The Death Of Bullishness

March 3, 2015

It's Monday morning, and a slew of things are on my mind; as the pitched battle between the “unstoppable tsunami of reality” meets headlong with the most relentless, all-encompassing market manipulation in the history of mankind. More on that in a moment; but first, some thoughts about random, but integrally connected topics from the wide world of “horrible headlines” – starting with Andrew Maguire’s weekend comments about the new “Beijing Fix” and associated physical exchanges, which appear likely to commence within weeks.

I briefly touched on this topic in yesterday’s article; but following several emails from readers, wanted to clarify my view further. Which is to say, that unlike the 2012 failure of the proposed Pan Asian Gold Exchange, these developments will decidedly go forward; and unquestionably, will make it more difficult for the paper gold Cartel to hold down physical prices. However, despite the fact said reality must eventually win the day, it is difficult to say just how much impact these new institutions will have, or how long it will take until they “matter.” Thus, we would advise readers to simply “watch and wait” for the “Beijing Fix’s” impact; knowing, of course, that “in due time” the world’s largest gold buyer (and producer) must set global prices.

In yesterday’s article, “The Big Apple,” I wrote of how Apple, starting next month, will produce one millions units per month of its new iWatch, which contains two try ounces of gold. Myself a career Windows user, my wife and I recently purchased an iPad and iMac irrespective; and consequently, went to the local Apple store yesterday to ask some technical questions. Not that many reader haven’t experienced this already; but even I was floored to see a tiny retail store with 30 fully engaged employees, whose employer is assuming global technological leadership in a manner matched only by fictional companies in futuristic sci-fi movies. Whether Apple can maintain this momentum is unclear, of course. However, for now it is undeniable that its technology is as cutting edge as it is popular. And thus, when considering that the piddling 12 million iWatches per year Apple intends to initially sell accounts for a whopping 30% of global gold production, it’s mind-boggling to think of the impact it could have on global monetary trends. Ironically, Precious Metal bulls always considered industrial silver demand to be a potential “straw that broke the Cartel’s back”; which it still might be, by the way. However, if the iWatch even comes close to Apple’s expectations, it may well be the world’s most “un-industrial” metal that does the trick!

Next up, we have the ongoing Greek saga; which worsens with each passing day, as the “countdown to Grexit” draws perilously nigh. This weekend, Greek leadership engaged in vicious verbal warfare with its PIIGS counterparts in Portugal and Spain, who are desperately attempting to isolate Greek’s problems from their own, equally dire situations. To that end, the ink isn’t even dry on the so-called “deal” Greece signed with the European “troika” (now called “the institutions”), and Greece and Germany appear to be in their own all-out verbal war. Clearly, Greece has no intention to abide by the so-called “austerity” terms written by the Euro Group itself; and frankly, is more likely run out of cash within weeks, let alone four months. Which is probably why Greek stocks and bonds are plunging; led by, the “world’s most insolvent financial institution,” the National Bank of Greece, whose stock is down from $1.94/share when the aforementioned “deal” was announced last week, to $1.38 this morning.

Meanwhile, per the “revenge of the people” forecast from my “2015 predictions” Audioblog, the Catalonian secession movement is indeed gaining momentum; which is probably why Spanish credit spreads have widened ever more than Greek spreads. Following November’s Catalonian secession referendum – which despite being deemed “unconstitutional” by Spain’s government, passed by a whopping 81% to 4% vote – the Catalonians are moving forward full force toward their goal of seceding; which in doing so, would take 25% of Spanish GDP and tax revenues. Apparently, Catalonia is setting up its own tax system and diplomatic corps, in advance of an expected “snap regional vote” on secession September 27th. And we assure you, if when this motion is decidedly passed, Catalonians won’t care a whit what the Spanish government decrees.

Tying this European tragedy together is this weekend’s developments in Austria; which following last year’s near-collapse of the so-called “conservative” nation’s largest bank; and last month’s ugly, potential bankruptcy-portending plunge in the stocks and bonds of its third largest bank; reported that its equivalent of America’s “Resolution Trust Company” of the 1980s is massively undercapitalized. And if it indeed is – which is most likely the case – Austrians may well get a taste of the new “bail-in” charters written into their law. But don’t worry, we’re told; as clearly, Zero interest bearing deposits; in “bail-in-able” banks; in countries hyper-inflating their currencies – are clearly superior to gold and silver coins and bars.

Next up, one of my “favorite” topics; i.e, the “unspeakable horrors” crashing oil prices portend. To that end, I have vehemently written of how oil prices must significantly decline given the historic, expanding gap between global supply and demand – not to mention, record global inventories that with each passing weak, grow larger. U.S. inventory alone is at an 80-year (all-time) high, and the Gulf of Mexico is literally teeming with tankers full of oil, but no place to go; which is probably why the Baltic Dry Index, which started trading in 1985, is at an all-time low. This weekend alone, we learned that Saudi Arabian production hit a new multi-year high, whilst Iraq forecast significant production increases next month. Meanwhile, the Cushing (Oklahoma) supply terminal is nearly filled to capacity; and with global economic data in freefall, it’s only a matter of time before it’s 100% full.

Moreover, Friday’s catastrophic Chicago PMI report – depicting a February plunge from 59.4 to 45.8 (a level not seen since October 2008) – was nearly equaled by this morning’s Canadian Manufacturing PMI freefall; from 51.0 to 48.7, a level last seen in 2010. Thus, the demand side of the equation is just as ugly as the supply side; And yet, for the fifth straight day, the new “oil PPT” defended the $49/bbl WTI level that has been deemed its “line in the sand” for the past month, causing it to again bounce from EXACTLY $49.00/bbl, at EXACTLY the same 10:00 AM EST period when stocks typically bottom (via the PPT’s “dead ringer algorithm”) and paper PM prices top. Yes, 10:00 AM EST; which despite the “end of QE,” appears to remain “business as usual” for the Fed’s “open market operations.” Which just happens to coincide with the close of global physical gold and silver trading; and lately, the commencement of the “oil PPT’s” goosing operations.

