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Quantitative Easing: The Fed’s Big Lie
“How do you print out of thin air $3 trillion and get it into the stock market this year without anybody seeing you do it? ‘Stock market’ meaning ‘stock market and other high risk/high yielding assets…’ The answer as it turns out is you don’t print $3 trillion, you print $6 trillion. You print a $3 trillion original, a master, and you print a $3 trillion clone right behind it.” – John Titus, Best Evidence
“QE is intended to to boost the amount of money in the economy by purchasing assets, mainly from non-bank financial companies. QE initially increases the amount of bank deposits those companies hold (in place of the assets they sell). Those companies will then wish to rebalance their portfolios of assets [i.e. reinvest the cash they receive from the Central Bank via the QE transactions] by buying higher-yielding assets, raising the price of those assets and stimulating spending in the economy.” – Bank of England Quarterly Bulletin, 2014 Q1, “Money Creation in the Modern Economy”
John Titus of Best Evidence has produced a must-watch video which explains how the Fed has, in effect, printed $6 trillion, or double the $3 trillion to which the Fed admits. The analysis also explains why stocks are at all-time highs, bond spreads at all-time lows and why QE is doing very little to stimulate REAL economic activity. By the way, the BoE’s proposition that rising financial assets stimulates spending in the economy is a complete load of bullshit. This is because 95% of all households have very little in way of financial assets.
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The next big move in financial assets will come from the mining stocks. Mining stocks offer potential wealth enhancement through exposure to the “optionality” upside of pric gold and silver prices. If you would like some ideas for investing in mining stocks, take a look at my Mining Stock Journal.
Tesla Was Added To The SPX – Now What?
Tesla is emblematic of the fraud and deception that has permeated every nook and cranny of the United States’ economic and political system. It is the poster-child for the biggest stock bubble in history.
UPDATE: Morgan Stanly/Adam Jonas have released their “Cover Your Ass” narrative: ” “Apple’s potential entry into autos represents perhaps the most credible/formidable bear case for Tesla’s stock that investors have had to consider for some time” (Uh Oh). This could mean Morgan Stanley has determined that going forward there will be a lot less financing/financial engineering fees to suck from the market using Tesla as the host.
Whether or not Apple will pose a threat to Tesla remains to be seen. The immediate threat is from the tsunami of competition getting ready to flood the global EV market in early 2021. Tesla doesn’t have chance to withstand that…
Well, the SPX index inclusion event is finally over. TSLA shares were quite volatile on Friday. TSLA was up over $30 early in the trading session Friday. In the last hour of trading, TSLA swung from from up $20 to down $20 and ended up closing up $39, as roughly 95 million shares crossed the tape at the close, likely index funds finalizing their rebalancing. The stock closed down $19 in the after-hours trading on Friday.
While it’s impossible to know for sure, my bet is that TSLA will start dropping precipitously in price sometime over the next 3-4 weeks. As of mid-day Tuesday (Dec 21) the shares are down 8.6% from Friday’s close.
A comparison to Yahoo is appropriate. Yahoo screamed from a market cap of $850 million by the end of its first day as public company in 1996 to $127 billion within a month after it was added to the SPX index in December 1999. It was trading at 211x trailing revenue at its peak market cap. Competition flooded Yahoo’s internet space, in 2000 and its sales dropped 36% over the next year. Over the next 1 3/4 years, Yahoo’s stock fell 98%. In the 1H 2021 there will be at least 24 new EV models rolling out in China. This will have a highly adverse effect on Tesla’s revenues.
Recall that a couple if weeks ago Consumer Reports rated Tesla’s Model Y as well below average for reliability. Edmunds issued a report in which it rated Ford’s Mach-E “the best in the luxury EV class.” It also said the Mach-E is far superior in ride quality to the Model Y, saying that “in our experience the Model Y Performance rides harsh, unacceptably so – the Mach-E’s ability to handle pavement is vastly superior.” In other words, the Model Y is a piece of shit, operationally and aesthetically.
