The fall of the stock market in the US and elsewhere is worrying investors. There is a feeling of confusion in the air. It was common knowledge that stocks were highly valued. The Everything Bubble is part of everybody’s life and it has proven to be quite resiliant. Why now? Why is this lovely money making machine sputtering?
It helps to remember that the current upswing was supported by three narratives. The Trump reflation trade, the global growth story and the assumption that company earnings could grow and grow. All of these assumptions look shaky. The Trump reflation trade was nothing but clever propaganda. This will become apparent to anybody who looks at the night Trump got elected. Within a few hours his image changed from devil incarnate to messiah of prosperity. People have sobered up and see more and more of the real Trump. He is a lonely warrior trying to build a team that does not backstab him. He is constantly attacked by Oligarchs and the Deep State. His tax reform and spending bill are dangerous pieces of legislation that may undermine the economy because of the trillion Dollar deficits that are part of it. The US Dollar is on life support, propped up day by day by ECB, BOJ and the SNB. Global growth may die in the upcoming trade wars and corporate earnings with it.
What does the future hold? We are still in the middle of the fog of war and can only see vague outlines of what lies ahead. This blog’s most educated guess is that we are on the cusp of a new era. An era of the revival of the nation state and the demise of the globalist ideology. The Peoples of the western world rise up against the tyranny of the Oligarchs and the deep state. In Europe there is at least one demonstration per day against the established order. Protests are most visible in Italy, France and Germany. In Denmark and Austria anti establishment parties are in government. In Germany, the party of the insurgency, AFD is the biggest opposition party and may win the next election. They attack in public speeches the regime of criminality and demand that its head, Chancellor Mrs Merkel be put on trial.
The UK government is in panic because populism spreads across the country. They have introduced legislation that allows Westminster to strip anybody of all of his rights, to detain him/her indefinitely and to convict him/her in secret trials where the lawyer of the defendant may not be allowed to see the evidence for the conviction because it is secret.
A week ago they arrested Austrian activist Martin Sellner and leader of Generation Identity for three days without charge when he entered the UK to hold a speech about free speech at Speaker’s Corner. Thousands of activists then met at this very place in protest and more than 100,000 watched this spectacle live on YouTube.
The genie is out of the bottle and the powers that be still believe that they can put it back where it was kept since the last age of revolutions, the 18th century. We live in pre revolutionary times. The economic cost of transition from a feudal tyranny to a different regime that so far nobody has conceptionally completed will be very high. The days of plenty are over. Clever investors position themselves before the volcanos erupt.
The gold price suppression regime was very active this week. The Cartel tried all week to push prices down to $1300 and below this mark to dishearten investors. They failed. Prices moved the other way. The gold price ended the week at $1348m driven by very strong demand. Bloomberg called this a horror week for the Dow. It certainly was not for gold and gold mining shares investors. The US Dollar fell as did US Treasuries, destroying the myth that they are a safe haven.
Here is the week in detail. All Gold Suspicious Price Movement Index data are based on COMEX price movements and other data, the analysis is based on one minute candle charts. Hits are the number of market interventions. The Market manipulation volume is the estimated volume of dumped gold contracts as a percentage of total market volume.
Monday: 101 hits, Cartel price target below $1310, failed. Manipulation volume at 30%.
Tuesday: 167 hits. Cartel price target below $1310, failed. Manipulation volume at 35%.
Wednesday: 101 hits. Cartel price target below $1310, failed. Manipulation volume at 30%.
Thursday: 291 hits. Cartel price target below $1320, failed. Manipulation volume at 40%.
Friday: 126 hits. Cartel price target below $1340, failed. Manipulation volume at 35%.
There are battles that never make it into the history books. Financial market battles. Yesterday one of these battles raged in the gold market. Since January 2017 the surgical attacks on the gold price have turned into massive carpet bombing exercises, a 1000 bomber raid every day. As if Sir Arthur Harris had returned to active service.
The GSPMI data for yesterday’s trading action are as follows: In total we observed 291 gold price bombing raids. 21 times did the gold price rise above $1330. 22 times did the Cartel push the gold price below this mark. In after hour trades gold went above $1330 again, a sign of steely investor trust in the metal. The volume of dumped gold contracts is estimated at 40 percent of total market volume, another 400 mt of bombing.
Harvey Organ, the gold market EFP chronicler, reports that as at of the 22 March the default on dumped silver contracts this year alone has risen to 679 million oz, for gold it is 1792 mt. Harvey mentions that there is a delay in the issuance of EFPs of 48 hours. Accordingly the reported default figures represent the end of last week.
This is Dresden blasted.
