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Global. Economic. Collapse. And The “Bernanke Moment”
The global economy, including and especially the United States, is collapsing. It’s debatable whether or not the western hemisphere countries produced true inflation-adjusted real GDP growth from 2009 to present. Yes, I know the numbers the U.S. Government’s BEA spits out purport to show “seasonally adjusted, annualized” economic growth. But a book could be written detailing the ways in which the Government manipulates and outright fabricates the data. John Williams of Shadowstats.com publishes a newsletter with highly compelling evidence. Anyone who dismisses Williams’ work does so out of complete ignorance.
The Baltic Dry Index is one of the primary tell-tales of economic collapse. It measures the 
demand for container cargo shipments of bulk raw materials used for all stages of manufacturing. It’s been twisted into evidence that China is slowing. But it tracks global shipments and the U.S. and Europe are China’s two biggest export markets. If China is not shipping, it’s because there is no demand from it’s two biggest customers. It’s really that simple.
Need another indicator of the collapsing U.S. economy? The mass layoffs that occurred in 2008-2009 are starting to hit the system again. We know the energy sector is shedding jobs quickly. But the retail and financial sector are close on the heels of the energy sector with 
job cuts – LINK. And all those bartender and waitress jobs that the Government alleges to have been created are to disappear again: Service economy is tanking. But there’s always this graph to the left if you think I’m making this up.
The point here is that the entire global economic system is in a state of collapse. I find it curious that the financial media and analysts in the United States want to blame the problem on the rest of the world, specifically pointing at the distressed debt market in China.
It’s not debt that weighs on economic growth. If debt issuance is required to generate economic growth, then the “growth” was not sustainable unless the growth could generate enough wealth to support the additional debt. Continuous systemic debt issuance is unsustainable and defies all natural natural laws of economics. At its base level it’s nothing more than a simple Ponzi scheme. A simple Ponzi scheme is probably what best describes the modern application – or misapplication – of Keynesian economics. I guess it’s poetic justice that Keynes’ economic thoughts were adopted by U.S. policy-makers originally at the onset of the first Great Depression and have been reinvented and re-mis-applied at the onset of the 2nd and bigger Great Depression.
I find it fascinating that the U.S.-based financial propaganda incessantly obsesses on this idea that China is the cause of the world’s ills. This is nothing more than narcissistic jingoism in its “best” light. But I prefer to see it as a form of yellow journalism seeded in pathetic ignorance. This article from the NY Times’ “Deal Journal,” for instance, references $5 trillion of troubled debt in China, calling it the world’s biggest problem. Hmmm…
Let’s shine just brief light on the United States. Currently the U.S. credit markets, enabled and partially backed by the Government, have now created over $1 trillion in student loan debt, at least 30% – 40% of which is in some form of technical default; over $1 trillion in auto debt, of which at least 30% can be considered of the toxic subprime variety and which I suspect will begin to collapse sometime during 2016; close to $2 trillion in junk bonds have been issued since 2009, with close to 25% of that in the energy sector, which is collapsing as I write this; since 2013, roughly $500 billion of new mortgage debt has been issue, a large portion of which is of the subprime variety masquerading as 3.5% down payment “conventional mortgage” debt. That’s $4.5 trillion of already or potentially toxic debt and that number does not include generic bank and revolving credit loans extended to consumers, small businesses and large corporations. We know already that the banking system is choking badly on a couple hundred billion of toxic energy loans.
The point here is that global economy activity – including the United States – is collapsing independent of the amount of debt sitting on top of the financial system. If the wealth created by economic activity was adequate to support the debt issued against the “hope” of economic growth, then servicing the debt would not be an issue. But economic cycles never have been and never will be growth in perpetuity. Unfortunately, the amount of debt issued since the advent of modern QE has taken a parabolic growth path.
We are about to be confronted with an economic catastrophe that will likely shock and awe just about everyone. The amount of fatal debt piled on top of the global economy will have the effect of throwing thermate into a napalm fire.
