Tag Archives: stock market bubble

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:

Rare Honesty From A Corporate CEO

In my view, the mood of these markets is in stark contrast with the many unknown from our current economic and political landscape, both here and abroad. For me, it’s a major disconnect, and it concerns me.  – James Tisch, Loews CEO (call transcript sourced from from Seeking Alpha)

James Tisch shared some extraordinarily candid observations about the financial markets on Loews Corp’s Q4 earnings conference call on Monday.   I say “extraordinary” because I do not believe I have ever heard, in well over 30 years of capital markets experience, any corporate CEO – or any corporate officer – ever speak honestly about the condition of the financial markets.

With regard to the amount of capital and credit made available by the Fed:

In the credit markets, spreads on the high yield securities are approaching historically tight levels, while key credit metrics such as leverage and coverage ratios are showing signs of weakening. The leverage loan market has been overrun by such massive inflows of capital that you could probably get loan to buy a fleet of zeppelins at this point in time.

That statement references the flood cheap capital made available by the Fed that has facilitated the greatest mis-allocation of capital since Greenspan inflated the tech bubble and Bernanke inflated the housing/mortgage bubble.

The merger market is being driven by large pools of private and corporate buyers, the wave of private capital combined with the abundance of available leverage at remarkably low rates has enabled private equity firms to pay big prices for companies that haven’t already been gobbled up by strategic buyers.

That statement is quite remarkable.  Thinly veiled in diplomatic finesse, Tisch essentially acknowledges that the private equity investors have fomented a massive M&A bubble and are significantly overpaying for acquisitions.

And the coup de grace:

In my opinion, the markets are priced for perfection, and they have been that way for quite some time, complacency reign supreme. However, my experience has shown me that this state of affairs won’t go on indefinitely.

In short, the market is historically overvalued and it will not end well for those who continue to hold long positions in the stock market.

In 2000 Greenspan has created a tech bubble which he said he could not see.  In late 2007 there was a housing and mortgage bubble, the existence of which Bernanke denied.  And now there’s an “everything” bubble, to which Yellen is role-playing Hellen Keller.

Panera Bread stock is a text-book example of the insanity in the stock market right now. PNRA announced earnings yesterday and “beat” the Street.  But here’s a synopsis of its numbers:

System-wide same store sales increased just .7%.  Franchise SSS dropped 1.4%. Franchised stores are 55% of the store base. Operating margin dropped 40 basis points. Net income in Q4 dropped $22.8 million from $24.7 million in 2015. Company bought back nearly $400 million in stock during 2016. It just issued another $200 million in debt. If it wasn’t buying back shares, it would not have needed to issue that debt. The share buybacks make the EPS look better but the net income of operations fell quarter over quarter and year over year.  That’s how PNRA “beat:” financial engineering because its net income declined quarter over quarter (2016 vs. 2015) and year over year.  – excerpt from an email exchange with a Short Seller’s Journal subscriber

For that, PNRA stock is up 8.4% today.  A $4 million year over year drop in net income has generated a $400 million one-day jump in PNRA’s market cap. This stock is trading at 38x trailing income as its ability to generate profits.  No wonder insiders are selling stock more quickly than passengers jumped off the Titanic.

I look at dozens of companies every week and insiders are furiously shoveling their shares into the market at well over 90% of these companies.  They all understand the same problem in the capital markets to which Tisch addressed.  In that latter regard, it was as refreshing as it was unique to come across an insider who was honest.

Is The U.S. Stock Market About To “Super Nova?”

ETF flows tend to be a good contrary indicator when they become extreme, so the buying frenzy doesn’t bode well for U.S. equities.  – David Santschi, CEO of TrimTabs

If the Federal Reserve were a private corporation and did not have a money tree, it would be technically insolvent – i.e. bankrupt. As of its latest balance sheet the Fed was reporting a book value (net worth) of $40.4 billion.   But the Fed does not have to mark to market its assets.   Given the recent 100+ basis point move in the 10-yr Treasury, if the Fed were forced to mark to market its $3.8 trillion Treasuries and mortgages, it would be forced to reduce the holding value by close to $400 billion, taking the Fed’s net worth to negative $360 billion.

