firms involved with helping the Company raise $2.7 billion ($2.4 billion net) just two weeks ago  have suddenly become bearish on the story. Morgan Stanley’s Andrew Jonas – snake oil salesman extraordinaire – has publicly set a “downside” price of $10.  However, in a non-public conference call with clients, Morgan Stanley’s cross-asset trading group has made the case that the stock is worthless.

That the stock is worthless has never been an issue for me.  The more interesting question regards the ultimate value of the junk bonds, which are currently “priced” in the low $80’s. But this is based on small trades –  $1mm-2mm face value crosses and investment advisors at boiler room operations like Wedbush dumping 10 bond lots into client accounts. We used to play this game with ill-fated junk bonds that were artificially priced to high until a big seller capitulated when I traded junk bonds in the 1990’s.  More likely the  ultimate chapter 7 liquidation value of the unsecured debt on Telsa’s balance sheet is  well below 20 cents on the dollar.  In other words, short away every time the stock price spikes up on rumors or on desperate attempts by Musk to squeeze the shorts.

More Evidence Tesla Is In A Death Spiral

Reuters  report in which the news service discovered that almost all of the solar cell production at Tesla’s solar factory in Buffalo, New York is being sold overseas, primarily to a large Asian buyer.  Tesla’s Solar City business was given $750 million in State subsidies to build the plant in NY in exchange for employing at least 1,460 people and spending $500 million per yer in the State over 10 years.

The factory employs far less than the 1,460 required and the State has no hope of ever seeing the $500 million per year. The factory has become little more than a solar cell production facility for Panasonic paid for by U.S. taxpayers.

Panasonic produces the solar cells in the factory that were supposed to be used in Solar City’s solar panels.  The problem is that Solar City’s sales are approaching zero.  In California only 21 Solar City roof systems are connected to the State’s three investor-owned utilities as the end of February.  Panasonic is seeking to use the Buffalo plant to fulfill demand for U.S. made solar sales from foreign buyers (foreign solar manufactures can then export the solar panels back the use duty-free).

Earlier this year Panasonic announced that it was suspending plans to expand capacity at Tesla’s Gigafactory. It also suspended planned investment in Tesla’s Shanghai Gigafactory. The decision to curtail investment in Tesla’s U.S. Gigafactory was based on declining sales in the Models S and X and on Model 3 sales which are running below plan.   Panasonic’s Tesla EV battery business had losses exceeding $181  million in its fiscal year that ended in March.  Panasonic was likely not interested in repeating that experience as a “partner” in Tesla’s Shanghai operations.

What’s interesting about the two situations described above is that, more than anyone outside of Tesla’s corporate suite, Panasonic has an up close inside look at the truth behind Tesla’s operations and financials.  It’s quite clear that Panasonic is in financial loss containment mode with respect to its relationship with Tesla.  In this regard, Panasonic is signaling that Tesla is in deep trouble operationally and financially.

Panasonic’s withdrawal from its relationship with Tesla reflects the same critical information about Telsa as the steady stream of high level executive departures over the last year, the rate of which accelerated over the last 4-6 months.  Clearly the message is that Tesla is now in an irreversible death spiral.

Just for the record, I believe that Goldman Sachs and Morgan Stanley used the recent stock and convertible bond offering to suck fees out the deal that would help offset the likely losses the two banks will incur when Musk inevitably defaults on loans he owes to both firms.  It cost Tesla $300 million to purchase derivative protection against the potential shareholder dilution affect if Tesla’s stock were to rise the conversion price of $309 in the new converts.

But those two firms know that Tesla is going to hit the wall and that the stock has no chance of sniffing anywhere close to $309 from now to eternity. It’s highly likely that Goldman and Morgan Stanley forced this hedge structure on Tesla to rake in the $10 to $20 million in fees skimmed on the derivatives used for the hedge.  It was nothing more than vultures who are closest to the carcass grabbing the choicest cuts of meat.

Ironically, Morgan Stanley’s analyst issued a ”worst case” $10 valuation on Tesla. Unless the analyst is a complete idiot with little experience in distressed situations – which is possible – the $10 dollar valuation is Morgan Stanley’s “code” for, “the stock is worthless if Tesla has to file” (which it will sooner or later).

Put A Fork In Tesla – It’s Done

Tesla has been “done” for awhile but many of the Wall Street and investor “uber” bulls are finally starting to see this reality.  Amusingly, Wedbush’s Dan Ives issued a report in which he lowered his price target on Tesla stock from $270 to $235.   He refers to Tesla’s situation as a “code red situation.”  Quite frankly, a “code red situation” with regard to a company and its stock price should be regarded as, “sell your shares if you’re long and get out of the way.”

How someone with the credentials to occupy a stock analyst’s seat at a stock brokerage – even if it is just Wedbush, a retail pump and dump mill – can truly believe that Tesla stock is worth the $40 billion market cap at $230/share is truly mind-blowing.  As an example, consider just a basic valuation metric.  The average automotive car OEM trades at an enterprise to revenue ratio of 0.2x revenues.  At the high-end Toyota trades at 0.6x revenues. That’s because Toyota sports a 7.5% operating margin.  Tesla’s market cap plus debt is 2.6x revenues, or 13x greater than the industry mean.