The Fed knows this and it’s why a couple of the Fed officials, including the highly influential NY Fed President, have been floating the concept of negative interest rates in this country. Think about that for a moment. The policy makers are considering the idea of paying you to borrow money. If that’s not an admission of defeat on the use of money printing to spur economic growth, I don’t know what is. Not only are we at the Bernanke Moment of dropping money from helicopters (apologies to Milton Friedman, who’s notion was hypothecated and abused by Bernanke), but they want to pay you to catch the money falling from tree tops in order to spend it. Man, this is going to get weird – I hope you are bracing for impact.
Did Something Blow A Hole In The Fed’s Balance Sheet?
[Note: A reader alerted me to this – LINK – which explains the $19 billion drop in Capital Surplus. Congress passed a law requiring all surplus capital at the Fed in excess of $10 billion to be transferred to the Treasury as part of the Highway Bill passed in early December. But does not change the thesis for the banking system underlying the analysis below: the banking system is starting to collapse again from billions in defaulting loans – loans that banks refuse to write down in value, just like they refused to mark down the value of the collapsing mortgage derivatives trusts in 2008 per “The Big Short.” It also calls into question the credibility of a Federal Reserve that is allowed and enabled to operate with just .8% book capital – $39 billion in book capital against $4.442 trillion in liabilities covered by just $4.482 trillion in “assets.” Finally, it calls into question the legitimacy of a Federal Government that continues to pass legislation for spending programs for which it has an increasingly diminished ability to fund. The analysis below is a snapshot of the collapsing U.S. and financial, economic and political system.]
The basis for this analysis is a video published today by Mike Maloney titled, Is A Financial Crisis Being Covered Up? My hats off to Mike for finding this data from the Fed because I would not have otherwise been looking for it. To help think about the analysis below, keep in mind that the Fed’s balance sheet is an aggregation of all of the Regional Fed balance sheets, which themselves are an aggregation of the banks that are members of each Regional Fed. (Click on image to enlarge)
On December 23, 2015 the Federal Reserve’s Capital Account plunged by 65% – $19 billion – when the Surplus Capital Account dropped by that amount. The Capital Account (CA) represents the capital required to be paid in (“Paid-In Capital) to the Fed when a bank becomes a member of the Federal Reserve system. Think of the CA as the “book value” of the Fed – assets minus liabilities. The Surplus Capital represents “retained earnings” and the Fed is required to maintain Surplus Capital equal to 100% of Paid-In Capital. This requirement is set by the Board of Governors. Currently, Fed interest earnings in excess of the required Surplus Capital and net of expenses is then transferred to the Treasury in the form of a dividend.
The 65% plunge in the Fed’s Total Capital Account, accounted for by the $19.4 billion drop in Surplus Capital, took the Surplus Capital account down to only 25% of Paid-In Capital (Total Capital minus Surplus Capital = Paid-In Capital). This points to a large scale financial crisis that had to be addressed by allowing some of the Fed member banks to withdraw an amount of Surplus Capital well in excess of the amount required by the Fed’s Board of Governors. Perhaps that might explain the Fed’s unscheduled “expedited, closed meeting” that took place on November 23.
Per the Financial Accounting Manual for the Federal Reserve Banks, the primary purpose of Surplus Capital is to provide a buffer against Paid-In Capital in the event of losses. And there’s the rub. Without having the benefit of even a modicum of Fed transparency, I would suggest that the $19 billion removed from the Surplus Capital account at the Fed was used to address collapsing energy-related loans (assets) sitting on the balance sheet of some of the big regional banks. On the assumption that these assets fall within the 10% reserve ratio requirement, it would suggest that some or several regional banks – and possibly one or two of the Too Big To Fail banks – have sustained at least $190 billion in losses in their energy-related loans. Or they are getting ready to take write-downs of that magnitude.
Interestingly, as I was getting ready to write up this analysis, a colleague with an energy industry contact in Canada called to tell me that he had just heard that CIBC is getting ready announce a big round of job cuts related to its energy banking business. The insider at CIBC also said that the big hits to the Canadian banking system are still coming.
I would suggest that this information can also be applied to domestic U.S. banks as well. We already know that the Dallas Fed has instructed its member banks to refrain from marking to market their energy loans and from pulling the plug on energy company borrowers who are in serious delinquency or technical default. We also know that Wells Fargo is somewhat admitting to sitting on an energy loan problem and that Citibank has an even bigger problem to which it is not admitting: Wells Fargo Bad, But Citi Is Worse.