This is the most conservative valuation scenario.   The Fed has other holdings, on and off balance sheet, that would likely take the Fed’s book value well past negative $400 billion if mark to market accounting were applied.

Think about this for a moment:   the U.S. dollar is backed by a Government and Central Bank, both of which are technically bankrupt.   The only difference between what happened to Greece and the U.S. is the U.S.’ ability to print money unfettered.

Just like water, markets eventually find their own level of balance.  At this point the U.S. stock market, is the most unbalanced financial market in the world.  A Trim-tabs report out yesterday revealed that the public threw $98 billion into U.S. stock ETFs between November 8th and December 5th.  Compare this to the $61.5 billion that went into stock ETFs over the entire year in 2015.   Currently the rate of cash flooding into stock ETFs for December is even higher than November.

Money from the public is literally flooding into the stock market, making this the most dangerous stock market I’ve witnessed in 30+ years as a financial markets professional.  If the GAAP accounting standards enforced in 1999 and 2007 were applied now to corporate earnings, this would prove to be the most overvalued stock market in history on an “apples to apples” accounting basis.

A supernova is an astronomical event that occurs during the last stellar evolutionary stages of a massive star’s life, whose dramatic and catastrophic destruction is marked by one final titanic explosion. For a short time, this causes the sudden appearance of a ‘new’ bright star, before slowly fading from sight over several weeks or months.  – Wikipedia

The U.S. financial markets, specifically the U.S. dollar and the stock market, can be likened to fiat currency-based financial markets “Super Nova.”  The public and the momentum-chasing hedge funds are desperately chasing the “appearance” of the stock market’s “bright new star.”   Unfortunately, it’s an illusion.  The stock market is headed for catastrophic destruction.

I don’t know if this final explosion will occur early in 2017 or if there will be on last “Weimar-like” push fueled by a round of money printing substantially larger than “QE 1 thru 4.”   Either way, the U.S. financial system is heading toward a period of unprecedented wealth destruction.

I’m not going to sit here and urge anyone who will listen to move their money into the safety of physical gold and silver because I have no idea how diabolically aggressive the Fed and the banks will be in exerting downward pressure on the price of gold and silver using fiat paper gold.  No one knows and anyone who proclaims to know is full of horse hooey.   I’m moving any money not needed for expenses into physical silver.  I know a sale when I see one and sovereign-minted silver bullion coins are on “fire sale” right now.

Unfortunately, the only chance you have to financially survive what is coming at us is to get your money out of all financial “assets.”  These are not “assets.” They are fiat paper liabilities issued by a Federal Reserve that is technically insolvent by at least $360 billion and likely multiples of that when off-balance-sheet considerations are factored in to the equation.  If you don’t want to buy precious metals, at least get your money out of the stock market.

While Wall Street shills and the financial media are busy seducing the public with their incessant “Dow 20,000” rally cry, corporate insiders are busy unloading their shares hand-over-fist.  Every company (other than mining stocks) I’ve analyzed over the last month has been characterized by extremely heavy insider selling.  The parabolic rise in the dollar is annihilating corporate revenues and profitability.   Follow the money here because insiders are broadcasting this fact loudly.

China is dumping Treasuries and corporate executives are dumping stocks.  Total U.S. debt outstanding hits new highs daily.   Once again “smart money” is unloading its paper “assets” on an unsuspecting public.  The delinquency and default rates in mortgage, auto and credit card debt are beginning to spike up, according to the latest reports made available and not disseminated through the mainstream media.

The U.S. markets are going Super Nova – don’t be left holding bag…

Guest Post: Human Derivatives and Gold

The Oligarchs’ Plan to Monetize Humanity – Stewart Dougherty

The greed-diseased and power-obsessed Deep State oligarchs hate you for your freedom and love you for your money, and they are accelerating their plans to strip you of both. There are two things standing in their way: cash, and precious metals. The oligarchs are doing everything in their power to falsely discredit both of them in the eyes of the people. Cash and precious metals are physical manifestations of financial and human liberty. Liberty, which is indivisible, is the absolute last thing the oligarchs have in mind for us, as there is no profit in it for them. The oligarchs realize that the people are fast waking up to what is being done to them. While the Oligarchy remains an unimaginably dangerous enemy, it was wounded in the United States presidential election, is acting more erratically and illogically, and is starting to make serious mistakes. How we, the people, push forward from here will determine whether we remain free, or become slaves to the greatest Force of Evil ever known to mankind, the Deep State oligarchs.

