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The Economy Is Tanking
The FOMC can raise interest rates any time it desires, without prior approval from anyone outside the Fed. Accordingly, the ncreased hype primarily has to be aimed at manipulating the various markets, such as propping the U.S. dollar. Separately, it remains highly unusual, and it is not politic, for the FederalReserve to change monetary policy immediately before a presidential election. – John Williams, Shadowstats.com
The March non-farm employment report originally reported that 215,000 jobs were created (ignore the number of workers who left the labor force). But five months later the BLS released “benchmark” revisions which took that original number down by 150,000. However, the BLS reports a 74,000 upward revision to Government payrolls, which means that non-Government payrolls were down 240,000 in March. So much for the strong jobs recovery…
A report out on August 19th that received no attention in the financial media showed that Class 8 (heavy duty) truck orders fell 20% from June and 58% year over year. This is after hitting a four-year low in June. The big drop was blamed on a high rate of cancellations. This is consistent with regional Fed manufacturing reports out two weeks ago that showed big drops in new orders. Again, the economy is starting contract – in some areas rather quickly. Heavy trucking is one of the “heart monitors” of economic activity. If you’re someone thinking about a career in trucking, check out trucking in Ontario and the opportunities available there. There is plenty of information online about this job as it is one of the most popular in North America.
Another datapoint that you might not have seen because it was not reported in the mainstream financial media: the delinquency rate for CMBS – commercial mortgage-backed securities – rose for the 5th month in a row in July. The rise attributed to “another slew of balloon defaults.” Balloon defaults occur when the mortgagee is unable to make payments on mortgages that are designed with low up-front payments that reset to higher payments at a certain point in the life of the mortgage. This reflects an increasing inability of tenants in office, retail and multi-family real estate to make their monthly payments.
Again, I believe that evidence supporting the view that housing and autos are starting to tank is overwhelming. Last week Zerohedge featured an article with data that showed that prices in NYC’s lower price tiers are starting to fall, following the same path as the high-end market there LINK. I want to reiterate that I’m seeing the exact same occurrence in Denver in the mid/upper-mid price segment. Furthermore, I’m seeing “for sale” and “for rent” signs pile up all over Denver proper and I’m seeing “for sale” signs in suburban areas where, up until July, homes were sold as soon as a broker got the listing. NYC, Denver and some other hot areas in the last bubble began to fall ahead of the rest of the country. I don’t care what the National Association of Realtors claims about the level of existing home inventory, their numbers are highly flawed and the inventory of homes on the market is ballooning – quickly.
I like to describe housing as “chunky,” low liquidity assets. It takes a lot of “energy” to get directional momentum started. Once it starts, it eventually turns into a “runaway freight train.” We saw the upside of this dynamic culminate over the last 6-9 months. But now that freight train is slowly cresting and will soon be headed “downhill.” I don’t think this dynamic can be reversed without extraordinary interventionary measures, even larger than 2008, from the Fed and the Government.
As for autos, I detailed the case that auto sales are heading south in previous blog posts. However, Ford disclosed in its 10-Q filing that charges for credit losses on its loan portfolio increased 34% in the first half of 2016 vs. 2015. GM’s credit loss allowances increased 14% vs. 2015. As credit losses pile up in auto-lender portfolios and in auto loan-backed securities, lenders will begin to constrict their auto sales lending activities. It will be an ugly downward spiral that will send negative shock-waves throughout the entire economy.
I find it highly improbable that the stock market will not continue lower unless the Fed steps in to prevent it. The Fed is playing “good cop/bad cap” with its rate hike theatrics. As John Williams points out, it does not require a formal FOMC meeting for the Fed to raise or lower interest rates. In fact, there’s precedence for inter-FOMC pow wow interest rate changes. This entire Kabuki theater is designed to support the dollar ahead of yet another meeting in which Fed stands still on rates. Honestly, even a quarter point hike could act like dynamite on the financial weapons of mass destruction hidden on and off bank balance sheets. The fraud at Wells Fargo is just the tip of the ice-berg.
The short-sell ideas I present in IRD’s Short Seller’s Journal have worked out of the gate four weeks in a row. The last time SSJ had a streak like this was during the early 2016 sell-off. Although my ideas are meant to be long-term fundamental shorts based on flawed business models and deteriorating business conditions, a couple of those ideas are down over 10% in less than a month. I’m also sharing my strategies with the homebuilders, all of which will be trading under $10 within the next 18-24 months (except maybe NVR.