It’s been estimated that funded (i.e. junk bonds + bank loans + funded revolver debt) is probably in the $500-750 billion area. Total including unfunded is over $1 trillion. More ominously, we have no possible way of knowing the size of the OTC derivative / credit default exposure connected to that $1 trillion. But we can safely say that it’s likely to be multiples in size of the actual debt in “nominal” amount, although every bank out there will claim to be hedged and thus the “net” is a small fraction of nominal. I would suggest that “net” becomes “nominal” when counter-parties begin to default. Just ask AIG and Goldman Sachs.
Given that there has never been a drop in the Fed’s Surplus Capital even remotely close to the 65% plunge that occurred the week of December 23, that sudden plunge in Surplus Capital at the Fed is somewhat shocking. But, given the probability that it is being used as an attempt to douse the lit fuse of a massive energy-related financial nuclear bomb in the form of defaulted energy loans and related derivatives, that drop in Fed capital is horrifying.
The BKX bank stock index has dropped 18% since December 23 vs. 7.5% for the S&P 500 in the same time period. While all eyes seem to be fixated on Deutsche Bank’s stock, it would seem to me that we should be focused on the financial meltdown occurring behind the Fed’s “curtain” that is clearly going on in the U.S. banking system based on the sudden plunge both in the credit quality of the Fed’s balance sheet and the recent cliff-dive in bank stocks.
The U.S. financial system is collapsing. This is evidenced by the extreme recent volatility in the S&P 500, as the Fed fights the inevitable stock market collapse, and in the recent run-up in the price of gold and silver. As a final thought to this analysis, I would suggest the possibility that the fraudulent silver price fix on the LBMA last week was a last gasp attempt by the big bullion banks to grab as much physical silver as they can, as cheaply as possible, before the price of gold and silver are reset by the market. How else can you explain the 40% move higher in the HUI gold mining stock index since January 19?
Housing: “Business Is Slowing Down – Quickly”
There has been no improvement in underlying consumer liquidity conditions. Correspondingly, with no fundamental growth in liquidity to fuel increasing consumer activity, there is no basis for a current or imminent recovery in the housing market. – John Williams, Shadowstats.com
The title quote is from a supplier to the homebuilding industry in south Florida, which had been one of the hottest housing markets in the country. He said his business has suddenly fallen off a cliff and development projects that had “been on the board” have been postponed indefinitely. Isn’t it a lot better to get information about what is going on at “ground zero” in the housing market rather than from some snake-oil salesman who bills himself as the National Association of Realtors’ chief economist or the sleazeballs on the financial “news” networks?
Make no mistake about it, regardless of the degree to which you want to put faith in the “seasonally adjusted, annualize rate” home sales reports generated by the National Association of Realtors and the Census Bureau, the housing market is a 10 mile train skid on a nine mile track.
Something is blowing up big time in the banking system. Everyone is talking about the interminably collapsing price of Deutsche Bank stock, but Bank of America, down only 2% right now, was down as much as 6% earlier today – same with Citi. The price plunge in these banks occurred in absence of any news reports or events that to which the sell-off could have been attributed.
The BKX bank stock index is down 25% from its high in mid-July:
While the entire U.S. financial media/community seems to be obsessed with the sell-off in Deutsche Bank stock, I’ll note that Barclays stock is down 50% from its 52 week high and Citigroup and Bank of America are down over 33% from their 52 week highs. Because of the incestuousness that has developed in the monstrous derivatives market, all of these banks are genetically connected. It’s really irrelevant which bank blows up first because when one goes, they’ll all go.
I am tying together housing and the big banks because the Central Bank money printing has reincarnated the housing bubble Frankenstein and the big banks – via the catastrophically massive Ponzi derivatives scheme – have been the transmission mechanism of printed money into the housing market.
The unexplained 25% collapse in the bank index is telling us that the financial system is melting down and that’s the most direct evidence that it’s not just a Deutsche Bank problem. Perhaps DB is merely 2016’s “Bear Stearns.”