While the above themes are not new to Inferential Analytics, the accurate and reliable forecasting method we have developed and use, the intensity with which the Deep State is pursuing its “dual mandate” of expropriating private wealth and enslaving the people by deliberately impoverishing them is absolutely unprecedented. If the people lose the war that the Deep State has declared against them, their futures and those of their descendants will be destroyed. The people must not and need not lose this war. In fact, the people can defeat the Deep State by using simple tools and common sense. The problem is that the people do not realize they have the power to take down the Oligarchy, so we all must work to open their eyes and show them the force of nature they truly are. That is our mission in this article, and the ones to follow.

The post-election orgy of precious metals price destruction is an open letter from the Deep State oligarchs that they couldn’t care less about the people’s desire for fundamental change, something the people shouted from the rooftops with their votes. The oligarchs have announced that there will be no change in policy or operating procedures; it is full steam ahead for them, because they know they can loot society of trillions more dollars if they can successfully implement their plans, which are well underway and inimical to the people in the extreme.

Money that flows into physical precious metals means less money in banks for the Deep State oligarchs to loot. In 2011, as gold surged to $1900 and silver to $50 per ounce, the oligarchs saw the real potential of a buying stampede breaking out among the people, which would have resulted in even greater bank withdrawals. They were simply not going to allow that to happen. Plans to gain control of the people’s money were in the formative stages, and could not be activated at that time. Not having the means to restrict the flow of money into precious metals, they decided instead to crush prices by market manipulation, both to financially punish those who had bought into the gathering stampede, and to scare away prospective buyers. The Deep State is now on the threshold of being able to implement its asset control agenda, and is certainly not going to lose bank deposits to precious metals when they are so close to their objective. Therefore, they have ratcheted up their illegal price manipulation activities to record intensity.

Post-election, the Deep State oligarchs have made it clear that they are going to continue to ram down the throats of the people the self-serving crony communist agenda they have been pursuing for the past twenty years, and particularly during the past eight, when they have had an energized communist organizer in place. If this means that they must hire phony activists on Craig’s List for $12.00 per hour and bus them around the country from one pre-arranged “demonstration” site to another, this is what they will do, as we can see. This is a small price to pay for the power and money prizes they have plotted to win.

The most profitable financial instruments ever created by the oligarchy are derivatives. These synthetic devices, designed for hedging, risk management and speculation by market players, and structured to generate guaranteed profits for the oligarchs who invent, issue and control them, include futures, options, forwards and swaps, and are a Deep State money machine.

Derivatives are layered on top of what are known as “underlying” assets, such as stocks, bonds, commodities, currencies, government debt, and securitized debt and mortgages.

We believe that the oligarchs are creating a new class of financial derivatives that could produce the largest transfer of wealth in history, from the people to them.

We call them “Human Derivatives,” or “HDs.” The “underlying” asset in HDs is humanity itself; specifically, the personal wealth and future wealth-creation potential of human beings, in addition to rich, deeply personal, tradeable and exploitable information about them. With HDs, the Oligarchy intends to monetize humanity. By positioning themselves as the “House,” and giving themselves proprietary fee-setting, settlement, arbitrage and inside trading powers over HDs and bank deposits, the oligarchs intend to create a monopolized toll booth through which most monetary assets must pass. This will enable them to siphon off trillions of dollars of existing and future financial wealth from “underlying” human beings. The oligarchs plan to turn humanity into a financial asset over which they have control.

Human Derivatives will not just leverage people’s underlying financial assets, but much more important, deep personal insight into who they are, what they buy, how they behave, their medical well-being, their relationships and social networks, their susceptibility to messaging and advertising, and their overall economic “value.” This information will be codified, scored and quantified, and then converted into indexes made tradeable by HDs. The tradeable financial digitalization of the people will be worth a fortune to the Deep State “House.”

The oligarchs face a critical prerequisite to the optimization of Human Derivatives: the elimination of cash. By removing cash from the system, the oligarchs will obtain full visibility into and control over the people’s monetary transactions, which is required to maximize HD profits.