You can access the Short Seller’s Journal here: SSJ Subscription. This is a weekly report in which I present my view of the markets, supported with economic data and analysis you might not find readily in the alternative media and never in the mainstream media. It’s a monthly recurring subscription you can cancel anytime. Subscribers can access IRD’s Mining Stock Journal for half-price.
Why Are Central Banks Buying Mining Stocks?
It was reported last week that the Norwegian and Swiss Central Banks had accumulated large positions in several high quality gold and silver mining stocks. Why would these bankers want to own producers of a barbarous relic?
This is not some scheme to load up on miners and then dump them into the market to help the Fed/ECB/BOE manipulate the precious metals. That’s an absurd view. They would just short shares if they wanted to accomplish that.
The dollar’s reserve status is coming to an end. In fact, the current fiat currency system is coming to an end. Central Bankers know this better than anyone. Every western CB has been printing money and buying worthless assets in order to keep the system from collapsing. Central Banks that want to survive are also finding ways to hedge their fiat currency-based portfolios with negative beta assets. Mining stocks are the easiest way to gain exposure to coming explosion in the price of gold and silver. Also note that Norway and Switzerland are not members of the EU.
We discuss this topic in this week’s Shadow of Truth. We also analyze the Hillary Clinton health situation:
Guest Post: Did The Deep State Postpone The Election?
Dave:
I believe the Deep State postponed the election today, using Clinton’s probably staged “health event” as the opening act of a drama that will unfold over the next several days to few weeks. The Deep State is in the process of pulling Clinton out of the game.
The Deep State knows several things. First, they know that the polls they manipulate showing that Clinton is ahead of or head-to-head with Trump are deliberate, doctored lies. They know that the true numbers demonstrate her campaign is disintegrating. This is reinforced by the fact that during her campaign appearances she plays to what are essentially empty halls, compared to Trump who routinely pulls in tens of thousands of standing-room-only supporters. Increasingly, the people realize that the polls are lies, and there is only so much further the Deep State can push them. The Brexit polls were total lies, too, and they impaled the establishment liars.
Second, they know that she is seriously ill, and that she will not be able to run a full-throttle campaign between now and election day; it will be physically impossible for her. Already, she has mysteriously disappeared from the campaign trail for hours at a time, and oftentimes longer. They thought they could prop her up through election day. Now they realize that they cannot.
Third, they know that Assange’s upcoming leaks are going to reveal her virtually indescribable dishonesty, greed, deviousness and criminality. They know that Assange has genuine information, and that it is going to be devastating to Clinton. She and her “Foundation” are complete frauds, and this fact is going to become totally inescapable, even to the most dimwitted and demented.
The “pneumonia” story will be used to excuse her hacking fits. It will also be used to get her out of the debates, during which she would be completely destroyed by Trump, particularly if she were not wearing her “earpiece” and getting talking points delivered to her by Abedin, who would simply be relaying the Deep State messages being conveyed to her, en route to Clinton. If Clinton has to go up against Trump in an honest debate, with no earpiece, she will be pulverized on her political record, avarice, physical and mental lack of fitness, and Foundation criminality. The Deep State will not allow tens of millions to watch that happen.
Clinton’s “health tragedy” (the “tragic event” of her health preventing her from becoming the first woman president, blah, blah, blah) will be gradually paid out to the populace over the next few weeks, and will be designed to induce the maximum amount of sympathy for her. The Deep State will keep her in the game for as long as possible, as they hope against hope that Trump screws up, or that perhaps something happens to him. If Trump’s numbers remain strong or increase, then they will pull her out of the game.
This will cause an election crisis. The election will be postponed.
Obama will pull the equivalent of a “pre-crime” maneuver, by extending Clinton and the Foundation “pre-pardons.” In other words, he will issue a Presidential Pardon for crimes the Clintons have not yet been charged with or convicted of, even though they would almost certainly face such charges and be convicted of them were the election to go against Clinton and were Justice permitted to function. A “pre-pardon” would be a first, but it would be absolutely no different from the unprecedented, dictatorial Executive Orders emanating from the White House over the past many years. The Supreme Court could render its verdict 20 years or so from now, after both of them are dead. The money, by then, would be long gone from view, and supporting Chelsea’s royal lifestyle of the Rich and Famous.
