The Stock Crash To End All Stock Market Crashes
Here at the Miles Franklin Blog, we rarely – if ever – receive negative feedback…which is quite a testament to the so-called “advice” we give – which I facetiously put in quotes, as we are not “advising” readers to do anything but seek truth; and with it, to do their own due diligence as to how to invest their capital.
However, in times of extreme (Cartel-orchestrated) Precious Metal price declines, we of course receive comments claiming our “advice” has been poor, given gold and silver’s under-performance relative to stocks, bonds, and other PPT/Fed/ESF-supported asset classes. Of which, we responded vehemently in yesterday’s must hear Audioblog, “gold, silver, and Miles Franklin“; not to mention, hundreds of commentaries throughout the years – that our bullishness about gold and silver stems not just from our business interests (although as bullion dealers, we profit just as much from selling as buying) but our personal belief of the terminal state of the global monetary system. In other words, our principals are as personally invested in what we discuss as any you’ll find in the financial world; and thus, there is not a shred of “conflict of interest” in what we espouse. And again, we are not only not classified as investment advisers, but don’t act in such a manner either. Our goal – both personally and professionally – is to educate as many as possible of what we have cumulatively learned over the past three decades on Wall Street, and in the mining and bullion industries; to which, we can only hope you are inspired to build your personal due diligence upon
To that end, please note that in all our writings, you’ll never see comments on whether to “buy” or “sell” assets other than gold and silver – although clearly we have strong views of their valuations, which we continually discuss. No, what we do is simply put such valuations in your hands, and let you decide what to do. That goes for sovereign bonds – trading at historically high valuations, amidst historically weak financial backing, solely due to Central bank monetization – or the expectation thereof. And currencies, as the dollar has exploded against nearly all global toilet paper – solely due to its superior liquidity, as the entire world fears “the big one” has arrived.
As for Precious Metals, the polar opposite of what I just wrote of sovereign bonds is the case; as amidst shrinking supply and surging demand, Central bank manipulation has suppressed prices below the cost of production. And then, of course, there’s the stock market – of which I have simply noted that valuations, both here and in many overseas markets, have exceeded all-time highs amidst the worst economic environment of our lifetimes – due solely to a combination of overt and covert Central bank support. Of which, I have continually espoused that, given such unprecedented inflationary and deflationary forces, the odds of hyperinflationary explosion – as in Venezuela – are no less than a 2008-style deflationary collapse. Of course, real losses will be just as bad in either case; as opposed to gold and silver, where the odds of material real losses, in our view, are slim to none.
Yes, the “manipulation operatives” that have taken over financial markets have caused “deformations” – to quote the great David Stockman – unlike any before; not only pushing everything from stocks to paper Precious Metals where TPTB want them, but altering their volatilities to make them more or less attractive. I mean, the stock market has historically – throughout centuries – been the market’s most volatile asset class, and rightfully so; whilst, as you can imagine, gold has been the least. Obviously, the outlook for stocks – and stock valuations – can change on a dime; while gold’s demand rarely materially changes, nor do the reasons for owning it. Which is why said manipulation couldn’t be more obvious; and why anyone with even a modest understanding of financial markets would be naïve – or biased – to ignore this. To that end, consider just how many horrifying political, economic, and financial issues have occurred since mid-2011′s “point of no return” manipulation scheme commenced – and consider the utter farce the PPT-supported “Dow Jones Propaganda Average’s” relentless 45-degree growth has been.
Of course, it’s not just the United States of Manipulation where stocks have been “government goosed” to record levels; as the same is occurring in nations where currencies and economies are hitting record lows – like Venezuela and South Africa, for instance; where gargantuan QE programs are ongoing (and in Japan’s case, overt equity monetization); and those where such programs are assumed to be coming, like China. To that end, last night’s Japanese manufacturing PMI data “unexpectedly” plunged to 50.4 in March from 51.6 in February, representing a 10-month low; whilst the Chinese data was even uglier, with the manufacturing PMI plunging from 50.7 in February to a recessionary 49.2 in March, representing an 11-month low – prompting none other than JP Morgan to predict another PBOC rate cut, perhaps next month. Not to mention, Chinese railway cargo was reported to have plunged 9% year-over-year, as iron ore prices hit a new six-year low. But don’t worry, the Chinese government still claims “7% GDP growth” – LOL. And take a guess how the Japanese and Chinese stock markets “reacted?” Yep, by soaring, to new highs; again, solely due to Central bank monetization, and the expectation of such in the coming months and years. I mean, what could possibly go wrong
In Europe, yesterday’s “make or break” talks between Angela Merkel and Alexis Tsipras achieved NOTHING but boilerplate can-kicking language like “we want Greece to be economically strong” – en route to the “Grexit” that must inevitably occur. The European PMI data – and by the way, you know how I feel about easily manipulative, statistically insignificant “island of lies” diffusion indices – was ever so slightly above pathetically weak expectations (54.1 versus 53.8); and yet, it is being hailed as an explosion of economic activity – which, of course, even if it were true (it isn’t), is being more than offset by the devastating collapse of the Euro currency. And sure enough, another explosion of dying nations’ QE-supported stock indices; led by the German DAX, which has reached an “overbought” level not seen since…drum roll please…March 2000, at the very top of the global internet bubble. I mean, think about it, Germany’s economic growth has been flat-lining for years; its principal business, exports to China, has plummeted; and with the Euro collapsing and Greece on the verge of blowing the continent’s finances to Kingdom Come, the German stock market is trading at a record high, with buying as manic as at the top of the greatest financial bubble in history!