While numerous “motherhood” justifications for the elimination of cash are enunciated by the Deep State shills who are promoting it, such as fighting terrorism, crime and drug trafficking, these are misdirections and lies. The real purpose for the elimination of cash is simple: to give the Oligarchy full-spectrum control over monetary assets. The fact that Larry Summers is one of the main proselytizers for cash elimination is all that you need to know; he is a longstanding Establishment spokesperson and enabler.

Influential, non-banker elitists are now joining the battle. For example, on October 27, 2016, while speaking to reporters, Apple Computer CEO Tim Cook triumphantly stated, “We are going to kill cash.” By “we,” he does not mean Apple, which has no means by which solely to murder cash, but the Deep State elite, of which he is a peripheral member. The elimination of cash will be a boon to Apple Pay, which collects a 0.15% commission on all transactions, an amount that is guaranteed to increase by multiples and passed on to consumers in the form of price inflation once digital payments are non-optional and monopolized.

On November 8, 2016, the Indian government announced the most brazen cash reset and windfall tax generation scheme ever hatched. At 8 PM, after the banks had closed, Prime Minister Narendra Modi made a surprise proclamation that as of 11:59 PM that same evening, all 500 and 1,000 rupees currency notes would be demonetized, stripped of “Legal Tender” status, and “extinguished.” In his words, “currency notes of rupees 500 and rupees 1,000 will be just paper with no value.” Rupees 500 and 1,000 notes are worth roughly $7.50 and $15.00, respectively, and they constitute 85% of India’s total currency supply. With no advance warning, Indian citizens were given 4 hours to spend 85% of India’s total money supply, or endure a massively time-consuming currency conversion ordeal.

In the few hours remaining that night, the stores were flooded with citizens trying to dump their 500 and 1,000 rupees notes. Gold spiked to the equivalent of $2,300 per ounce, before completely selling out at dealer locations, as people were willing to spend pretty much anything to get a real asset like gold in exchange for “just paper with no value.”

The government gave those unable to offload their 500 and 1,000 rupees notes during the four hour window the option of depositing them into their bank accounts (assuming they have them) until December 30, 2016. But to do that, the depositor must fill out an affidavit, explaining where the money came from. If the authorities determine that the depositor has not satisfactorily accounted for the funds, then an income tax and fines will be imposed on the depositor, or the currency will simply be seized.

The government also gave the people the ability to physically exchange at banks their rupees 500 and 1,000 notes for new currency, but only until November 24, 2016 (a period of 14 days), and only at a rate of 4,000 rupees (roughly $60.00) per day. If a person is willing to stand in a bank line for hours a day, for 14 days straight, they will be able to exchange a grand total of 56,000 rupees, or roughly $840.00.

Modi stated that the extraordinary action was taken to curb “counterfeiting,” “corruption,” “terrorism,” “black money,” and the “black economy,” the usual excuses for tyranny, but never explained how, which is typical of these Deep State gambits. While making his announcement, Modi stated: “Experience tells us that ordinary citizens are always ready to make sacrifices and face difficulties for the benefit of the nation.” As we can see, the citizens’ willing acceptance of surprise currency resets is being positioned by the Deep State as a matter of patriotism and duty.

India’s gun control laws are among the strictest in the world, and have been tightened even further by Modi since he came into office in 2014. The people are also trained from a young age to be compliant and polite. It is no wonder why India was chosen as the test site for Deep State’s first surprise, national currency reset.

Almost exactly one year ago, it was the same Modi who announced an Indian “paper gold” scheme. The Indian people were asked to turn in to their bank their physical gold, in exchange for a paper “note” that would provide 2.25 – 2.75% interest per annum on the gold’s value at the time of submission. The “investor” would not be able to get their gold back for at least 5 years. By then, of course, it would be long gone. Indian inflation is consistently above the offered interest rate. The Deep State’s scheme, promoted by their puppet Modi, flopped because the people, who are never nearly as stupid as the elitists think, saw right through it.

There are an estimated 20,000 tonnes of gold in the private hands of the Indian people, and the bullion banks wanted it for their own profit-making purposes, not the least of which was to cover their enormous naked short positions.