The government needs to shut down the Clinton investigations as soon as it can, because the high tide of Clinton criminality washes into every orifice of Washington, D.C. and Wall Street. The Deep State is never in 1,000 years going to allow Christie to formally investigate such endemic, monumentally profitable State corruption.
The motive for the Deep State to postpone the election until it can re-group its wounded forces is simple: Looting. The Deep State is looting one trillion dollars ($1,000,000,000,000.00) per year from the U.S. economy per year, at an absolute minimum. The true amount is almost certainly equivalent to the GAAP-based national annual deficits, which are running at roughly five trillions dollars ($5,000,000,000,000.00) per year. The $6.5 trillion ($6,500,000,000,000.00) missing from the Army, as admitted by the government, is a drop in the bucket compared to the actual amount that has been stolen from the nation, and the people. It should be no wonder to anyone why the Middle Class has been destroyed; it has been looted into oblivion.
These looting amounts do not include the Insider Trading looting that occurs in the financial markets every single day, facilitated by domestic and international information flows from connected insiders to complicit, profit-sharing traders who operate in total obscurity, privacy and immunity, and who annually book hundreds of billions of dollars in profits at a minimum. Inside Traders can book $25 billion in profits in 30 seconds on advance interest rate change information, and those opportunities happen dozens of times per year, as one simple illustration. There are thousands of similar opportunities in any given year.
The Deep State seeks to keep the Perpetual Fountain of Money gushing epic amounts of lucre into its pockets for as long as possible, because the profits from the Perpetual Fountain of Money are far beyond a mere Fairy Tale, they are a Living Dream Come True. The Deep State is not going to allow anyone or anything to turn off its Perpetual Fountain of Money, particularly not Trump.
The postponement of the election will most likely extend for at least one year, during which new events will cause a extensions of the postponement.
Revelation of the postponement of the November election could be one Black Swan that creates a dollar crisis. This might be why certain members of the Federal Reserve are now pushing for a rate hike in September, even though current U.S. economic circumstances make that idea absurd. It is probable that the Deep State realizes its machinations could create extreme, unpredictable and uncontrollable Forex volatility, and that they are attempting to pre-emptively head this off, or at least, ameliorate it.
The coming days will provide additional puzzle pieces for insertion into the mosaic, but needless to say, as a nation, we are in the most dangerous situation we have experienced during the past 50 years, at least. If people are not making serious preparations right now, they might come to regret it.
Regards, Stewart
About Stewart Dougherty: I am a Harvard MBA, and Inferential Analytics leverages quantitative and qualitative techniques that I learned both in my education, and during a 30+ year business career. I am semi-retired, but have never worked harder in my life. About six years ago, I wrote several articles that were picked up by 24hgold, MarketOracle, Lew Rockwell, Goldseek and numerous other Internet publishers followed even by some magazines.
The 2008 Collapse Will Continue Without More QE
Craig “Turd Ferguson” Hemke invited me onto this Thursday A2A podcast show last Thursday. As usual, Turd does a great job of blending irreverent humor and truthseeking in order to flush out cutting-edge insight on the issues affecting our markets. In this episode we discuss:
- The history of DeutscheBank and how this is all still relevant today
- Jim Rickards and his role as a “spokesperson” for gold
- The relative safety of working with different custodians and online clearing firms
- The benefits of owning shares in streaming/royalty companies
- And, as usual, a whole lot more
You can hear our conversation and the excellent questions asked by the members of Turdville here: A2A with Dave Kranzler of Investment Research Dynamics
Paper Gold Is Legalized Fraud
A lot of questions were raised when it was reported that Deutsche Borse failed to deliver physical gold in exchange for its Xetra-Gold Notes. But the only real answer to those questions is simple: the only way you ever own physical gold is if you buy actual physical gold and take possession.
The allegations that Xetra-Gold or Deutsche Bank or Deutsche Borse committed fraud or failed to deliver gold are strictly false. One thorough reading of the Xetra-Gold prospectus dispels those allegations. The prospectus little more than a blanket legal disclaimer. The language is clear. It says right in the prospectus that the an investment in the Notes “does not constitute a purchase or other acquisition of Gold.” There is not case for fraud because none of the participants in Deutsche Borse, and Deutsche Borse itself, did not commit any breach of contract per the terms of the prospectus.