The entire global financial system, including and especially the U.S., is headed for a collapse that will be worse than what occurred in 2008. In fact, it will be nothing more than an extension of an unavoidable collapse back then that was deferred with QE and Taxpayer money. The concerted Central Bank move to take interest rates negative are telling us that the QE rabbit is no longer available to pull out of the hat. Negative rates are telling us that the skidding train mentioned above is on the 9th mile of that skid.
A colleague of mine called me today and told me that he’s been monitoring the housing market activity on the west coast of Floriday, a previously white hot housing market. He said inventory is up about 15% from year end he is getting a constant flow of “price reduced” emails. I am seeing the same thing and getting the same number of “price reduced” emails from the MLS-based website I use to track the Denver market. And a reader posted this comment yesterday about Las Vegas, which also had been red-hot market for home sales and buy-to-rent schemes:
Supply is building quickly (no pun intended) and sales are in the toilet. Housing in going to be one of, if not the lead horses that take this economy down. A friend of mine who lives in L.A. and lives in Vegas 3-4 days per week for business, just rented a furnished luxury two bedroom condo with all utilities including cable and internet for $1250 per month. That is good, especially considering where he lives. But I reckon he could do better. Now I wonder if there is a way that electric companies in his area would be able to provide him with a better deal for his electricity so he has more money to spend on any things he may need to make his house a home. Although, as this isn’t his permanent residence, I think he’s doing quite well with that price. He also said that there were many choices available in the Las Vegas area and he is even considering buying his own property. He should probably read more about Las Vegas real estate at a website similar to https://vegashomesnv.com/, for example, to make sure he knows about closing costs and other expenses before buying. We are just at the beginning of the end. Even in Texas, many are looking at new luxury homes, with many looking to real estate companies similar to cayena as a way of finding themselves onto the housing market. They do this in the hopes that they will be stable enough to enjoy their new home without worry or at least have the ability to get on the property ladder in the future.
Another Huge Reason To Short AMZN – The Perfect Contra-Bill Miller Trade
First of all, regard this as a warning to get your cash out of any funds at Legg Mason that are touched by Bill Miller. The last time Miller was this bullish on stocks and AMZN, the S&P 500 collapsed from 1550 to 700 in 17 months.
Miller bills himself as a “value” investor. Yet, currently he has the pools of money he manages at Legg Mason 10% invested in AMZN. This just in, Bill, any stock that trades at a 425x earnings, 2.5x sales and 19x book definitionally is not a value play. Miller’s current highly disillusioned view on the stock market can be seen here: LINK.
Bill Miller’s claim to fame was beating the S&P 500 11 years in a row – until 2008 hit. He did this by making highly concentrated bets in the hot financial sector stocks, homebuilders and hot momentum stocks like AMZN. Nothing complicated there – certainly nothing Miller should have been earning $10’s of millions in fees on – go to the Blackjack table with the hot shoe and bet everything in your pocket on every hand. Of course, eventually the shoe turns ice cold and the dealer wipes you out, quickly.
Fast forward to February 2009 and Miller had one of the worst 10-year track records in the industry. He should have been investigated and barred from the industry. Instead, he’s back to his same old tricks with a 10% bet on AMZN. His fund at Legg Mason is down 20% for the month of January. By the end of the year, I predict that all of the gains he may have achieved over the last 5 years will be wiped out and his investors’ accounts will be incinerated.
If anyone wants to understand why Miller’s position in AMZN is the ultimate example of reckless money management devoid of proper due diligence, you can see the truth in detail in my Amazon dot Con report. I’m working on the 4th quarter numbers and will soon have an update, which will be available to everyone who has bought the big report.
A Warning Signal For The Housing Market
PennyMac (PFSI) is a mortgage finance company that describes itself as a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. The stock has been getting crushed and insiders have been dumping shares:
The graph above (click on image to enlarge) shows PFSI vs. the BKX banking index. Other mortgage finance stocks have been getting hammered as well. That steep decline that started on Dec 24 in the graph above was not accompanied by any news triggers. In fact, PFSI signed a new “warehouse finance” credit line with Credit Suisse for $100mm at the end of the year. That should be great news if you are a housing and mortgage finance perma-bull.
