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There Are Lies, Damned Lies, Statistics and The Employment Report
Last month the Government’s Bureau of Lies And Statistics served up an employment report purporting 312,000 new jobs in December. This despite massive seasonal retail lay-offs in the latter half of the month. The BLS happily counts those jobs when hired in October but forgets to remove them when are dismissed at the end of the holiday shopping season. As John Williams (Shadow Government Statistics), the 312,000 jobs were created by re-doing the spreadsheets for prior months’ jobs reports:
Surging December payrolls were a reporting fraud, a canard, no more than massive prior-period revisions “recalculation of seasonal factors” that shifted growth from past months into the October 2018 to December 2018 time-frame, without showing the headline downside revisions to the earlier months from which the growth was borrowed
The same re-calc’ing of the spreadsheets created the 304,000 pop in jobs, December’s 312,000 print revised down to 222,000, with the jobs shifted into January’s number. But no one looks at the revisions, besides a handful of tin-foil hat conspiracy theorists.
My good friend and colleague, John Titus of Best Evidence videos wrote a scathing commentary on the nefarious Labor Force Participation Rate metric, which allegedly rose in January:
The labor force participation rate ticked up this month, from 63.1% last month to 63.2% this month. Great news, right? Umm, not unless shameless fraud designed to mask an economy headed for a depression is good news. The fraud in this case arises from the blatant manipulation of the two data points underlying the participation rate.
The participation rate is simply the number of people in the labor force divided by the working age population (the latter of which is called the civilian non-institutional population). Stated differently, the participation rate is the percentage of working age people who are working or looking for work. So the labor force is slightly larger than the straight-up number of workers because it includes workers PLUS anyone who’s looked for work in that last 4 weeks.
All three numbers—the participation rate, the labor force. and the working age population—are reported each month. But only the participation rate gets any media attention (and precious little at that). This month, as noted, the participation rate ticked up 01% as noted.
What’s curious, though, is that the labor force itself ticked down slightly, by 11,000 workers. For the participation rate to tick up, then, in the teeth of a shrinking labor force, means that the working age population had to have declined quite a bit. And that’s what’s weird—populations tend to increase, relentlessly so.
Indeed over the last 60 years (720 months), the working age population has ticked down only 8 times. And guess what? By far the largest two declines occurred recently—this month and in January 2017 (when Trump was inaugurated). In both cases, the working age population supposedly shrank by 650,000 people! Holy shit! Neither Wyoming nor Vermont have 650,000 people in total, much less 650,000 working age people. Did the media miss a couple of huge meteor hits?
The gloves are off now when it comes to fraudulent data manipulation, as the powers that be will do flat-out anything to disguise the gangrenous cadaver that is the U.S. economy. Sadly, the rot is concentrated among young people. who are now taking on huge amounts of educational debt—debt that cannot be discharged in bankruptcy—that would more properly be called welfare. This situation cannot sustain itself for very long, and won’t.
Basically all of our country’s ills are due to a monetary system predicated on fraudulent interest-bearing debt. Jefferson is rolling in his grave. I plan to go into this and a lot more when I re-launch my Youtube channel with an enhanced vlog-style format.
Note, IRD highly recommends John Titus’ previous podcasts, which you can view here: BEST EVIDENCE VIDEO’S
The Stock Market Would Crash Without Central Bank Support
The mis-pricing of money and credit has also driven a terrible misallocation of capital and kept unproductive zombie debtors alive for too long. Saxo Bank, “Beware The Global Policy Panic”
“Mis-pricing of money and credit” refers to the ability of the Fed to control interest rates and money supply. Humans with character flaws and conflicting motivations performing a role that is best left to a free market. After the market’s attempt in December to re-introduce two-way price discovery to the stock stock market, the Fed appears ready to fold on its “interest rate and balance sheet normalization” policy, whatever “normalization is supposed to mean.
Tesla is the perfect example of terribly misallocated capital enabling the transitory survival of a defective business model. Access to cheap, easy capital has enabled Elon Musk to defer the eventual fate of the Company for several years. But as the equity and credit markets become considerably less tolerant, companies with extreme financial and operational flaws are exposed, followed by a stock price price that plummets.