The term “economic” in the prospectus is defined (pg 12) to mean that the “bears the market risk associated therewith. If the gold price decreases, provided that all other conditions remain unchanged, such decrease may result in a partial or complete depreciation of the invested capital. If the gold price increases, provided that all other conditions remain unchanged, such increase may result in an increase in the invested capital.”
In this latest episode of the Shadow of Truth we discuss why buying paper forms of gold like GLD or Xetra-Gold is nothing more than an investment in a paper claim to the rate of return on gold during the period in which you own the security. If you don’t hold your gold in your own possession, you don’t own it:
There Is No Default Or Fraud Committed On The Xetra-Gold Securities
Anyone who purchases paper gold with the belief that it is an investment in gold is an imbecile.
Last week Zerohedge broke a story about an investor who tried to redeem shares in Xetra-Gold “notes” in exchange for the designated amount of gold represented by those notes. The story gained legs on the internet as a “refused delivery” and a “delivery default.” I received several inquiries about this and my only response was that someone needs to go through the prospectus in order to determine what type of event has occurred.
I went through the prospectus and so far, everything published on the internet, including any claims made by Zerohedge, are reckless, useless and incorrect. Here’s a link to the prospectus: Xetra-Gold Notes. Ultimately, there has not been a legal default. Furthermore, here has not been any fraud committed because there has not been any breach of contract.
Let’s start with some facts directly from the prospectus. 1) The Issuer is Deutsche Borse Commodities GmbH; 2) The Custodian is Clearstream Banking AG; 3) The Debtor of the Gold Delivery Claims is Umicore AG. That latter aspect is interesting. Unicore is a Swiss metals refiner and trader. Any claims of failure to deliver should be directed at Unicore. The securities in question are unsecured Notes of the Issuer and the only “asset” of the Issuer is a “claim for delivery of one gram of Gold in accordance with the Terms and Conditions.” That’s it, there are not any other assets in Deutsche Borse Commodities GmbH.
Deutsche Bank is one of the redemption agents. But Zerohedge labelled Deutsche Bank as a “Designated Sponsor” as if it meant that DB had obligations beyond what was defined by the prospectus. In fact, DB is a “designated sponsor in the electronic trading system” of the notes. In other words, DB is the primary market maker in the trading of the securities. Nowhere in the prospectus does it specify that DB is obligated to fulfill delivery of gold in exchange for redeemed Xetra-Gold Notes. Note: This is not a defense of DB – I regard DB as one of the most vile and corrupt banks on earth; but legal facts are facts that need to understood and regarded.
Here’s the other relevant facts: 1) The purchasers of the Notes will only acquire the rights securitised by the Notes. The purchasers of the Notes will not acquire any title to, or security interests or beneficial ownership in, the physical Gold held in custody on behalf of the Issuer. An investment in the Notes does not constitute a purchase or other acquisition of Gold. This means that the notes are unsecured and the only right is to submit a claim against Unicore, the Debtor of the Gold Delivery Claims. Good luck with that.
2) The gold price is determined based on demand for and supply of gold. The value of the Notes is a function of the demand for and supply of the Notes as such. This distinguishes an investment in the Notes from a direct investment in gold. The purchasers of the Notes will only acquire the rights securitised by the Notes. The purchasers of the Notes will not acquire any title to, or security interests or beneficial ownership in, the physical Gold held in custody on behalf of the Issuer. An investment in the Notes does not constitute a purchase or other acquisition of Gold. This means that you are investing in paper plus the right to make a delivery claim.
3) Deutsche Bank AG is not, in any way, obliged to protect the interests of the investors. That’s self-explanatory and it is legal refutation of all of the accusations made against DB by reckless blog posts.
4) Umicore AG & Co. KG as the responsible agent for all physical delivery processes in connection with the Notes and in its capacity as the Debtor of the Gold Delivery Claims will be actively trading in gold. This activity may also lead to various potential and actual conflicts of interests. Umicore AG & Co. KG is not obliged to decide any such conflict of interests in favour of the investors, but will in connection with the trading in gold take such decisions and measures at its sole discretion as it may deem
necessary or expedient to protect its own interests and will act in this context as if the Notes did not exist. That basically says that if you expect to be guaranteed delivery of gold when you send your notes to Deutsche Bank, who is a redemption agent, then pay your lawyer to file a claim in German and Swiss courts.