We believe the Indian currency reset is a test, foisted upon a compliant, disarmed people to gauge their reaction. The real drama is yet to come, and will occur throughout the West. If the oligarchs cannot trick the people into accepting the elimination of cash, then they will do the next best thing: a for-profit currency reset that nets a windfall. Most likely, they will do both, in succession: a currency reset, netting a windfall, followed by the elimination of cash, netting a second, much larger windfall.

Several prominent commentators have recommended holding cash as a financial defense mechanism. But none of them has warned of the possibility of a currency cancellation, such as the one that just occurred in India. This demonstrates how entropic, unpredictable and dangerous the current financial environment has become. We urge readers to stay highly informed via the Alternative Media, the only place where you can find the truth. Developments are happening fast, and you could get blindsided if you are inattentive and drop your guard.

All of the above begs the question: how can we financially defend ourselves from the Establishment controllers who are coming for our money and our freedom?

Even though precious metals prices are being deliberately crushed at this time, for the reasons outlined above, we view them as the best, and in certain cases, only defense against Deep State exploitation and expropriation. Gold and silver are financial Freedom Fighters, uniquely capable of protecting people from oppression. Throughout history, as people have fled persecution and sought liberty, gold has been their salvation. For millions over millennia, freedom has only been payable in gold. Precious metals provide the best escape from the Deep State’s coming financial command and control matrix, and are the only assets that cannot be canceled, demonetized or extinguished by government decree and whim. Even assets traditionally viewed as being safe, such as productive farm land, can be taxed into oblivion by a government gone rogue. It has happened in the past, and will certainly happen in the future. One cannot hide farm land, or stitch it into one’s coat.

Some people express the concern that governments will prohibit the ownership of precious metals, particularly gold, when things unhinge. We would respond by saying that if it ever comes to that, you will know, for a fact, it is game over. By issuing such an order, the Deep State would make it absolutely categorical that they intend to impoverish and enslave you. While many people might surrender to that kind of totalitarianism, hundreds of millions to billions of people worldwide will not.

Governments can create currency, but only God can create gold, and He is not in the Deep State’s back pocket. No government has the moral authority or practical ability to extinguish the value of the gold made by God. The gold and silver markets have been healthy, consensual and vibrant for more than 5,000 years, and that will never change as long as human beings still walk this earth and breathe the air. Government made currencies have catastrophically failed every single time they have been created. That, too, will never change. Soon, the exchange value of metals will be determined by people, trading one to one, and not by Deep State manipulators and criminals who now set phony prices in rigged markets that they control. You will only be able to enjoy gold and silver’s many virtues if you own them. As millions upon millions of people wake up, see monetary truth and buy, it will become harder to acquire metals at anywhere near current prices, in our view. This is not investment advice (we are not investment advisors and urge you to do your own research and make your own decisions), this is common sense. We believe your opportunities for action are diminishing, because you are battling deteriorating fiscal, economic and monetary circumstances, not to mention time.

Stewart Dougherty
November 13, 2016

Stewart Dougherty is the developer of a privately-held, principles-based forecasting methodology named Inferential Analytics. The unique IA model assesses monetary, fiscal, financial, market, social, political, empirical and anecdotal factors to get a glimpse of tomorrow, today. He has 35 years of management, corporate strategy and business development experience. He is a graduate of Tufts University (MA) and Harvard Business School (MBA).

As The Stock Market Levitates, Economic Activity Deteriorates

In my latest issue of the Short Seller’s Journal, I predicted a weak showing for July auto sales.  Both GM and Ford missed Wall Street’s forecast.  With the magic of seasonal adjustments, the industry data overall was presented to show a .7% increase in overall sales vs. June.  GM sales dropped 2% and Ford’s sales fell 3%.  Again, any overall industry gains can be attributed to mysterious “seasonal adjustments.”  June auto sales dropped 3.4% from May.

When Ford reported its Q2 earnings, Ford’s auto finance division reported a decline in profits that reflected lower values realized at auction on cars returned after the lease expired.  Auto market weakness typically shows up first in the resale/used market (I traded the auto supply sector junk bonds when I traded on Wall Street in the 1990’s, which is why I’m familiar with auto cycle dynamics).  In addition, Ford Credit reported higher than expected credit losses.

