SoT #35: The System Is Collapsing – Time To Get Physical

The global economic system, including and especially the U.S. economy, is starting to collapse.  Negative economic reports have been continuously streaming since late last fall. Even by the Government’s own manipulated numbers, the GDP in the U.S. contracted in Q1.  From the majority of the economic reports for April and May – nothwithstanding the absurdly fraudulent U.S. Government non-farm payroll report – it is likely that Q2 GDP will be at least as negative as it was in Q1.

Interestingly, and something which has gone completely unnoticed, there’s been a big rally in the junior mining stock sector, which is up 18% since March 10.  The junior mining stock sector of the market has outperformed everything since March. This tells us that the smartest money is expecting a big move in gold and silver (click to enlarge):

GDXJvsSPX

That makes sense because of what the other markets are telling us. The Shanghai Containerized Freight Index and the Baltic Dry Index are both telling us in tandem with each other that the global economy is tanking – it’s done – it’s toast.  – Rory Hall, Shadow of Truth

Perhaps most puzzling is that, in the face of contracting economic activity, bond yields in the big western economies are spiking higher (see below).  This should not be occurring.  In our opinion, not only is the system collapsing but the Fed and ECB are losing their ability to control the markets, with spiking bond yields as primary evidence.

In this latest Shadow of Truth market update, we discuss some of the big indicators telling us that the system is collapsing.

Since early April, the yield on the 10yr Treasury has spiked up 38%. This graph below shows the big move lower in the price of the 10yr Treasury (price moves in the opposite direction of yield – Central Banks and big investor – e.g. pension funds – have lost $10s of billions in their Treasury positions since early April –  derivatives losses are trebled in magnitude  – click to enlarge:

10yrTreas

This graph shows the recent big spike up in the German 10yr bund yield:

Bund1

6 thoughts on “SoT #35: The System Is Collapsing – Time To Get Physical

  1. Thanks. I still don’t understand why rates would go up. All they have to do is print another trillion and buy the bonds, right? They still have the power of the printing press right? They don’t have to tell us about it.

  2. Dave, you say: “Perhaps most puzzling is that, in the face of contracting economic activity, bond yields in the big western economies are spiking higher (see below). This should not be occurring. ”

    Is it not possible that the investment community around the globe really thinks that the FED…because of recent “outstanding” unemployment numbers is going to raise rates? Lots of investment gurus may be thinking: Economy back on track, a new era of tighting rates is coming.

    Is that not a plausibe explanation? Naive thinking by me?

    1. I’m not sure how many investment professionals believe the jobs report from the Govt. When I say “professionals,” I’m referencing most institutional hedge fund managers. 90% of all retail investment advisers are glorified car salesmen. CNBC, Bloomberg and Fox Biz cater to retail retards and retired dopes sitting at home daytrading 100 shares at a time.

      Bond yields are spiking higher because the longer end of the curve is starting to price in all of the risk embedded in the financial markets and the Fed/ECB can’t control the longer end of the Treasury curve unless they print A LOT more money, a risk of which is being priced into the longer end.

      Maybe I’ll do a blog post detailing all the risks that spiking bond yields are starting to price into the market.

  3. As long as the price of precious metals remains a “paper price” the massive money printing can continue almost unlimited while it is done by ALL Central Banks and coordinated by the BIS in Basel under full participation by the Chinese andRussian central banks!! And since there is no more an universal measure point( physical gold price), the system will not collapse but be extended by further money printing. Prices for Real assets like property will skyrocket! Cherio

  4. The Baltic Dry Index (BDI) weekly average since the start of the year sits at 618.00 and the BDI today is at it’s average of 618.00 Chopping sideways at a continuing low level.

    Another freight index that most believe to be the second most important after the BDI is the China Containerized Freight Index (CCFI) which for routes from Asia to North/South America and Europe is down 41% since January.
    China Rail Freight volume Y/Y% is down 17%.

    The Cass/INTTRA Ocean Freight Index which tracks US containerized ocean export activity is in a pronounced down trend since March 2011.

    The Commodities Tracking Index (DBC) average since the start of the year is 17.92 and today sits at 17.77 Chopping sideways at a low level. This index is an all encompassing commodity sector tracking system. The best performing item in the index is still down 10% year-over-year! Nobody is buying. Nobody is shipping. The global economy has tanked. Only question being, is how much lower will it go?

  5. $IRX – which represents “real” money (as opposed to Bank / System-held Cash) is currently reaching down into negativity Yield-wise.
    What this effectively achieves is to discount the Future (>5 -10 Yr Bonds) in preference to the Present. (< 3Mth Bills)
    When it becomes apparent $IRX Yield is driving further into negativity, the jig will be up.

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