Speaking of which, last night almost broke a streak of 88 “Sunday Night Sentiment” raids in the past 89 weekends. That is, until another “Cartel Herald” showed up at 11 PM EST; followed by another when gold rallied EXACTLY 1.0% into the “2:15 AM” EST open of the London pre-market paper trading session; another at EXACTLY the 8:20 AM COMEX open; and a fourth at exactly 10:00 AM EST, following a slew of horrific economic data. Apparently, China’s surprise weekend rate cut is not bullish for Precious Metals; even when, as I write, nearly every global currency is in freefall, and the “dollar index” on the verge of taking out its 12-year high. And again; NO, said “dollar strength” is not due to U.S. “recovery,” but global fear that the “big one” is upon us – causing capital to flee to liquid assets like the dollar; and oh yeah, gold in essentially every currency but the suppressed U.S. dollar gold market.

As for said data, it’s hard to believe anyone doesn’t realize the U.S. is deeply mired in recession at this point; as essentially all data – aside from “island of lies” NFP employment reports – are not just weak, but contracting. To wit, this morning’s February personal consumption report came in at negative 0.2% (compared to expectations of unchanged), whilst February construction spending came in massively lower than the predicted, meager 0.3% gain; instead, printing negative 1.1%. Finally, the “PMI” and “ISM” Manufacturing Indices came out simultaneously; in true, “economic data is meaningless fashion,” depicting one rising, and one falling. Of course, the one that rose (the PMI version) reported its lowest employment component in eight months, making one wonder exactly how it could have “risen.” And in the aftermath of this global political, economic, and social misery, how did the “markets” react? Why, oil bottomed at $49 and surged above $50; the “Dow Jones Propaganda Average” surged to an all-time high; all of gold and silver’s overnight gains were erased; and, last but not least, the Fed’s own “PPT” operation of holding the benchmark 10-year Treasury yield above 2.0% (to prevent universal realization of the “most damning proof yet of QE failure“), whilst all other global yields (except Greece) plunged was executed in prototypical fashion. All, of course, at EXACTLY 10:00 AM EST. And don’t forget, the aforementioned, historic dollar surge intensified, yielding instantaneous inflation for billions worldwide, despite the so-called “deflation” major Central banks like the Fed, ECB, BOJ, and PBOC so desperately “tilt” against. And capping the lunacy off; yet another moronic article by the “Fed’s mouthpiece” – Jon Hilsenrath of the leading MSM propaganda outlet, the Wall Street Journal; which, despite Janet Yellen last week delivering the “most unequivocally dovish FOMC statement in memory,” was titled “Fed ushering in New Era of Uncertainty on Rates.”

Which brings me to today’s principal topic; as fittingly, the only propaganda capable of trumping Benedict Arnold Hilsenrath today emanated from the King of crony capitalism himself, Warren Buffett. Yes, Warren Buffett, sold himself out more blatantly than even Maestro Greenspan. The only difference being that Greenspan is 20 years out of office – and consequently, speaking TRUTH; whilst Buffett is still running his government-supported equity operations – and thus, will not only “talk his book,” but the government’s as well. Which is why a man known for “value investing” claiming the “biggest risk is not owning stocks” – amidst the worst economic conditions, and highest equity valuations, of our lifetimes – is such a shameful way to advise countless millions.

Why do I bring up Hilsenrath, Buffett, and the rest of the  sellouts that could just as easily have been characters in Atlas Shrugged? Because, just like in Atlas Shrugged, these sociopaths – who at least in Buffett’s case, once had a conscience – are preaching a platform of failure to the handful of “99 percenters” that still have the means to protect themselves, not much differently than the Pied Piper of Hamelin. Frankly, the current definition of hubris needs to be re-defined in light of the relentlessly insane “perma-bullishness” that has engulfed financial market participants in light of the unprecedented money printing, market manipulation, and propaganda scheme that has blanketed the Western world; to the point that everything is spun as bullish for stocks and bearish for Precious Metals; and nothing even the slightest bit worrisome. And this, with the highest equity and fixed income valuations EVER, amidst the weakest global economic environment since the Great Depression, growing exponentially weaker with each passing day.

To that end, it is utterly amazing to look at the economic calendar each Sunday morning, and see – week after week – “expectations” of improved economic data. Including, I might add, another 230,000 jobs in Friday’s March NFP employment report, despite a second straight month of across the board weak economic – and specifically, employment – data. I wrote of where such “expectations” emanate nearly three years ago; but even I couldn’t imagine the level of economic data – and financial market – manipulation that would ultimately accompany them; in turn, yielding the unprecedented, misplaced “bullishness” destined to destroy the world in an economic conflagration making 1929, 1987, 2000, and 2008 pale in comparison. In other words, the “death of bullishness” is as inevitable as the death of unsustainable financial valuations – no matter how much Central bank “liquidity” is poured on them. And of course, death of the unbacked, worthless currencies underlying history’s largest scheme. And when bullishness finally dies in markets controlled by the world’s largest Central banks – as it already has elsewhere – if you haven’t already protected yourself with real money, Gold and Silver, you may never get the chance.


Courtesy of Courtesy of

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

Most silver is produced as a byproduct of copper, gold, lead and zinc refining.