My point here is that the auto industry, after being hyper-stimulated by the Fed with $100’s of billions of subprime quality car loans and leases, is going  to head south – probably rather quickly.   Our financial system is about to feel a huge shock from delinquent and defaulted car financing extended to people who could never really afford the payments.   Ford is already feeling it.   Carmax also reported bigger than expected losses in its car loan portfolio.

Housing is the other economic sector that has been hyper-stimulated by the Fed and the Government with artificially low interest rates and taxpayer-sponsored low to no-down payment mortgages.  Housing is going to head south quickly as well.  This was evident with yesterday’s construction spending report:   June private construction spending fell .6% from May, non-residential construction dropped its most since December, April construction spending was revised to down 2.9% from down 2%.

Not only is construction spending declining, previously reported construction spending is being revised to show that it was weaker than originally reported.

The housing market data reported by the National Association of Realtors is tragically corrupted.  Recently the NAR has been reporting an increase in first-time buyers.  Yet, the Census Bureau-measured rate of home ownership continues to decline.   Last week the CB reported the rate had dropped 62.9%, a 51-year low (click to enlarge):

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What this means is that real first time buyers are not showing up as buyers, contrary to the NAR’s manipulated data.  The chart to the left is from the National Association of Homebuilders.  It shows the breakdown of home ownership by age demographic for Q2 2015 vs Q2 2016.  As you can see the first-time homebuyer age demographic has declined.  This graph undermines the data being reported by Larry Yun and the NAR.

My educated bet is that a large percentage of existing home buyers over the last couple years has been speculators – either quick-flippers or “investors” who buy a home with the intent to fix it up and re-sell it six to twelve months later.   There will be a lot of “second” home owners who end up stuck with their “investment.”

I have been theorizing for quite some time that the housing market would get “squashed” from the top.    The first-time buyer is the key component in the housing market sales activity cycle.  If a move-up buyer can’t sell its home to a first-time buyer, the owner with the “move-up” home – the upper price-range home – for sale can’t sell. It leads to a glut at the high end – something that is being reported all over the country.

As I’ve noted several times recently, high-end inventory has been building up across the country for well over a year.  Long-time housing market analyst and consultant, Mark Hanson, said in his latest blog post:

I am getting reports from sources in mid-to-high end regions all over the nation that after a strong June, July sales were down between 15% and 50% with Pendings down as much as 60% from a year ago. One large West Coast brokers with whom I talk said they are recommending to clients with mid-to-high end properties on the market over 30-days with no offers to cut list prices aggressively in order to get in front of the market versus the process of small, frequent price cuts that look bad optically and keep sellers constantly behind the market.  LINK:  Big Trouble Ahead

In other words, the inventory clog at the high end of the market is starting to spill over into the upper-middle price range.  I received a price-change alert yesterday about a $1-million+ home which was taken down over 14% in price.   The “new price” competition is heating up.  I’m seeing “new price” signs in the mid-priced homes now all around Denver.

The point here is that the two primary drivers of economic activity – albeit artificially stimulated economic activity – auto and housing – are heading south.  I believe the U.S. economic system will be engulfed by drop off in economic activity that will shock even those who can see through the economic propaganda being reported by the Government, Fed and industry associations.

In my last couple of Short Seller’s Journals, I have been recommending shorts in the housing and auto sectors.   These are two high-beta sectors that will sell-off more than the overall market once the market heads south again, something which may already be happening.

As you can see from the following 11-year weekly graph of the Dow Jones Home Construction index, the homebuilders and related home construction companies have been trending sideways since April 2013 (click to enlarge):

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The index is down 6.8% since hitting 610 intra-day last Wednesday.  The S&P 500 is down just .7% in that same time-frame.  But this illustrates my point about the downside potential for the housing stocks if the S&P trends lower.

My Short Seller Journal presents facts about economic data not reported by the media and analysis not generally found on most, if any, blogs.  It’s a weekly report in which I also offer ideas for using options to short the market plus trading and capital management strategies.