The prospectus makes it very clear that the purpose of the notes is to make profits for the entities who are the shareholders in Deutsche Borse. In that regard, the prospectus states that: The only business activity of Deutsche Börse Commodities GmbH is the ongoing issuance of the Notes which are the subject matter of this Prospectus and transactions associated with such issuance. All activities resulting from the issue of the Notes, e.g., the safekeeping of Gold and the fulfilment of claims for delivery of holders, have been outsourced by the Issuer to third parties. Those third parties are generally the shareholders of Deutsche Borse.
The bottom line on the failed delivery incident reported by Zerohedge and strangulated by several other blogs is that Deutsche Bank has no obligation with respect to delivering gold to any note-holder who submits the paperwork required to redeem notes for gold other than to pass on the request to Umicore, which is specified as “the responsible agent for all physical delivery processes in connection with the Notes.” In fact, the prospectus reiterates that “Deutsche Bank AG is not, in any way, obligated to protect the interests of investors.”
It goes on to state that Unicore, in its capacity as Debtor of the Gold Delivery Claims, will be actively trading in gold and that “this activity may also lead to various potential and actual conflicts of interests. Unicore AG & Co. KG is not obliged to decide any such conflict of interests in favour of the investors, but will in connection with the trading in gold take such decisions and measures at its sole discretion as it may deem necessary or expedient to protect its own interests and will act in this context as if the Notes did not exist.”
With the above as legal context, I’m not surprised that Deutsche Bank did not offer any remedy when it was asked to respond to the allegations of a failed delivery of gold. In fact, the prospectus does not contain any specific remedies in this case. The only possible conclusion is that there has been a “breach of morals and ethics.” Boo hoo.
Ironically, the Xetra-Gold notes have more loopholes and lack of investor protections than GLD. Anyone who buys GLD thinking they are investing in gold is an idiot. What does that make anyone investing in Xetra-Gold with the belief that it’s an investment in gold?
The easy conclusion in this situation is that the entities that are involved in Xetra-Gold do not have the gold that is supposed to be delivered. That’s probably the most likely explanation but unfortunately the prospectus does not specify any legal remedies. I guess a gold-delivery-note-holder could file a lawsuit against the Issuer and Unicore. Until someone with deep pockets who is interested in truth discovery takes that initiative, we are left with no definitive explanations.
The Stock Market Veers Further From Economic Reality Each Day
Actual Monthly Change in August Payrolls Likely Was a Contraction – Though Bloated by Seasonal-Factor Distortions and Add-Factors, Annual Payroll Growth Effectively Held at a 30-Month Low – Second-Quarter Real Merchandise Trade Deficit Remained Worst Since 2007. – John Williams, Shadowstats.com
The negative economic news continues to spill out, with most economic reports reflecting an economy that is already in contraction (recession). The most interesting report out last week was auto sales for July, which showed a 5.5% drop from June overall and a 6.2% drop for domestic vehicles. These comps are based on seasonally “adjusted” annualized rates. I would bet anything that the actual number of cars sold in July vs. June were a lot lower. Ford reported an 8.4% drop in sales. Ford admitted that the market was soft and that retail price incentives are at historical highs. In short, the overall auto sales report was a disaster and it’s going to get worse going forward.
With regard to the transports index, a report out on August 19th that received no attention in the financial media showed that Class 8 (heavy duty) truck orders fell 20% from June and 58% year over year. This is after hitting a four-year low in June. The big drop was blamed on a high rate of cancellations. This is consistent with regional Fed manufacturing reports out last week that showed big drops in new orders. Again, the economy is starting contract – in some areas rather quickly.
One last datapoint that you might not have seen because it was not reported in the mainstream financial media, or even Zerohedge: the delinquency rate for CMBS – commercial mortgage-backed securities – rose for the the 5th month in a row in July. The rise was attributed to “another slew of balloon defaults.” Balloon defaults occur when the mortgagee is unable to make payments on mortgages that are designed with low up-front payments that reset to higher payments at a certain point in the life of the mortgage. This reflects an increasing inability of tenants in office, retail and multi-family real estate to make their monthly payments.