It would be useful to use other valuation metrics but Tesla does not generate any profits beyond its highly suspicious gross profit as shown in its SEC filings. It would also be useful to know if Dan Ives owns any Tesla shares. Does he really put his money where is mouth is?

That aside, Tesla shares are going to zero. Tesla stock broke down last week, closing at its lowest price since December 21, 2016. The stock is down $44 (17.5%) since May 6th, when it closed at $255 after completing the stock/convertible deal. It’s down 43% from its $370 close after the “funding secured” incident (August 8, 2018). Today the shares traded as low as $195 before a dead-cat short-cover bounce that has lifted the shares back over $200.

Tesla has likely entered into an irreversible death spiral. The only question at this point is how long it will take for the stock to head below $10 and how long the Company can stay solvent. There are scattered reports that the latest price cuts have stimulated a brief increase in sales of the Model S and X, but nothing has been verified. To be sure, sales of the Model 3 have fallen off a cliff in Europe and China, as an increasing number of potential buyers are made aware of the poor quality and follow-up service of this vehicle.

At TSLA’s current cash-burn rate, it won’t make it until the end of the year without a sales turnaround miracle on par with Moses seeing God in a burning bush. I doubt the Company will ever be able to raise money again. The stock does not have value as an acquisition because I highly doubt any potential acquirer would pay an amount that would cover Tesla’s debt load plus other fixed obligations.

In my 34+ years of experience in the financial markets, I’ve witnessed several Pied Piper types who have led their faithful  off the cliff.  Elon Musk for my money is the greatest purveyor of cult of personality that I’ve observed in my lifetime.  I don’t know how else to explain, at least for myself, how so many seemingly intelligent people continue to support Musk’s glaringly indisputable fraud.

Utter Insanity…

That’s the only way to describe this stock market. It won’t end well for the hedge funds whose algos are chasing price momentum nor for the retail daytraders playing the game of “greater fool.” Apparently CSCO and WMT’s “beat” triggered a multi-hundred point spike in the Dow on Thursday. Funny thing about that. CSCO’s one-cent “beat” has been routine since the late 1990’s.

Walmart also “beat.” But for Walmart, the numbers below the headline sucked. The 1.1% revenue growth was well below 1% if you strip out gasoline price inflation from Sam’s Club numbers. Speaking of Sam’s, membership revenue was down 7.9% (these are FY Q1 vs Q1 last year). Operating income was down 4.1%. The “beat” was manufactured by one-time “other gain” that was not defined in the 8-K. This enabled WMT to generate the headline “beat.” Cash flow provided by operations dropped from $5.1 billion last year to $3.5 billion this year – not good. Despite the deteriorating financial fundamentals, the stock market added over $7 billion to WMT’s market cap.

But that’s a tempest in a teapot compared to the the IPO valuations of companies like Lyft, Uber and WeWork. These companies not only have never made a dime of profit, but they bleed billions negative cash flow. Yet, a $50 billion stock market valuation set by the underwriters is greedily bought into by hedge funds. That’s your pension money at work, folks. It’s amusing to watch the hand-puppets on financial cable tv frown when stocks like Uber and Lyft drop a quick 20% from the IPO date.

The prized “jewels” in the stock market – i.e. the stocks with the best performance over the last 4 months – are the ones with escalating operating losses on increasing revenues. But the stocks soar when the earnings announcement hits the tape with the phrase “beat estimates” – which means the company lost slightly less money than forecast by Wall Street’s brightest.

But these companies all share a common trait: a tragically flawed business model in which the only way to grow revenues is to charge the end user a price that does not cover the all-in cost of producing the product or providing the service but which attracts end-users because the price is lower than the competition. Despite eventual financial doom from the start, the stock market currently values this type of business model over companies that generate bona fide cash/economic profits.

I’m reviewing a company in my next issue of the Short Seller’s Journal which trades at a price/sales multiple that is 15-times higher than the industry average. Its operating losses grow at a double-digit rate every quarter sequentially and double every quarter year-over-year. We can’t use any of the other tradition valuation metrics because the company has negative cash flow, massive net losses and negative forward earnings. This is all nothwithstanding the fact it operates in a highly cyclical industry with declining sales.

I mention this to illustrate just how far off the rails the stock market has traveled. The current stock market bubble is at an historical extreme. It’s worse than 1999 or 1929 – I don’t care what the manipulated GAAP p/e ratio comparison shows. I was trading tech stocks in the late-90’s bubble and this current one is worse. IT’s utterly insane…

April Retail Sales Soiled The Bed Sheets

Perhaps the perma-bullish Wall Street analysts should contribute to retail sales by stocking up on Depends – like the Merrill Lynch analyst who forecast retail sales to climb 0.7% ex-autos. Retail sales, preliminarily, were said to have declined 0.2% from March.   The “core” retail sales group – retail sales not including autos and gasoline – were flat. Wall Street’s finest expected a consensus 0.4% gain.