The Everything Bubble is a term that describes the inflation in value of almost all assets that can be described as financial assets. At the heart of the Everything Bubble are the equity and bond markets, real estate, commodities, fine arts, vintage cars, antiques and some more exotic objects of desire like sequences of numbers on a computer, commonly called crypto currencies. The ever rising Everything Bubble is essential for the stability of the current political and financial regime because:
It conveys the illusion of a strong economy, thus providing political and economic stability
It bolsters the Oligarchs, deficit ridden pension funds, the chronically insolvent banking industry and the coffers of the US Treasury (capital gains tax)
It serves as collateral for the expansion of the debt based economy
It attracts foreign investment and allows even more creation of American IOUs aka Dollars and other forms of debt
It hides inflation. Central banks have created horrendous inflation by printing more than $20 trillion of currency. Commercial banks even more. The effects of this inflation are hidden because most of it was soaked up by rising bond and equity markets
It projects an image of vast prosperity whilst the United States is insolvent on a federal. state, municipal, private and corporate level
It encourages US citizens to take on ever more debt, in the belief that they have entered a new era of prosperity
The Everything Bubble was born in 2008 when the Federal Reserve started its Quantitative Easing (currency printing) regime to save the banks. It has since gone global.
The Everything Bubble has shown signs of distress in last couple of weeks. The Federal Reserve has been tightening monetary conditions for more than a year now and the draining of liquidity in the markets sucks the air out of the bubble. Contrast this with yesterday’s description of the state of the US economy by Fed chair Jerome Powell. “The job market remains strong. The economy continues to expand and inflation appears to be moving towards the FOMC’s 2 percent longer term goal.”
Yesterday, the FOMC raised interest rates by 25 basis points and signalled two more rate hikes for 2018. For an insolvent system. Mr Powell has obviously decided to pull the plug on his country’s economy and on the global economy as well. To be the originator of the biggest depression in more than 200 years. His place in the history books is guaranteed.
Harvey Organ yesterday published an update about the EFP issuance (COMEX trades where the seller did not deliver the physical metal). As at of the 21 March it is 662 million oz of silver and 1743 mt of gold. Yesterday, the Cartel dumped in 101 price manipulations roughly 400 mt of gold contracts on the market (COMEX). This is more than 13 percent of annual mine production. In one day! We do not know how many of these contracts will trigger a demand for physical metal. What we can see from the EFP issuance in the first seven weeks of this year is that the gold price suppression regime is running amok.
March 21/GOLD UP $9.65 TO $1321.80 COMEX CLOSING TIME AND THEN ADDS ANOTHER 10 DOLLARS IN ACCESS TRADING/SILVER UP 21 CENTS TO $16.41 AND ANOTHER 14 CENTS TO $16.55 IN ACCESS TRADING/STRONG GOLD EFP ISSUANCE AT 10,200 CONTRACTS/STRONG SILVER EFP ISSUANCE : ALMOST 5,000 CONTRACTS/TOTAL EFP ISSUANCE THIS YEAR IN SILVER: 662 MILLION OZ/TOTAL EFP ISSUANCE IN GOLD: THIS YEAR TO DATE: 1743 TONNES/CHINA SET TO RETALIATE AGAINST TRUMP TARIFFS BUT IT WILL NOT BE BIG/ DEUTSCHE BANK IN TROUBLE AGAIN AS THE STRONG EURO IS KILLING THEM/FOMC: USA RAISES RATES BY .25% BUT GUIDANCE DOVISH/
There is another interesting take away from the EFP update. Why would anybody enter into an EFP agreement if the issuer has almost systematically defaulted on physical metal deliveries since last autumn? Do clients not realise that they are dealing with some of the most sinister and untrustworthy characters imaginable? Sometimes you get an offer that you can not refuse. This is particular the case when central banks are getting uneasy about their large holdings of FR notes. What happens if a central bank, let’s say in Europe or Central or Latin America, decides to buy a few hundred mt of gold in exchange for some of its Dollar holdings? There is a playbook for this. Search for ‘Confessions of an Economic Hitman’.
On the 8 March we published the article ‘Living on Borrowed Time’. It is about zero interest rate malinvestment and the lingering issue of Zombification. This time bomb is getting closer to detonation. This was nicely highlighted by Bloomberg today. Unfortunately they did not mention the size of the problem. In the Eurozone now more than 12 percent of all corporations are seen as Zombies. Enough to wipe out the equity of Eurozone Banks. In the US anf Japan the issue is equally pressing.
It is 10:47 EST. During the night the Cartel came various times close to its intra day target of pushing gold below $1310. Once that was achieved it would push to get the gold price below $1300. They failed time and time again. The public knows the drill and investors and traders move in for the kill whenever the Cartel smashes the price. It is amazing to watch how much power this once omnipotent clique has lost. Instead of going down, gold is now above $1320. Will there be another ferocious attack? It can not be ruled out. Any major dip however will be short lived according to all we can observe.
Some economic indicators hit the wire. MBA Mortgage application were weak, Existing Home Sales came in in line with expectations. Triggered by discounts for slow moving inventory?
The press conference with Jerome Powell will be the highlight of the day. Expect some wild price movements whilst he speaks.