When stocks decline steeply with no related news events to set-off the price-drop – and when one of the largest individual holders, Leon Cooperman, is unloading shares – it’s the market’s way of signalling problems not yet recognized by the peanut gallery. PFSI reported its Q3 earnings on November 4 and with a cursory glance they looked to be what the market expected. The stock did not do anything unusual.
The action in PFSI’s stock and in some other related mortgage finance and real estate stocks tells me that the “invisible hand” in the market is signalling a significant downturn coming in both home sales volume and mortgage finance volume. Per the invaluable work of John Williams (Shadowstats.com), when you remove the statistical manipulation and annualization of the existing home sales report for December, it turns out that existing home sales evaluated on an unadjusted monthly basis for the fourth quarter was down 20% from the third quarter. That’s not something that you’ll hear about or read in mainstream media or on venues like Seeking Alpha or Realmoney.com or the Motley Fool or Business Insider.
That is what I believe the market is seeing and is why stocks like PFSI are taking a beating outright and relative to the overall banking sector. Anecdotally, I just got a call from a friend who told me house that would have sold for $620k on his block last year was put on the market two weeks ago for $599. The neighbors all thought the price was too low. Two weeks later, today, the price was lowered to $579. I bet that price will be lowered at least once or twice more before it sells. And this is an area that was still seeing bidding wars last summer.
Sometime in the next few weeks I’ll be featuring another mortgage-related stock in my Short Seller’s Journal that still has a LONG way to fall before it gets back to its 2008 great financial crisis, pre-QE price. My picks this week are significantly outperforming the market. SHORT SELLER’S JOURNAL
World’s Largest Silver Producer Calls On The LBMA To Explain Last Week’s Fraudulent Silver Fix
The London gold/silver fix was established in 1919 principally by the House of Rothschild to enable the Rothschilds to control international money markets through the manipulation of the price of gold. The daily gold/silver fix was conducted in the offices of N.M. Rothschild and Company. Fast-forward to 2016 and very little about the London fix has changed, other than some of the names involved with setting the “fix.”
As most of you know by know, the London price fix committee “fixed” the price of silver 84 cents below the market price as represented by silver futures trading. In the context of the daily interventions in the precious metals market in London and NYC, this act of manipulation was a particularly brazen display of contemptuous disregard for anti-collusion laws.
The parties who were harmed by this are the entities that had posted offerings in physical silver prior to the fix. They are the ones who need to initiate legal action so we can find out what happened. Certainly mining companies who posted their silver for sale had their face ripped off by this event. The more interesting side of the “fix” would be know the identities of the beneficiaries. My bet is that the bullion banks, some of whom are involved in the price fix process, were the biggest beneficiaries of the fraudulent price fixing.
As it turns out, the world’s largest silver producer, Poland-based KGHM, has called on the LBMA to provide an explanation:
KGHM, one of the largest producers of copper and the single largest producer of silver in the world, called the difference between the prices “very alarming” and called on the London Bullion Market Association (LBMA) to provide an explanation. LINK
Unfortunately, KGHM’s half-hearted plea will fall on deaf ears. The criminal manipulation of the London gold and silver market has been going on for over 100 years. Nothing will change that until the west collapses and the global system of fiat currencies is reset.
Having said that, not only does the LBMA price set the price for clearing physical gold and silver trades twice a day, it also is used to benchmark OTC derivatives. My best educated guess is that a couple of the most influential bullion banks involved in the fix – JP Morgan and HSBC, each of whom respectively operates the SLV and GLD trusts – used the fraudulent silver price on Friday in order to address an immediate need – either a large physical silver deficiency or a derivatives problem.
A friend of Bill “Midas” Muphy’s sent a note into Midas relating what happened with CDS in “The Big Short” with the silver market:
I can’t get the comparison to silver out of my mind as it truly is the mirror image of Credit Default Swaps. That is the CDS were never allowed to rise in value as the underlying mortgage bonds defaulted yet Goldman was constantly trying to buy them back from the holders at very low prices…..it wasn’t until Goldman had been able to purchase enough CDS back that the price skyrocketed.
I think what we saw on the LBMA last week with the silver fix is exactly that.