Here in the states, “WTF algos” – as Zero Hedge deems them – in “favored” markets like copper and oil attempt to move paper markets where TPTB want them, despite the collapsing demand and exploding supply that show no signs of reversing; certainly in the near-term – and likely, for years to come. And of course, equities, as the Fed desperately attempts to generate an economy-saving “wealth effect” by printing money and supporting stocks; which, as the entire world is starting to realize, has created nothing but a parabolic debt explosion; economic stagnation; suicidal corporate behavior – like record, debt-financed stock repurchases at bubble-like valuations; and oh yeah, a “wealth effect” all right – for the “1%” privy to such free money. For the “99%,” all that’s been “achieved” is record real unemployment, relentlessly plunging real wages, and a retail spending collapse – even with the so-called “tax cut” of plunging gasoline prices.
At this point, we are being utterly besieged with useless economic data, to the point I can’t even keep up with it anymore. Heck, out of the blue, a recently IPO’d company – “Markit” – has been contracted to put out the world’s fraudulent PMI data; sort of like, in Robocop, OCP being contracted by the Detroit government to run its police department (for those that haven’t seen Robocop, it didn’t work out well). In other words, not only is the government’s upward bias incorporated into today’s exploding amount of economic data “noise,” but corporate bias as well. Frankly, it’s no different than the hideous conflicts of interest inherent in the ratings agency business; which, like OCP, hasn’t work out too well.
Today, for instance, the brand new “Philly Fed non-manufacturing regional business activity index” – not to be confused with the plunging “Philly Fed Index” – was reported to have risen from 46.9 in February to 48.8 in March. I’m not sure if it’s a diffusion index (in which sub-50 indicates contraction) or not, but what I am sure of is that, when the “new orders sub-index” plunges from 32.7 to 30.2; the “wage and benefit cost index” from 38.8 to 32.6; and the “firm-level business activity sub-index” from 51.0 to 44.2; it makes little sense that the overall index would rise – much less, the reported surge in the “full-time employment sub-index” whilst both “firm-level business activity” and “wage and benefit costs” plunge! In other words, completely useless, unquestionably comprised noise to confuse us – and promote a “mythical services boom,” whilst simultaneously, real data like the Richmond Manufacturing Index prints at -8, compared to +2 last month and expectations of zero.
There’s a reason I wrote “all economic data are lies” last year; and particularly, “island of lies” data like “diffusion indices – which as you can see, have essentially ZERO correlation to GDP growth (which itself, is horrifically cooked), both within individual nations and comparatively across the world. And again, it’s not just one category of data, but all data; from the Fed fabricating loan data to convince us QE is “working”; to the “seasonal adjustment” of home sales by the criminal “National Association of Realtors” (talk about biased data!); to, of course, the “crime of the century” that is the BLS’ bogus NFP employment reports.
And thus, amidst history’s unquestionably broadest scheme of money printing, market manipulation, and propaganda – in and of itself, a Ponzi scheme that must exponentially expand – financial bubbles of epic proportions have developed, putting all previous versions (which, by the way, occurred without PPT or QE support) to shame – in the U.S. (highest ever P/E ratios; epic sector bubbles; unprecedented accounting fraud; venture capital mania), Germany, Japan, China, South Africa, Venezuela, and countless other nations. And the scariest part is the “tie that binds” them all is the global fiat Ponzi scheme anchored by the dying U.S. dollar; which, ironically, is surging against all other currencies as global fear of the ultimate “end game” accelerates; which, in turn, will foster a generational fear of paper currencies, in lieu of the only real money the world has ever known.
Even more ironically, the “surging dollar” – which not only the U.S. Commerce Secretary, but the White House itself have recently, overtly warned of – is killing what remains of the U.S. economy, which is dominated by multi-national firms that have been relying on the favorable translation gains of a weak dollar for the past 15 years. Thus, it’s no surprise that, “token hawks” aside, Janet Yellen delivered the “most unequivocally dovish FOMC statement in memory” to Congress last month, and followed it up at last week’s meeting. In other words, the Fed-led global financial bubble is now “going for broke” – with the final blow-off to occur when the inevitable “Yellen Reversal” puts the Fed back in the overt QE game, and/or the “Big Bang” when the PBOC is forced to de-peg the Yuan from the dollar. That is, if these inevitabilities aren’t usurped by some other “black swan” event. And thus, whether via hyperinflation or deflationary collapse, the “stock crash to end all stock crashes” will inevitably arrive – to the detriment of essentially all paper assets, and the benefit of the only real money the world has ever known.
Courtesy of Courtesy of http://blog.milesfranklin.com
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.