It’s clear that the Fed is doing what it can to keep the broad market indices from selling off,NewSSJ Graphic but underneath the marquee lights there’s a whole world of stocks that are collapsing in price.  In the next issue I’ll be presenting what I believe is an energy sector debt-induced Ponzi scheme that could drop from $20 to at least $5.  You can access the my short-sell ideas using this link:   Short Seller’s Journal.

The Fed’s Final Solution

Today is Bastille Day in France which celebrates the overthrow of the French feudal monarchy and the establishment of a Constitutional Monarchy.   The storming of the Bastille was a key event in the French Revolution.

It’s ironic that the course of the U.S. Government, and it’s original “Bill of Rights” foundation upon which the French “Declaration of the Rights of Man and of the Citizen” was based, is going in the opposite direction of the gift given to us by the Founding Fathers.

The 3rd massive stock market bubble in 16 years is emblematic of the fraudulent Ponzi scheme that has engulfed the United States political, economic and financial system.   The Fed now as much as openly admits that it is driving the stock market higher, ostensibly with the goal of stimulating economic growth.

However, I the elitists who control the Fed are not stupid.  They have ignited the third stock market bubble specifically for purpose of a final effort to confiscate public wealth and destroy the middle class.  For purposes of this discussion, “middle class” is defined as anyone not in upper .5% (point five percent) of wealth in the U.S.

In today’s episode of The Shadow Truth, we discuss the stock bubble as a wealth confiscation mechanism and explain why we believe an explosive move in gold and silver is going to occur this  year.

Give me control of a nation’s money and I care not who makes it’s laws — Mayer Amschel Bauer Rothschild

The Stock Market Is A Weapon Of Massive Wealth Destruction

The discussion about p/e ratios and other valuation ratios derived from Company-issued GAAP accounting financials is idiotic.  The GAAP accounting allowances have been liberalized beyond a Bernie Sanders wet dream over the last 20 years.   The p/e ratio at the peak of the tech bubble is completely different from the p/e ratio at the top of the 2007 stock bubble which is completely different then the p/e ratio now.

If 1999’s or 2007 GAAP standards were applied to today’s earnings, the P/E ratio on the S&P 500 would be at least as high as 65 p/e ratio registered in 2007.   By several other metrics, most notably market cap/sales ratio, the current stock market is by far the most overvalued in history.

And that does analysis does not incorporate any adjustments for the fraud component of contemporary corporate accounting.

The S&P 500 and Dow are hitting all-time highs this week.   This was triggered by the Ben Bernanke influenced Bank of Japan decision to engage in “helicopter money” activity in an attempt to stimulate economic activity.  Notwithstanding the fact that Bernanke is likely the most destructive Central Banker in history, Japan’s decision will end in destruction of its currency.  Maybe that’s what the NWO’ers are working toward achieving anyway.

Interestingly, the U.S. stock market reacted counter-intuitively to Japan’s move.  The yen and other Asian currencies plunged vs. the dollar, making U.S. manufactured exports to Japan/Asia more expensive and making Asian imports into the U.S. cheaper.   This in turn will further depress U.S. corporate revenues and earnings, which have dropped 5 quarters in a row – likely a 6th quarter when we get to see Q2 earnings reports.   To label this response by the U.S. stock markets “idiotic” is an insult to the word “idiotic.”

Beneath the glow of a stock market on fire, the U.S. economy is collapsing, especially the consumer.  I’ve detailed the decline in a key consumer spending metric, dining out, to demonstrate that middle class disposable income is shrinking quickly.  The Canadian brokerage firm, Canaccord, released a report this morning which stated that, “said the firm’s checks indicate a material decline in sales and traffic trends in casual dining restaurants was seen in June LINK.

June auto sales came in below expectations.  This is despite a new record in auto debt issuance.  The auto debt bubble is starting to look a lot like the housing mortgage bubble of 2005-2008.

The price of oil is starting to drop quickly again.  Refiners are cutting crude oil orders quickly as demand for refined products slips as another oversupply condition has accumulated:  LINK.   The Fed and the TBTF banks have been working hard to keep the price of oil propped up.  They know all too well that a big bank balance sheet disaster looms if too many junk-bond financed companies go tits up all at once.  That will happen anyway and for that we can soon expect Helicopter Money in this country.