And thus the real competition stage in the Tesla saga begins. This is when we get to see 
worldwide what happens to Tesla’s market share when the big OEM’s muscle into the EV space. We’ve seen a preview of this in the EU, especially Norway and Netherlands, which are two of the largest and most developed EV markets globally.
Tesla had little to no competition between 2010 and 2019. As competition begins to invade the market, its accompanied by price cuts and shrinking margins. With little competition through 2019, Tesla has been unable to generate profits from its sale of automobiles (the only source of income has been the sale of regulatory credits). What will Telsa’s income statement look like in 2021 when there will be 50+ new EV models launched worldwide?
The dollar-value of Tesla call option trading going into the Company’s inclusion in the SPX index increased 2,400% YoY. On December 16, 2019, the dollar value of TSLA’s options open interest was $3.9 billion, or 1.5% of the value of the open interest for SPX stocks, including SPX index options. On December 14, 2020, the value of Tesla’s options open interest was $94.8 billion, or a whopping 17% of the total value of option interest for SPX stocks inclusive of SPX index options.
TSLA’s bubble may not pop immediately, but I have a hard time imagining that TSLA’s shares will not be significantly lower six months from now.
The commentary above is an excerpt from the Short Seller’s Journal, a weekly newsletter that dissects the latest economic reports and presents ideas for short sellers. You can learn more about it here: Short Seller’s Journal information.
A Run On Gold And Silver Is Starting
The run has started early in Germany: “Gold and silver in the form of coins and bars are experiencing an enormous surge in demand at German precious metals dealers” (link). This is to be expected but the Germans, more-so than any other EU country (Switzerland is not a formal member of the EU), understand the wealth preservation/currency devaluation attributes of gold and silver.
But don’t mistake buying GLD and SLV for buying and self-safekeeping physical gold and silver. The integrity of GLD and SLV is highly questionable. I wrote this in a 2009 research report on GLD:
“A close reading and analysis of the GLD Prospectus, however, reveals that investing in GLD is drastically different from owning gold…Ultimately, the value of the GLD Trust the potential to experience a substantial loss in value. Under certain circumstances GLD could be worthless. As an investment advisor, I do not recommend that anyone use GLD instead of buying physical gold because it is not an investment in gold and the legal structure of GLD is such that unsuspecting investors could end up losing all of their money.”
In this week’s episode, Chris (Arcadia Economics) and I discuss why the prices of gold and silver are imminently heading much higher and why you should avoid paper investments in GLD and invest in physical gold and silver that you safekeep yourself.
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Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar. But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my Mining Stock Journal.
Gold, Silver and Mining Stocks: A look at 2020
The behavior of the mining stocks since early August is the reason why I am emphatic in recommending to never go “all in” and to keep plenty of cash on hand to take advantage of market pullbacks. The sector had a massive up-cycle since mid-March.
Consider this: since the market bottom in March, GDX is up 84% YTD. GDX has outperformed all of the major stock indices including the Nasdaq, which is up 80.4% over the same period. I am positive that fact would take most market participants by complete surprise. After all, the precious metals sector is never discussed by mainstream financial media unless it’s in a negative context.
Trevor Hall (Mining Stock Daily) and I engage in a recap of the precious metals sector this past year, including the precious metals sector performance in 2020 vs our expectations, how the Bitcoin mania maybe be affecting gold and silver and out most disappointing mining stock investments in 2020 as well as our best ideas. Click on the graphic below to hear our conversation:
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The Mining Stock Journal is a bi-weekly mining stock newsletter that focuses primarily on the junior exploration stocks. The latest issue includes a review of a junior silver mining company with huge silver optionality. You can learn more about this newsletter by following this link: Mining Stock Journal subscription information
Note: I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest my own money in most of the stock ideas I present.
Gold, Silver, and Mining Stock FAQs
The behavior of the mining stocks since early August is the reason why I am emphatic in recommending to never go “all in” and to keep plenty of cash on hand to take advantage of market pullbacks.