Unfortunately we’ll never know the truth about what happened. But the act itself reflects the desperation that is creeping into the bullion banking establishment. Desperation that is being fueled by what I believe is the early stages of an extremely powerful resumption of the bull market in gold/silver.
Did The Stock Market Bottom Last Week? You Can’t Be Serious
Toward the end of last week, when the S&P jumped 58 points (3%) for the week, 46 on Friday alone. The negative interest rate announcement by the Bank of Japan triggered the move on Friday. Earlier in the week the bottom-callers in oil were on their megaphone proclaiming a new bull market in oil, which got the stock market permabull drones all giddy. The trading action last week was entirely characteristic of a typical bear market short-squeeze rally fueled by momentum-chasing hedge funds and daytraders who had piled into the short side of the market as they chased momentum lower.
Typically these bear market counter-trend rallies are short-lived and are followed by sell-offs to new bear market lows.
I was quite dismayed by all of the stock market bottom-callers who jumped out of hiding to announce that the stock market “water” was warm and that it’s safe to jump in. Several of these mentally challenged mutual fund manager drones were on bubblevision Friday. These guys are either complete morons or ethically challenged. If it’s the latter case, then they are breaching their fiduciary duty by encouraging the public to put more money in their funds.
An article in the Wall Street Journal featured a money manager who tried to make the case that the bottom is in. Again, I hope that view comes from stupidity rather salesmanship. And some guy named Rob Arnott who supposedly manages a zillion dollars was featured on a well-known podcast website encouraging listeners to put money in emerging markets. May as well take lighter fluid and a match to your money. At least that would be worth the heat you create from the fire.
It simply blows my mind that, after 6+ year bull market in stocks that was entirely a product of money printing by Central Banks globally, a supposedly well-educated market “professional” can announce that the market has bottomed after a paltry 10% decline. The directional movement of the stock market is now solely derived from the actions and words coming from Central Banks. The valuation levels in the stock market have never been more dislocated from underlying fundamentals than the present era and thus conveniently ignored.
But we can’t even begin to discuss a bottom until the entire investment universe is focused on real fundamentals. This guy Rob Arnott tried to make the case that the emerging markets represent “deep” value. That must be some kind of joke. Many of the emerging market countries are the verge of financial, economic and political collapse. If you put your money in Mr. Arnott’s fund you may never see it again. But just like every other big money manager, he’s motivated by selfish interests. If he were to preach the truth, his investor base would disappear and along with it the $10’s of millions in fees he’s making off of it.
I have a couple of friends who manage individual accounts. They both called me on Friday with the same story of taking multiple calls from clients asking if the sell-off was over and if it was time to move more money into stocks. That’s one of the surest signs that the move last week was nothing more than a bear market counter-trend rally.
Bear markets are designed by the laws of nature to inflict damage on as many people as possible. Weeks like last week are designed to keep the middle class invested in stocks while the market goes lower. The truth is that the entire global financial/economic system is collapsing. The stock market and credit market action in January was nothing more than tremors ahead of a massive “earthquake” that will inflict unimaginable financial damage.
It’s part of the human condition to believe that really bad things can’t happen. This is a big part of the reason it takes a long time for a bear market in stocks to unfold. That plus blinding greed. But the unfortunate truth is that more than likely the stock market in general will have to drop at least 50-70% before we can credibly discuss whether or not a bottom will occur. I say 50-70% because most people would not believe me if I were to disclose where I really think the stock market is headed before this over.
The weekly issue of the Short Seller’s Journal has been released this afternoon. This is my best issue yet and includes an options trading resource (emailed separately). I have identified a short-sell idea that takes advantage of a highly leveraged company exposed to a highly cyclical industry and has significant exposure to subprime counterparty risk. I also have a leveraged energy sector “Quick Hit” play to take advantage of what appears to be yet another rumor-driven short-squeeze move in the price of oil last week.
Finally, I have some preliminary comments for subscribers on AMZN’s earnings report. Every quarter I seem to discover more problematic aspects to AMZN’s business model. By the way, as predicted, the growth in its cloud computing sales – the so-called AWS buiness – are starting to show signs of slowing down.