I say “preliminarily” above because, if you scan the Census Bureau’s report you’ll note “asterisks” in several major line items.

This means that “advance” numbers were not available for those retail sales categories.  Thus, the CB guesstimates the number based on past numbers for that category.  It also means the Census Bureau can overestimate that category for headline purposes with the intent to revise lower in future reports.

Retail sales numbers are reported on a nominal basis.  If they were to be adjusted by a real rate of inflation, the month to month decline from April likely would have approached at least one half of one percent.

Funny thing about the guesstimate for new car dealer sales.  The OEM’s report actual deliveries to new dealers every month.  I would have to believe that new car dealers have highly automated sales tracking software. It would seem that the Census Bureau should be able to have a fairly accurate data sample and estimate for April new car dealer sales well before the middle of the following month. But using the (*) enables the Government to manipulate the number into a favorable outcome for the “advance” report.

We know that the average household – i.e the 80-90% of all households – are struggling under the weight of record monthly debt service requirements on a record amount of consumer debt. This plight is made worse by the fact that real wages are declining.  Not to judge Wall Street analysts harshly (said sarcastically), but it should be obvious that retail sales were going to show a decline in April.  Imagine how bad the actual number must be if the Government has to release a guesstimated report showing a nominal decline.

In my weekly Short Seller’s Journal, I present detailed analysis of weekly economic reports. In addition, I provide specific short ideas along with suggestions for using options to short stocks synthetically. You can learn more about this newsletter here:  Short Seller’s Journal information

Gold And Silver May Be Setting Up For A Big Move

The price of gold soared over $13 Monday as flight-to-safety money flowed into the precious metals sector while the stock market went into a downward spiral. I see Monday’s market action as a preview of what’s in store going forward as price discovery once again engulfs the stock market and causes the most extreme stock bubble in U.S. history to deflate.

Despite the fact that it seems to be taking forever for gold and silver to enter into a prolonged move higher, the chart below should offer encouragement.

Gold, silver and mining stocks are deeply oversold technically. It’s  obvious that the western Central Banks are throwing everything they can at the gold price via the paper derivative gold markets in London and NYC in an attempt to prevent a massive move higher.  The data for gold and silver futures on the Comex show that the banks are working hard to stunt any rally by unloading loads of paper gold on the market.

This effort is rewarding the large physical gold importing countries in the east. India’s net import of gold jumped by 27 per cent to 192.4 tonnes in the first quarter of calendar year 2019 from 151 tonnes in the same period last year. In April India unofficially imported 121 tonnes of gold, up significantly from April 2018. The increase in import activity is attributable to the lower gold price. Note that the official statistics do not include smuggled gold, which is thought to average around 25 tonnes per month. China also has stepped up its gold buying over the last several weeks.

At some point the Fed is going to be forced by the market to cut the Fed Funds rate, as the 1yr Treasury is now yielding less that the Fed Funds target rate. In addition, the yield curve is inverted from 1yr out to 7yrs, with a steep inversion between the 1yr and 3yr Treasurys. It won’t take much flinching from the Fed to ignite a rally in the metals. In addition, the investor sentiment as measured by MarketVane is about as low as I’ve seen it in a long time (34% bullish for both gold and silver).

Despite the 600 pt sell-off in the Dow today, complacency persists, along with an expectation that the Fed will continue to support wanton speculation in the stock market.  But the inverted yield curve, combined with an effective Fed Funds rate that is above the interest rate used to calculate the quantity of free money given by the Fed to the banks on excess reserves, is strong evidence that the Fed is losing its ability to control the financial markets.  At some point the Fed and its western Central Bank collaborators, led by the BIS, will also lose control of the gold price.

Global Synchronized Depression: Buy Gold And Silver Not Copper

It’s not “different this time.” The steep, prolonged yield curve inversion reflects the onset of a deep global economic contraction which is now being confirmed by leading indicators such as semiconductor and auto sales.  At some point the Fed is going to be forced by the market to cut the Fed Funds rate, as the 1yr Treasury is now yielding less than the Fed  Funds target rate. In addition, the yield curve is inverted from 1yr out to 7yrs, with a steep inversion between the 1yr and 3yr Treasurys.  It won’t take much flinching from the Fed to ignite a rally in the metals.  In addition, the investor sentiment as measured by MarketVane is about as low as I’ve seen it in a long time (34% bullish for both gold and silver).

We are headed into a severe global recession with or w/out a trade agreement. To be sure, over the next 10-20 years, it’s likely the price of copper will move higher. But if my view plays out, a severe recession will cause a sharp drop in the demand for copper and other base metals relative to the demand over the last 10-15 years. This in turn will push out the current supply/demand forecasts for copper by several years and drive the price of copper lower.

Trevor Hall and I discuss the global economy, the intense western Central Bank gold price manipulation activity and the factors that will drive the price of real money – gold and silver – higher and commodities like copper lower in our latest Mining Stock Daily podcast – click here or on the graphic below:

**********

You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information