The housing market is going to crash again. Vancouver home sales crashed 23% in one month – LINK. Think this can’t happen in the U.S.? Think again because, as I detailed in a previous post, home sales in Aspen and the Hamptons have crashed 50% this summer. In this post – LINK – I presented data from Redfin which showed home sales in July fell 46% in Vegas, 24% in Miami, 21% in Portland, 20% in Oakland and 11% in Denver.
The entities that report housing and auto sales can hide the truth about monthly sales volume using seasonally adjusted annualized rate metrics, but they can’t simulate actual economic activity with fake data. Eventually reality catches up. Go drive around areas where you live that use to be “hot” housing markets. I bet you’ll see a lot of “for sale,” “for rent” and “price reduced” signs. I am seeing that all over Denver and I’m starting to see it in the formerly “hot” suburban areas.
I have no problem betting on housing with my own capital. My homebuilder short positions are the highest they’ve been since 2008. Unless the Government starts pushing 0% down payment mortgages in general, vs. through programs sponsored by the USDA and VHA, the housing market is hitting a stiff wall in Q4.
The stock market is going to have to break one way or another. Below is 60-minute, intra-day chart of the S&P 500 that I have been posting in my weekly Short Seller’s Journal (click to enlarge):
I just don’t think the S&P 500 can continue in this “holding” pattern much longer. Some think the Fed is holding up the market until after the election. I don’t know if that’s true or even possible. It’s my view that, unless the Fed engages in another massive round of money printing, at some point it’s going to lose its ability to keep the market from turning south violently. By the way, because of what you see in the graphic above, puts on most stocks, especially homebuilder stocks, are very cheap right now. Buy cheap and sell dear.
Even though the Fed is obviously propping up the S&P 500 and Dow, several sub-sectors of the market are heading lower. Housing, retail, transports and financials are just a few. Interestingly, the last four short ideas presented in my Short Seller’s Journal have worked right out of the gate. This type of winning streak has not occurred since late December. Regardless of whether my ideas work immediately or take a few months to develop, most of them will work better than shorting the SPX over the next several months/years. You can access the Short Seller’s Journal this link: SSJ Subscription.
Thoughts On Rate Hikes, Money Printing and Jim Rickards
In times of universal deceit, telling the truth is revolutionary act. – George Orwell
A subscriber to my Mining Stock Journal sent me this correspondence a few days ago while the precious metals were being pushed lower by the bullion banks:
I read an article before the July 4th holiday from James Richards. He said that China would use the G20 meeting to push for the SDR. I kept this in the back of my head while the PMs were being smacked around in August. Zerohedge came out with this story today that more fiscal stimulus was coming: LINK
There’s no question that Fed co-chairman Stanley Fisher floated his “rate hike coming” propaganda all week last week, starting with his useless speech at Jackson Hole, as a device to help the Comex banks smack gold with their fraudulent paper gold.
It’s now clear that gold was taken down ahead of the G20 meeting because the insiders knew that a call for more QE would emerge. And that’s about the only thing that emerged other than the amusing abuse of Obama by China and Russia.
This was my response to the above subscriber inquiry – I thought it was worth sharing:
Rickards is controlled opposition. He appears to be friendly to anti-elitists like our crowd but he’s a front for the Deep State that is pushing hard for the SDR to replace the dollar because the dollar will still be largest component and it will enable the Deep State to maintain a high degree of control of the global economic system.
I believe China/Russia are using the SDR as an intermediate step toward getting rid of the dollar completely. That the SDR will play some type of role for awhile is already priced in to the market. That Chinese SDR bond issued is an example. Rickards is regurgitating information that is already obvious and absorbed into the markets. More interesting is to figure out what’s next.
You saw how China treated Obama at the G20 vs. Putin. The writing is on the wall on the for the dollar and the U.S.
If the big Central Banks resort to more QE to keep everything from collapsing, gold will soar. If they don’t resort to QE, everything will collapse and gold will soar in flight to safety.
The only strategy “they” have left is to create as much disinformation and confusion as possible. Rickards is part of that disinformation apparatus. Note the heavy onslaught of anti-gold propaganda the past few weeks, primarily Fed heads chirping like pre-programmed monkeys about rate hikes. Won’t happen.
Enjoy This Labor Day – The Next One Might Be Unpleasant
I hope everyone enjoys this Labor Day with a few beers, family, friends and the U.S. Open Tennis Championships. Most Americans do not realize that they are living in the shadows cast by the setting of the American Empire’s sun. The U.S. political and economic system has morphed into a Banana Republic of the sort at which we used to laugh in high school history courses.