The Stock Market Would Crash Without Central Bank Support – A few weeks after Fed head, Jerome Powell, hinted that the Fed may hold off on more rate hikes, an article in the Wall St. Journal suggested that the Fed was considering halting its “Quantitative Tightening” program far sooner than expected, leaving the Fed’s balance sheet significantly a significantly higher level it’s original “normalization” plan.
But “normalization” in the context of leaving the Fed’s balance sheet significantly larger than its size when the financial crisis hit – $800 billion – simply means leaving a substantial amount of the money printed from “QE” in the financial system. This is a subtle acknowledgment by the Einsteins at the Fed that the U.S. economic and financial system would seize up without massive support by the Fed in the form of money printing.
I suggested in the January 13th issue of my Short Seller’s Journal that the Fed would likely halt QT: “The economy is headed toward a severe recession and I’m certain the key officials at the Fed and White House are aware of this (perhaps not Trump but some of his advisors). I suspect that the Fed’s monetary policy will be reversed in 2019. They’ll first announce halting QT. That should be bad news because of the implications about the true condition of the economy. But the hedge fund algos and retail day-trader zombies will buy that announcement. We will sell into that spike. Ultimately the market will sell-off when comes to understand that the last remaining prop in the stock market is the Fed.”
Little did I realize when I wrote that two weeks ago that the Fed would hint at halting QT less than two weeks later.
When this fails to re-stimulate economic activity, the Fed will eventually resume printing money. Assuming the report in the Wall Street Journal on Friday is true, this is a continuation of the “mis-pricing” of money credit alluded to above by Saxo Bank. Moreover, it reflects a Central Bank in panic mode in response to the recent attempt by the stock market to re-price significantly lower to a level that reflected economic reality.
The Deflating Stock Bubble Will Fuel A Bull Move Mining Stocks
“The economic and financial condition of the U.S. and global economy is similar to that of 2008, although I think now it’s a lot worse than it was back then…the ‘gravity’ of true fundamentals has finally gotten ahold of stocks…”
Fundamentals ultimately drive value. In terms of the fundamentals, financial assets – stocks, bonds, real estate – are extremely overvalued. The precious metals sector right now is extremely cheap relative to fundamentals.
Don’t be fooled into thinking that the stock market bounce that started the day after Christmas was the end of the “bear market,” as Jim Cramer is asserting. Bear markets last a lot longer than four weeks. A bear market in financial assets is just getting started. At the same time, the bull market cycle in gold, silver and mining stocks that began in late 2015 with a 250% run-up in GDX over the next 8 months is ready to resume after using just over 2 years to effect a 38% pullback from the sharp in 2016.
Elijah Johnson invited me to discuss the economy, stock market and precious metals sector on his Silver Doctor’s podcast:
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If you are interested in ideas for taking advantage of the inevitable systemic reset that will hit the U.S. financial and economic system, check out either of these newsletters: Short Seller’s Journal information and more about the Mining Stock Journal here: Mining Stock Journal information.
The Fed Panics And Gold Soars
First it was the loudly broadcast convening of the Working Group on Financial Markets – aka “the Plunge Protection Team” – by the PPT’s el Jefe, Steven Mnuchin. This was followed the “mouse that roared” speech from Fed head, Jerome Powell, hinting that the Fed would moon-walk away from rate hikes.
Today was trial Hindenburg launched by the Wall St Journal suggesting that the Fed was considering curtailing the the FOMC’s balance sheet Weight Watchers program. The terminology used to describe the Fed’s actions is Orwellian vernacular. “Reserve levels” – as in, “leaving more reserves on the Fed’s balance sheet” – sounds mundane. In plain-speak, this is simply the amount of money the Fed printed and will leave in the financial system or risk crashing the stock market.
I suggested in the January 13th issue of my Short Seller’s Journal that the Fed would likely 
halt QT: “The economy is headed toward a severe recession. I’m certain the key officials at the Fed and White House are aware of this (perhaps not Trump but some of his advisors). I suspect that the Fed’s monetary policy will be reversed in 2019. They’ll first announce halting QT. That should be bad news because of the implications but the hedge fund algos and retail day-trader zombies will buy that announcement. We will sell into that spike.”
Little did I realize when I wrote that two weeks ago that the assertion would be validated just two weeks later. When this fails to re-stimulate economic activity, the Fed will eventually resume printing money. Ultimately the market will figure out that it’s a very bad thing that the only thing holding up the stock market is the Fed.