Click here or on the image above to subscribe: SHORT SELLER’S JOURNAL
Thanks for putting together an informative report with actionable ideas. For years I have stared in stunned disbelief as the rigged up, QE inflated stock market kept defying gravity but it looks like the chickens are coming home to roost now. With the ideas you provide, I hope I can take advantage of the coming downturn with some profitable trades.
New Bull Market For Mining Stocks?
Concerning gold and noting that this is Friday, “they”…and we’ve no idea who “they” are, but we do indeed know that “they” exist… are out there again making mischief as they have tried to do so many times in the past. Fridays “They” wage war on gold. – Dennis Gartman from his Jan 29 “Gartman Letter”
With the entire precious metals community is still discussing the fraudulent LBMA a.m. silver fix, I happened to notice that the HUI gold mining stock index quietly is up 20% since January 19.
What I find interesting about this is that if this were a stock like AAPL or AMZN, for instance, CNBC/Bloomberg News/Fox Biz would be falling all over themselves with the declaration of a new bull market in those stocks. Instead with regard to mining stocks – crickets.
Perhaps even more interesting is this graph to the left, which shows the performance of the HUI from the inception of the 
precious metals bull market vs. the S&P 500 over the same time period. This is yet another example of information that will never be presented on the adult cartoon channels also known as financial news programming. Since the end of November 2000, the S&P 500 has traveled from 1314 to its current 1919, or 46%. But the HUI mining stock index has moved from 42 to its current 120, or 285%. That fact would probably surprise a lot of people.
Turning to the quote at the top of the blog, you’ll note that until very recently Dennis Gartman habitually used to lift his leg and urinate on the investment community, which he referenced simply as “bugs” (as in “goldbugs”). He used to veto with an iron fist any notion that the precious metals market is manipulated. Wonder what all off a sudden gave him religion?
Here’s another fact that might surprise a lot of people: It’s now being estimated that India imported at least 110 tonnes of gold in December. In addition, Swiss and Hong Kong gold exports to China reached a record in December. It’s estimated that China and India combined imported 300 tonnes of gold just in December. That goes a long way toward explaining why the amount of gold made available for delivery on the Comex has reached a low level not seen in decades and the paper to gold ratio has reached a level that is mindblowing.
The point here is that, just like the true underlying fundamentals of Amazon.com’s business model and financials do not fit the market valuation given to its stock, the underlying fundamentals of the physical gold do not fit the price as reflected in the fraudulent paper markets controlled by the LBMA and the Comex. If anything, yesterday’s LBMA silver fix reflects the endemic corruption in the paper gold/silver market. It also reflects the extreme degree of desperation to control the precious metals markets by the western bullion banks. The bottom line is that they are running out of physical metal with which to perpetuate their fraud.
Thus I’m not surprised that the mining stocks, as represented by the HUI index, are up 20% in a short period of time. The mining stocks are at their most oversold and undervalued in U.S. stock market history, especially when evaluated in relation to the price of gold and silver. But don’t wait around for Maria Bartiromo or Joe Kernan to start promoting the mining stock sector – that will never happen. As Dennis Gartman has noted, it’s a war on gold. But my best guess is that the key battles are now being won by the “bugs.”
They Don’t Bother To Hide The Criminality In Silver And AMZN Trading
When they’re trading 1.5 billion oz. of silver each day in London, the ‘silver’ fix each day is a complete sham. Now the fix has been found to be openly manipulated, it will be interesting to see what happens with the London silver market. – David Jensen, “Silver: Is It The LBMA’s Greatest Rig?”
Strange things are happening in the global financial markets. Most likely evidence of a massive systemic earthquake starting to shake. As many of you know, the LBMA price fix “fixed” the a.m. price
of silver 84 cents below the front-month futures price right before the price was “fixed.” This graph to the right shows how the criminal activity went down (click to enlarge).
I awoke this morning and had an email from Bill “Midas” Murphy asking me if the $13.98 low print shown on Kitco was correct. I responded that it looked like there were some “low hanging” stop loss orders that were attacked in an attempt to get the price of silver down. This was before I had learned of the crime committed on the LBMA.