While the Government attempts to brainwash the population into slavish adulation of the military as the Deep State prepares for a global war, consider that the true patriots in this country are people like Paul Craig Roberts who have the balls to expose the truth about what is transpiring beyond the veil of propaganda that has fallen between the American public and the wealthy elitists:
Workers understood that labor was the backbone of the economy, not Wall Street moguls or bankers in their fine offices. Workers wanted a holiday that recognized labor, thus elevating labor in public policy to a standing with capital. Some states created labor day holidays, but it wasn’t until 1894 that Labor Day was made a federal holiday.
The labor movement, which gave us Labor Day, is no longer with us. The American labor movement died about ten years after the death of its most famous leader, George Meany of the AFL-CIO. Meany, born in 1894, died in 1980.
Looking at last Friday’s BLS payroll report, the jobs are in the lowly paid, part-time service sector. The goods producing sector of the economy lost 24,000 jobs. The jobs are in retail trade, health care and social assistance, waitresses and bartenders, and government which is tax supported employment.
Whether Washington policymakers realize it or not, the American work force smells like India’s of a half century ago. Whatever deranged Hillary and her neoconservatives claim, there is no evidence in the composition of the US labor force that the US is a superpower. Indeed, what the employment statistics show is that the United States is a third world country, a country whose leaders are so out of their minds that they are picking fights with first world countries—Russia and China. LINK
Dr. Roberts is a colleague and a friend with whom I’ve debated several issues and ideas. Unfortunately I do not have a realistic counter-argument to his sordid conclusion: “The United States of America is on its last legs. As there is no willingness to recognize this, nothing can be done about it. America’s last function is to cause World War 3 in which all of us will expire.”
Guest Post: The Mysterious Guardian Of The U.S. Stock Market
Note: Scott Rabinowitz owns Quarterwave Asset Management LLC and has been a professional investor in the precious metals sector for over 15 years.
Yes, this has all become mentally exhausting for anyone that has been around what are still referred to as “markets for the past 25 years. In fact, I’d say it has become mentally exhausting to anyone still capable of thinking on their own, not having to be spoon fed an explanation for every logical and illogical outcome that seemingly approaches at a more rapid rate as each day passes. To most thinkers, it is frustrating that fundamentals seem to be nothing more than an old pastime to everyone else. Our world has succumbed to an existence in which a mere few can and will dictate their desired outcomes as if it is a certainty and not just an experiment in which unintended consequences are nothing more than a potential nuisance.
So, when nothing makes sense anymore and every day feels like lunch with the Mad Hatter, one must seek out a potential explanation for the confounding behavior of “markets”. After all, fundamentals have clearly been deteriorating for some time now, whether it be corporate revenues (declining), earnings (declining), etc. Yet US equity markets are at all time highs – coated in as much Teflon as the political world. Oddly enough however, precious metals are having a great year despite the pullback in August. It should appear to both the casual and non-casual observer that there must be a conduit, instigator, call it what you will, mechanism, to help explain how “markets” seemingly either abruptly stop going down or up as if was magic.
The mysterious guardian of markets appears to be the USD:JPY (US Dollar:Japanese Yen). It is hard to imagine that the correlation to equity market bottoms and tops is correlated to anything other than this magic elixir. This also includes the counter movement of precious metals to the USD:JPY as well. What am I saying? When the USD:JPY is rising stocks have been rising in lock step with it while precious metals have experienced the opposite move and vice versa.
Below are the two 4-hour charts (click to enlarge) of the USD:JPY and the S&P 500 back to December 2015 to show how there appears to be a potential mysterious guardian of markets. Furthermore, the takeaway are the dates of the “turns” in the USD:JPY because yes the decline YTD looks to be quite orderly even though the S&P 500 has moved higher.
The reason the USD:JPY appear
s to be the chosen guardian of markets is due to the fact that it’s movement determines whether the carry trade (shorting JPY vs. the USD to buy risk assets) is turned on or off. The reason the Fed uses the yen rather than the euro is because the yen is the second most liquid currency in the world and its near-zero cost to 
borrow efficiently enables the carry-trade mechanism – short/borrow yen and buy dollar fiat currency based assets (stocks, Treasuries). Also the U.S. has a much tighter political policy control grip on Japan than the EU.