The policy reversal by the Fed reflects panic at the Fed. Nothing reflects “Fed Panic” better than the price of gold:
CEO Of Moscow Exchange: Replace Dollars With Russian Gold
One way or another, the eventual fate of the dollar is inevitable…
“Super-conservative investors purchase dollars and keep them “under the pillow, which is not very safe”
Russian gold could become the perfect alternative to conservative investments in the greenback, the CEO of Russia’s key trading floor, Moscow Exchange (MOEX), believes.
“Let’s offer an alternative to the US dollar in the form of Russian gold, which we produce… investment gold,” CEO Alexander Afanasiev suggested, speaking in the Lower House of Russia’s parliament on Monday.
He added that some “super-conservative investors” purchase dollars and keep them “under the pillow,” which is not very safe, he believes. The MOEX chief also noted that Russians have increased their investment activity and act “surprisingly rational.”
Russia is the world’s third-largest gold producer and in 2017 boosted its gold output by more than six percent. It produced almost 265 tons of gold in January-October 2018, according to data provided by the Finance Ministry.
Read the full article here: US Dollar/Russian gold
What’s In Store For The Precious Metals Sector in 2019?
The Newmont/Goldcorp merger is the second mega-deal in the industry after Barrick acquired RandGold in September. Without question, the two deals reflect the growing need for large gold and silver mining companies to replace reserves, which are being depleted at these two companies more quickly than they are being replenished. The deal will give Newmont access to Goldcorp’s portfolio of developing and exploration projects acquired by Goldcorp over the last several years.
While this deal and the Barrick/Randgold deal will help cover-up the managerial, operational and financial warts on Barrick and Newmont, it will also likely stimulate an increase in M&A activity in the industry. I believe that the other largest gold mining companies – Kinross, Yamana, AngloGold Ashanti, Gold Fields, Eldorado, and Agnico-Eagle – will look closely at each other and at mid-cap gold producers to see if they can create “synergistic” merger deals
The same “impulse” holds true for silver companies, the largest of which are diversifying into gold or acquiring competitors (Pan American acquires Tahoe Resources and SRM Mining buys 9.9% of Silvercrest Metals, which will likely block First Majestic from going after Silvercrest, and Americas Silver buys Pershing Gold). Similarly, we could see mid-cap producers merging with each other or acquiring the junior producers.
Phil Kennedy – Kennedy Financial – invited me along with Craig Hempke – TF Metals Report – to discuss the implications of the two gold mega-deals, our outlook for the precious metals sector and a some other timely topics affecting the financial markets:
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In my latest issue of the Mining Stock Journal, I provided a list of gold and silver stocks that I believe could become acquisition targets this year, as well as an in-depth update on one of my top gold exploration stock ideas. You can learn more about this newsletter here: Mining Stock Journal
Unprecedented Manipulation And Trading The Precious Metals Ratios
Anyone who denies that Governments and Central Banks manipulate the gold and silver markets using paper derivatives and deceptive physical metal custodial operations is ignorant of history and facts. Currently the gold and silver price capping is as oppressive as I’ve witnessed in 18 years.
As of Tuesday, January 15th, the open interest in gold had soared by 89,120 contracts to 501,605. 89,120 contracts is 8.9 million ozs of paper gold, or 278.5 tons – about 30 tons more than the amount of gold produced by mines in the U.S. in one year.
But artificial market intervention creates information inefficiencies. This in turn generates exploitable profit opportunities for traders who know how to identify the set-ups from official manipulation.
With unprecedented manipulation continuing to occur in the precious metals market, some tradeable anomalies have appeared in the gold /silver and platinum / palladium ratios. My friend and colleague, Chris Marcus (former options trader at Susquehanna International), got together with Andy Schectman and Mickey Fulp to discuss strategies you can use to take advantage of the market anomalies which have been created by official intervention in these markets in the video below. You can see more of Chris’ at his website, Arcadia Economics:
Stock Market Volatility Reflects Systemic Instability
The post-Christmas stock rally extended through Wednesday as the small-cap and tech stocks led the way, with the Russell 2000 up 14.3% and the Nasdaq up 12.5%. The SPX and Dow are up 10.4% and 10.1% respectively. During the stretch between December 26th and January 17th, the Russell 2000 index experienced only two down days.