The pm sector has had a massive up-cycle since mid-March. Consider this: since the market bottom in March, GDX is up 84% through this morning (12/10/20). GDX has outperformed all of the major stock indices including the Nasdaq, which is up 80.4% over the same period. I am positive that fact would take most market participants by complete surprise. After all, the precious metals sector is never discussed by mainstream financial media unless it’s in a negative context.
Chris Marcus (Arcadia Economics) and I talk about investment allocation in the precious metals sector and why you’ll be better off in the long run converting as much of your fiat currency-based investments into gold and silver:
Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar. But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my Mining Stock Journal.
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Silver (And Gold) Are Getting Ready To Launch
Bullish For Gold: Yellen’s Appointment Merges The Treasury With The Fed
The appointment of Janet Yellen as Treasury Secretary fully removes the “Chinese Wall” that is supposed to separate the Fed and the Government. I believe her appointment signals a decision to transition monetary policy into the unfettered implementation of “Modern Monetary Theory.”
This will encompass a record amount of Treasury debt issuance, which started last Monday with record 2-year and 5-year Treasury Note auctions. The Fed will be required to fund a large portion of the coming bond issuance or risk a rapid escalation in interest rates, especially at the longer end of the curve. As evidence of this, the Fed is considering increasing the amount of longer-dated Treasuries it is buying. This is MMT in a nutshell and it is exceedingly bullish for the precious metals sector.
The New York Sun found it interesting that Congress nuked the appointment of Judy Shelton to the Fed, who is a gold standard advocate, on the grounds that it would compromise the Fed’s “independence from the Treasury” and now will get to evaluate the nomination of Fed Chairman, Janet Yellen, for Treasury Secretary:
News that Vice President Biden intends to nominate the former chairman of the Federal Reserve, Janet Yellen, to be treasury secretary certainly has its ironies. We’re still in the midst of watching the Democrats maneuver to defeat the nomination to the Fed board of Judy Shelton on the grounds that she would compromise the independence of the Fed from the Treasury. Mr. Biden’s move is practically a merger.
How is that going to be handled by the Republicans who used Fed independence to libel Ms. Shelton? Are Senators Susan Collins, Lamar Alexander, and Mitt Romney going to go after Mrs. Yellen the way they did Ms. Shelton? What of Senator Sherrod Brown and the rest of the Banking Committee Democrats who are rallying against Mrs. Shelton in the most demagogic fashion? Not to mention the New York Times and the Washington Post. (New York Sun)
Mussolini described “Facism” as a merger between private corporations and the State. Unequivocally, Yellen’s appointment as Treasury Secretary represents a merger of the Federal Reserve, which is a private corporation owned by the banks, and the U.S. Treasury 
Department. The integration of the Federal Reserve into the U.S. Treasury Department is the hallmark of fascism. The regulatory capture of the Government by the Too Big To Fail Wall Street banks is now complete.
The flip-side to this – the “dark side of the moon,” if you will – is that this set-up is extraordinarily bullish for gold. The Fed under Bernanke and Yellen ushered in the application of Modern Monetary Theory to the Fed’s monetary policy. With Yellen in charge of the Treasury, MMT will be be unleashed full-throttle.
I can’t think of a more positive development in support of higher gold and silver prices.
Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar. But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my Mining Stock Journal.
The Price Attack On Gold Signals More Fed Money Printing
“As I always bore people with: The true numbers, location, and disposition of national gold reserves are secrets far more sensitive than the true numbers, location, and disposition of nuclear weapons.” – Chris Powell, Treasurer of GATA
I love that quote from Chris. It reminds of when I suggested back in 2004 that the U.S. would start a war before it ever gets to the point at which it was forced to open the Federal Reserve gold vaults for a independent audit with the entire world watching.