I would love to have an explanation from the committee in charge of overseeing the LBMA fix. The fact that paper silver bounced back almost immediately is evidence that the a.m. fix was a fraudulent act in its entirety. But for what purpose? The price fix is supposed to be the price that balances out the amount of physical silver bars being offered for sale and bid to purchase during morning trading.
The entities selling silver on Thursday morning didn’t just get their faces ripped off, they had their entire head decapitated. These are the entities who should be pressing for investigation. It’s money out of their pocket or their clients’ pockets.
This was my final comment to Bill on this matter: The insider elite are laughing at everyone spending so many calories and so much energy reporting, discussing, analyzing and agonizing over the paper vs. physical issue. Meanwhile the biggest theft in history is taking place right under our nose as they pluck every ounce of physical gold and silver out of the system from the idiots and the idiotic mining companies who are willing to sell it at the paper price levels. The biggest wealth transfer mechanism is the Central and bullion banks. The banking system has been ripping us off in every aspect of our lives for decades. Why on EARTH would anyone question or doubt that they’re ripping us off in the precious metals market? Seriously. Everyone in their heart of hearts knows that gold/silver are the ultimate root of any monetary system. Why would the banks rip us off using paper currency schemes and not touch the metal? For God sakes, the metal is what they’re ultimately after. That’s why the first thing any military does when they take over a country is it takes the gold. The most recent proof of this Ukraine. That practice goes back to at least the Romans.
Someone sent me an excerpt from Ted Butler’s “news” letter in which he rationalized away the reason why the registered gold vault account at the Comex was so low now. Bill, I seriously think he was on LSD when he dreamed that one up.
I guess what’s most troubling about the above incident is the blatancy with which the LBMA crooks implemented their crime. They made no attempt whatsoever to cover up the crime scene. It’s almost like they’re taunting us.
This brings me to the issue of AMZN’s trading today. AMZN stock ran up $52, or 8.9% ahead of its quarterly earnings to be released right after the NYSE close on extraordinary volume of 14 million shares – 2.4x more than its 10-day average daily volume. After the market closed, AMZN’s stock plunged as much at $95 from the close on a disappointing report. It closed out the after-hours session down $85.
I bring this up because there is no question in my mind that the stock was likely run up by one of the hedge funds with a big position in the stock (or possibly two or three in collusion). The purpose of this would be to generate a frenzy of buy activity into which the hedge fund could unload a chunk of stock. This also implies that one (or more) of the big funds was given a “heads up” from inside AMZN about the nature of the report.
The reason I am convinced this is what happened is because I was part of a junk bond trading operation in which this occurred all the time. Back then we had to be more careful because laws were actually somewhat enforced, sometimes with vigor. But if I had a big position in say, Trump Casino bonds, occasionally I would get a tap on the shoulder from one of the Trump bankers in corporate finance who would whisper, “uh, I don’t like your Trump position.”
In present times, the laws and regulations designed to prevent/discourage insider trading are rarely, if ever, enforced. Insider information sharing is almost as blatant as the London silver price fix today. Of course, I have zero sympathy for any of the idiots who chased the stock higher today. Anyone who goes near that stock without doing extensive analytic work will get what they deserve. Some of these big hedge funds who have massive AMZN positions are eventually going to get impaled on their holdings (or at least the pensions they manage money for will). Here’s an example of one of the retail trading oriented dopes who was giddy about AMZN stock before it reported – Timothy Collins of TheStreet.com’s Real Money: I’m Bullish On AMZN Ahead Of Earnings. Nice trade, Tim.
Speaking of AMZN’s numbers, I will hopefully get around to updating my AMAZON dot CON report with the latest information sometime in the next 5-7 days. If you have already purchased the report, please email for the update. If you have not yet purchased the report but have thought about it, I am going to raise the price again (it takes a lot of time and energy to work on this Company’s numbers) once the full research report is published with the update.
Today’s after hours action was just the start of the AMZN bubble deflation process. I don’t know what path it will take, but I know that AMZN’s stock will eventually fall from the $550 after hours close today to
below $100. To be sure, there will be periods of time when the stock moves up sharply because Jeff Bezos is the king of highly misleading stock promotion and there’s plenty of idiots out there who lap up his drool with blind greed. My stock report will help you understand why AMZN is one of the world’s greatest Ponzi schemes.