Make no mistake, this is primarily a vicious short-covering and hedge fund algo momentum-chasing rally. It’s a classic bear market move with the most risky and most heavily shorted stocks experiencing the greatest percentage gains. But the rally has also been accompanied by declining volume. When abrupt rallies or sell-offs occur with declining volume, it’s a trait the conveys lack of buyer/seller-conviction. It also indicates a high probability that the move will soon reverse direction.
As you can see in the chart of the Nasdaq above, volume has been declining while the index has been going nearly vertical since January 3rd. This is not a healthy, sustainable move. The Nasdaq appears to have stalled at the 50 dma (yellow line). The three previous bounces all halted and reverse at key moving averages.
The global economy – this includes the U.S. economy – is slipping into what will turn out to be a worse economic contraction than the one that occurred between 2008-2011. As it turns out, during the past few weeks Central Banks globally have increased the size their balance sheet collectively. This is the primary reason the U.S. stock market is pushing higher. If you are somebody that likes to gamble on the stock market, during periods of uncertainty you may wish to receive some investment tips that can help you make even more money. With this in mind, you may want to have a look at a Motley Fool review, as this could tell you whether you’d be better off receiving external stock advice from a long-running team of professionals.
Official actions belie official propaganda – If the economy is doing well, the labor market is at “full employment” and the inflation rate is low, how come the Treasury Secretary convened the Plunge Protection team during the Christmas break plus Jerome Powell and other Fed officials have been softening their stance on monetary policy? Despite assurances that all is well, the behavior of policy-makers at the Fed and the White House reflects the onset of fear. Without question, the timing of the PPT meeting, the Powell speech and the highly rigged employment report was orchestrated with precision and with the intent to halt the sell-off and jawbone the market higher.
In truth, the economy is headed toward a severe recession and I’m certain the key officials at the Fed and White House are aware of this (perhaps not Trump but some of his advisors). I suspect that the Fed’s monetary policy will be reversed in 2019. Ultimately the market will figure out that it’s highly negative that the only “impulse” holding up the stock market is the Fed. For now the perma-bulls keep their head in the sand and pretend “to see” truth in the narrative that “the economy is booming.”
Both the economy and the stock market are in big trouble if the Fed has to do its best to “talk” the stock market higher. The extreme daily swings are symptomatic of a completely dysfunctional stock market. It’s a stock market struggling to find two-way price discovery in the face of constant attempts by those implementing monetary and fiscal policy to prevent the stock market from reflecting the truth.
The Fed and Trump are playing a dangerous game that is seducing investors, especially unsophisticated retail investors, to make tragic investing decisions. As an example, investors funneled nearly $2 billion into IEF, the iShares 7-10 year Treasury bond ETF, between Christmas and January 3rd. This was a “flight to safety” movement of capital triggered by the drop in stocks during December. Over the next three days, the ETF lost 1.3% of its value as January 4th was the largest 1-day percentage price decline in the ETF since November 2016 (when investors moved billions from bond funds to stock funds after Trump was elected).
With this significant drop in value, it doesn’t come as a surprise that many people have now decided to invest in ATX ETF within other world markets instead. No one knows for sure when the stock market will roll-over and head south again. But rest assured that it will. Cramer was on CNBC declaring that the “bear market” ended on Christmas Eve. It was not clear to me that anyone had declared a “bear market” in the stock market in the first place. But anyone who allocates their investment funds based on Cramer recommendations deserves the huge losses they suffer over time. Don’t forget – although the truth gets blurred in the smoke blown over time – those of us who were around back in the early 2000’s know the truth: Cramer blew up his hedge fund when the tech bubble popped. That’s how he ended up on CNBC. So consider the source…
The “bears” may be in brief hibernation, but will soon emerge from their den – While the market is still perversely infused with perma-bullishness, this latest rally is setting up an epic short-sell opportunity. I have my favorite names, which I share with my Short Seller’s Journal subscribers, and I try to dig up new ideas as often as possible. My latest home run was Vail Resorts (MTN), on which I bought puts and recommended shorting (including put ideas) in the December 2nd issue of my newsletter. MTN closed yesterday at $185, down 33.6% from my short-sell recommendation. To learn more about this newsletter, please click here: Short Seller’s Journal information.
