Is The U.S Ponzi Scheme About To End?

“How did you go bankrupt?” “Two ways. Gradually, then suddenly.”
– Ernest Hemingway, “The Sun Also Rises”

I was chatting with a friend two days ago who was agitated by the insanity of the markets. Look at TSLA, for instance. This thing loses $13,000 for every car sold. Soon the tax credits – i.e. the taxpayer subsidies – will expire and TSLA will lose even more per car because it will have to lower the price to entice buyers. Its balance sheet is a ticking time bomb in the form of residual value guarantees issued by TSLA used to induce buyers into paying up for a car that has depreciated in value considerably more than the value of the guarantee. Those poor saps don’t realize it yet, but they will be unsecured creditors to a bankrupt corpse of a company. And yet, the market has pushed the market cap above the market caps of GM and Ford.

To say this is absurd is an insult to the word “absurd.” I’m still trying to decide whether TSLA or AMZN is the biggest Ponzi scheme in U.S. history. I have not had a chance to dissect TSLA’s financials and operations to the extent that I have done so with AMZN. With AMZN the market doesn’t seem to care that, on a net income basis, in its latest quarter AMZN’s product sales business (it’s non-cloud, or AWS, business) lost money (that’s right, if you subract the operating income of AWS from total net income, AMZN lost money – AMZN manufactures net income for its non-AWS business via GAAP gimmicks) . But why focus on the facts? The operating income of its aws cloud monitoring business dropped 29%. Once GOOG, MSFT and ORCL have fully implemented their attack on AMZN’s cloud market share, AWS will become irrelevant. I would bet every single entity that bought AMZN stock since it released its Q1 earnings does not know these facts. AMZN, pure and simple, is a Ponzi scheme.

Amusingly, there’s a contest on CNBC over whether AMZN or GOOG hits $1000 first. This is the surest signal that the end of this fiat currency-driven credit and stock bubble globally is about to collapse.

Given the inability to manipulate its market via paper derivative instruments and short selling, this is the message that Bitcoin is signaling:

In the absence of the ability to manipulate the market, this is the same message that gold and silver would be sending to the world, only the scramble for gold and silver bullion in any form would be more frenzied and it would be widespread. There actually is a somewhat frenzied scramble for gold and silver in eastern hemisphere markets based on the premiums to melt being paid for refined products in places like India, China, Turkey and Viet Nam.

At some point the western Central Banks will lose the ability to manipulate the gold and silver price and the Comex will default. That’s when chaos will break out in the physical gold and silver markets. That may be what it will take to trigger the collapse of the U.S. Ponzi scheme. Apparently JP Morgan understands this inevitability. Prior to 2011, JPM did not operate a Comex vault. It had zero Comex silver. Currently JPM is holding nearly 108 million ozs of silver, or 54% of the total silver reportedly held in Comex silver vaults. This tells us, or at least me, that smart insider money is loading up on precious metals – not Bitcoin – and that silver is a better bet than gold.

Hemingway’s “slowly” method of going bankrupt has nearly run its course. There’s no way to tell the timing on the “all at once” side of this trade but the price action in Bitcoin is signaling to the world that the obviously inevitable draws near.

7 thoughts on “Is The U.S Ponzi Scheme About To End?

  1. I moved my wife’s 401k from stocks to a money market last night, made a decent return but looking at your analysis recently decided to pull the plug, haven’t yet convinced her to get out completely but at least she’s with me on owning some PMs.

  2. Excellent commentary. I would also point out that the decision by the CME and Reuters to step down from the LBMA silver fix just looks suspicious in the context of bitcoin’s stratospheric increase and the accumulation of gold and silver by China, Russia, etc…

  3. These media darling stocks…they are propped up, accounting fraud ignored by the SEC & other regulatory agencies. They must show extraordinary “growth” to lift up the indexes they are part of.

  4. Like a cockroach that refuses to die, the stock market keeps coming back and edges higher and higher. In 17 years of following the market I have never seen anything like this. Earnings, macro level news, political disasters, nothing matters. The furious btd programs are just unbelievable. Right now, it is abundantly clear that the star stocks are holding up the indices with a whole lot of stocks struggling badly. But they keep getting more and more bloated like a floating carcass. It seems the entire investment world has taken leave of their senses. How else can you explain pension funds gambling so recklessly in this dangerously bloated market? More and more I am feeling that a 2008 like collapse might not happen anytime soon. If the DOW reaches 30k and “crashes” by 40%, it will still be at 18k. I would only cautiously trade if I were a short seller in this market. Fundamental valuation doesn’t matter diddly squat in what has clearly become a propaganda vehicle. A few contrarians fighting against the might of the central banksters is like a bunch of forest dwelling foot soldiers fighting against an armored tank driving army.

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