Speaking of Helicopter Money, Cleveland Fed President, Loretta Mester, gave a speech in Australia in which she alluded the possibility of using “Helicopter Money” to stimulate economic activity.  Mester is a voting member of the FOMC. This tells us that the FOMC itself has been discussing the possibility of dropping bags of money on the population.

This reflects a Fed that is in a complete state of desperation about the collapsing economy.  $4 trillion in direct money printing plus several multiples of that amount of money injected into the system in the form of credit failed to stimulate real economic activity.  Why are they talking about even more?   Sure, housing and auto purchases using DEBT were stimulated, but that ship has sailed unless the Fed wants to give out money for down payments.

The Fed is even more desperate to keep the stock market elevated. If the stock market collapses, or just drops over 10% for an extended period of time – as in a few months – every single pension fund and insurance company in this U.S. will collapse.  It’s a simple as that.

In other words, the stock market is one big weapon of Mass Wealth Destruction.  You can protect yourself by unloading your non mining stock dollar-based “investments” and moving your money into physical gold and silver.

I am expecting a MONSTER move in the precious metals between now and the end of the year.  I will lay out an overview of my views later this week…I save details behind my analysis for subscribers to my Mining Stocks and Short Seller Journals…

 

BREXIT Is Being Used To Deflect From The Economic Collapse

I actually could care less about BREXIT.   I have yet to encounter any valid analysis on why the issue matters at all.  What is valid is that the BREXIT theatrical show is being used to deflect scrutiny of the continuous economic reports  showing that the U.S. economy is collapsing.

The Chicago Fed National Activity index released today plunged to -.51 against Wall Street’s expectation of a .11 gain.  Last months data-point was revised lower to barely positive.  The way that this index is calculated, it takes a lot to move the needle.  A drop from a revised lower .05 to -.51 reflects heavy contraction in economic activity across a broad (85 indicators) spectrum of the economy.  The 3-month moving average declined from -.25 – which was revised lower from the original .22 reported – to -.36.

New home sales reported today – for whatever the data series is worth – indicated an 11% plunge from the previously reported number for April, which of course was revised lower. May’s print was down 6% from the revision.  Ironically,  yesterday the National Association of Realtor’s Chief Economic Clown was extolling the virtues of new home construction and sales activity.  Oops.

I suggested yesterday that existing home sales report was highly overstated by the seasonal adjustments imposed on the data collected.  The Census Bureau, which prepares the new homes sales data series, has admitted in the past its estimation and adjustment models tend to overstate sales when actual sales are in a downtrend.  Ergo, the incessant downward revisions of previous reports.  Same with existing home sales, as the NAR uses the same statistical modelling package as the Census Bureau.  The NAR’s report yesterday contained a significant downward revision for April’s report, not coincidentally.

To be sure, there are still some hot pockets of housing activity around the country.  But most of the large economic areas are experiencing falling demand, falling prices and rising inventory, especially in the upper price segment of the market.  The collapse of the current housing bubble will be even more spectacular than the last bubble collapse.

The U.S. economy is collapsing.  In the “inside out” world of U.S. financial media Orwellian propaganda, today’s jobless claims number is being used to substantiate a “tight labor market.”  That’s a complete fairy tale.  The reason jobless claims are historically low right now is that the number of workers as a percentage of the workforce who qualify to apply for benefits when they get fired is at a historical low.  This fact is substantiated by the historically low labor participation rate and the percentage of the workforce that is now part-time.   Part-timers do no qualify for company healthcare or unemployment insurance.  It’s that simple. the  I would question the data if jobless claims were high.

So the entire financial world is focused on what is largely an irrelevant  referendum  on whether or not the UK will remain in the EU.   Meanwhile, the rug is being pulled out from under the entire western economy, including and especially the U.S. economy.

SoT #85 – Protect Your Gold And Silver From Financial System Risk And Fraud

In this Shadow of Truth Market Update, we discuss the best way to invest in silver, why the only way to protect your wealth and savings is to remove your money from any of the various custodians (banks, IRA/retirement fund custodians, ETFs, any financial firm) and the fraudulent nature of the U.S. financial system.

Five years down the road you’re going to pay taxes and early withdrawal fees on zero because that’s what your IRA is going to worth. – Shadow of Truth

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