Barkerville Gold: Quickly De-Risking And Undervalued
Barkerville Gold (BGMZF, BGM.V) is advancing it Cariboo Gold Project in British Columbia. The Cariboo Project is a district-scale, massive land package loaded with gold mineralization (over 110 gold-bearing streams on the property). Osisko Mining took operational control of the Project, with the transition beginning in mid-2015. Chairman, Sean Roosen, took the old Osisko Mining’s Canadian Malarctic Project purchased for about $90,000 and developed it into what is now one of the largest gold mines in the world, selling it to Yamana/Agnico-Eagle in deal worth nearly US$3 billion.
BGM currently has a resource consisting of a little more than 3 million ozs of measured, indicated and inferred gold averaging 6 grams/tonne. It also has an operating mine at the Bonanza Ledge/BC deposits which has been successfully tested recovering over 20,000 ozs of gold at a 91% recovery rate. This is important for two reasons: 1) the mine will used to generate cash flow to help fund the massive exploration program in progress; 2) it confirms that the ore can be extracted economically at the current price of gold.
The current market cap of BGM using the 555.6 million fully-diluted share-count is US$194 million. It would be a mistake to dismiss this investment opportunity because of the high share-count. The resource could easily end up at least 3-4x larger than the current 3 million ozs. with a production profile of 400-500,000 ozs of production per year. With a higher price of gold, this company has $1 billion market-cap potential. Even if there’s 1 billion fully-diluted shares outstanding at the time, that’s a triple from the current price. That said, I can guarantee that Sean Roosen did not just invest another $1mm of his own money for only a triple.
You can view a webcast presentation of Barkerville by BGM’s President/COO, Chris Loder, with intermittent comments from Sean Roosen by clicking on the link below. The webcast is hosted by O&M Partners, which produces live management presentations of mining stocks for retail/high net worth/small institutional investors. I have found these webcasts to be invaluable. I was invited to give brief opening remarks on gold and junior mining stocks (note: you will need to fill out form with your name and email information – this will only be used by O&M to invite you future webcasts):
BARKERVILLE GOLD MINES Management Presentation
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You can learn more about Vista Gold and other highly undervalued junior mining stock in the Mining Stock Journal: Mining Stock Journal information
Vista Gold: Overlooked And Undervalued
Vista Gold (VGZ) has a storied history as a junior gold miner. In 2012 new management, led by CEO, Fred Earnest, took control of the operations and has been advancing the Mt. Todd gold project, which is the largest undeveloped gold project in Australia.
Mt. Todd contains nearly 6 million ounces of gold reserve (proven/probable). A Preliminary Feasibility Study updated in 2018 shows a project with 381,000 ozs of annual production over a 13-yr mine life (479,000 ozs/yr for first 5 years), an after-tax IRR of 20% and after-tax NPV of $679 million. The current market cap of the stock is $57 million (100 million shares outstanding). As an operating mine, it would be the fourth largest gold mine in Australia and one of the largest new gold mines in the world over the last several years.
I’m not sure why VGZ trades at a huge discount to its peers and to its “intrinsic value.” To be sure, the Mt. Todd Project has a checkered history. But this is primarily attributable to inept management by previous owners. On the surface the resource grade may appear low (.82 grams per tonne). But VGZ has successfully tested and implemented high-tech ore sorting technology which has improved the throughput grade by as much as 50% (1.2 grams per tonne) and has taken heap leach recovery rates north of 90%.
The Mt Todd Project will be converted eventually to a mine. I suspect that, as the price of gold rises, a large mining company will either invest in the Project and take over operational control or acquire Vista outright. The Company has signed recent non-disclosure agreements with mining companies interested in the Project. Until an “exit strategy” event unfolds, this stock is an easy double from its current price.
The Mining Stock Daily’s Trevor Hall interviewed Vista’s CEO to discuss the Mt. Todd Project (click on the graphic below to stream the interview or stream it on your favorite app here – Mining Stock Daily):
The Mining Stock Daily is produced by Clear Creek Digital and the Mining Stock Journal. MSD is now sponsored by Mineral Alamos, which has a portfolio of high quality gold and gold-silver-copper polymetallic assets in Mexico.
You can learn more about Vista Gold and other highly undervalued junior mining stock in the Mining Stock Journal: Mining Stock Journal information.
In the latest issue, I discuss my outlook for the precious metals and mining stocks in my latest Mining Stock Journal. I also present a list of large and mid-cap mining stocks that should outperform the market for at least a few months, including ideas for using call options.