What might require such an event? If the China/Russia economic axis were to roll out a gold-backed currency that required independently verified proof of sovereign gold holdings by all trading partners…
Tom Bodrovics invited back onto to his Palisades Radio podcast to discuss the current manipulated price take-down of gold and silver and why, among other things, it signals that another big round of money printing by the Fed is being tee’d up:
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The Mining Stock Journal is a bi-weekly mining stock newsletter that focuses primarily on the junior exploration stocks. The latest issue includes a list of stocks that I think have been unreasonably beaten down in price plus a review of Cabral Gold . You can learn more about this newsletter by following this link: Mining Stock Journal subscription information
Note: I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest my own money in most of the stock ideas I present.
Fake News Engulfs The Gold And Silver Markets
The gold price was given a a quick $35 ride on the down-elevator today starting at 7:40 a.m EST. There were no news items or events that occurred that would have triggered the price hit. More likely, the Comex banks implemented another Comex open interest liquidation operation targeting the remaining 45,000+ longs in the December contract in an effort to get the December gold contract open interest as low as possible ahead the December first notice period, which begins this afternoon.
Reuters wrote a news report attributing the sell-off to “hopes for a virus vaccine.” Just one problem with this explanation: no new vaccine news was released today. In fact there was a complete absence of any news relevant to precious metals before or after the price ambush. The U.S. dollar index broke key support at 92 this morning and has continued lower. No mention of this gold-bullish market occurrence by Reuters. Crickets. Moreover, Reuters asserts that “investors dumped metal.” This would have been a true comment but for the fact that no physical metal would have traded. The entire price decline started and ended on the Comex with paper derivative gold.
Chris Marcus (Arcadia Economics) and I discuss the latest events in the precious metals sector as well is talk about what the appointment of Janet Yellen as Treasury Secretary might mean for gold and silver prices:
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The Mining Stock Journal is a bi-weekly mining stock newsletter that focuses primarily on the junior exploration stocks. The latest issue includes a review of a junior silver mining company with huge silver optionality. You can learn more about this newsletter by following this link: Mining Stock Journal subscription information
Note: I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest my own money in most of the stock ideas I present.
Bitcoin Is Free From Counterparty Risk? Not So Much…
Hugo Salinas Price is one of the most successful businessmen in Mexico. He also happens to be a brilliant monetary system analyst. In his latest essay, he explains why Governments and Central Banks largely ignore Bitcoin and cryptocurrencies, choosing instead to focus their efforts on containing the price escalation of gold and silver.
{Note – as an aside: the latest price attack on gold and silver is largely a paper gold/silver market operation. Outside of the massive quantities of gold being imported by India every day right now, very little physical gold is changing hands. Yesterday I saw commentary accompanied by a chart that showed “a record outflow of cash from the largest gold fund.”
Again, the withdrawal of cash from GLD does not at all trigger physical gold selling. Most of the cash that piled into GLD over the last 6 months has been leased from the Bank of England or ECB or counterparty to the massive quantities of BIS gold swaps since July. When enough cash leaves GLD, the gold lease expires or the BIS swap unwinds – not one ounce of gold is moved from the vauts]
Contrary to the promoters of Bitcoin, and to the myth to which the believers in Bitcoin ascribe, Bitcoin has significant counterparty risk. As Mr. Price asserts:
Bitcoin relies on the continued existence of a worldwide electronic Internet. In the event of WAR, the Internet will go down instantly. Goodbye, Bitcoins!
Furthermore, as Price explains, Bitcoin is imaginary money and nothing more:
Bitcoin has a monetary value, only because the – unknown – founder said that it had monetary value, and a few simple souls accepted that statement. Once a few repeated the mantra “Bitcoin is money”, its “monetary value” began to rise. Fundamentally, Bitcoin is nothing more than a satisfying game to play.
You can read his entire essay here: The Bitcoin Game
Note, I do not have any problem whatsoever with treating Bitcoin like any other speculative trading vehicle that relies on the greater fool theory for the buyer of Bitcoin to make money. But please do not buy and hold Bitcoin thinking that it is a monetary and wealth preservation asset similar to gold.