Never have I had so many topics to choose from and hence, the ominous title of today’s article. However, before I start, I want to discuss a survey we recently sent to readers of the Miles Franklin Newsletter. Overwhelmingly, the feedback was positive, as validated by hundreds of positive responses; and in fact, no more than 1% had anything materially negative to say. Thus, overemphasis of the negatives would be misleading in the context of the whole.
However, since several comments struck a chord, I want to address them here. Two were related to the same topic; i.e., “too much repetition of gold/silver manipulation” and “newsletters spend way too much time discussing manipulation and the Cartel.” Meanwhile, another – albeit not necessarily “negative” – stated “specific investment advice on gold and silver should be included.”
As for the manipulation comments, I must note that many of the most positive responses were those thanking us for our coverage of this topic – i.e., the why, when, and how of PM suppression. That said there are always those who choose to not see or are more comfortable in a “status quo world” where we can believe our “leaders” in Washington, Wall Street, and the MSM. Conversely, the Miles Franklin Newsletter and blog exists to logically dispel misinformation and propaganda from these institutions, to enable readers to view the world as it really is. Unfortunately, manipulation – of all markets, but particularly Precious Metals – is not only a way of modern life, but TPTB’s only remaining tool for preventing wholesale fear. And thus, we will speak of it as much as any other relevant topic – which we assure you, there are few in its league. Not only that, but in David Schectman, Bill Holter and myself you are reading three of the pre-eminent global experts on PM manipulation having diligently followed – and documented – it for more than a decade.
As for the latter comment, we must emphasize that Miles Franklin is neither a broker nor investment advisor and cannot give financial advice and for that matter, the Miles Franklin Blog is not a “newsletter.” We don’t charge a fee for its use, or make “investment recommendations” and importantly, have no ability to influence gold or silver prices by “talking our book.” Conversely, our simple goal is education of the virtues of Precious Metals, to add value to readers’ individual due diligence processes. And if the result of such is a decision to buy, sell or store Precious Metals, we hope you will give us a chance to earn your business. Gold and silver coins, in and of themselves, are commodities but as we have learned well in 25 years of business – and particularly the trying times of the past 12 months – bullion dealing and storage are decidedly not.
OK, now I want to speak of the tragic Ukrainian crisis – which we first discussed in detail in our March 3rd article, “This Is Why We Do What We Do.” Since then, the situation has dramatically worsened; although, if you listen to the “status quo” seeking MSM, it is perpetually “de-escalating” – in much the same manner the U.S. economy is “recovering”…
…including the so-called “housing boom,” which evenMSM mouthpiece Yahoo! Finance’s top story today refutes…
Clearly, the potential for military confrontation has reached “DEFCON 1” and sadly, U.S. government aggression is the principal reason. To wit, U.S.-led NATO troops are massing on Ukraine’s Western borders as rapidly as Russia’s on the East; and within Ukraine itself, the political, economic, and social situation has deteriorated to pure chaos. The currency has collapsed, rioting and militant violence are prevalent, and the nation is on the verge of defaulting on its debt – and equally important, its liabilities to Russian natural gas giant Gazprom; which at any time, could withdraw supplies from both Ukraine and the Gazprom-dependent European nations supporting it.
Today alone, a major pro-Ukrainian political leader was assassinated, while the U.S. announced new sanctions against Russian companies and individuals including, incredibly, the CEO of its largest oil company. Worse yet, former Citigroup derivatives trader and current Secretary of State, Jack Lew, made highly inflammatory statements this weekend, in stating Russia needs to “take a step back,” threatening it will “pay the price” if it doesn’t. In response, Russia stated its “disgust” with the White House and subsequently, that such sanctions “wont’ go unanswered.”
By pure coincidence, I was amidst reading James Michener’s Poland as the current Ukraine crisis broke out – relating the history of Poland and surrounding regions since the 13th century. The reason he chose to write of Poland was, frankly, its incredibly miserable and wretched history. Being half-Polish – and a quarter Russian – myself, I am well aware of such tragedy in that my mother’s parents fled Poland to avoid the Nazis (in my grandmother’s case, to never see her family again); while my father’s father fled Russia to escape pogroms, in which Jews were beaten and killed for no other reason than being Jewish. To wit, the book’s dominant theme was that Poland, as well as the Ukraine, were forever cursed by the unfortunate geographic reality that powerful, malignant Germany bordered them to the West, and Russia to the East. Neither Poland nor the Ukraine has ever been large enough – let alone, sufficiently organized enough – to defend themselves; and thus, their histories are littered with centuries of poverty, oppression, serfdom, and genocide.
Today, the situation is worse than ever, as Ukraine possesses the only year-round warm weather port accessible to the powerful Russian navy’s Western front, while its natural gas pipelines supply much of continental Europe. In other words, Ukraine’s strategic value to both the Germans and Russians has never been stronger; let alone, the “new kids on the block” in America who aim to control the global geopolitical scene with a terrifying and dominant military. Throw in the fact that Ukraine’s population is already split into large pro- and ant-Russian factions, and you can see why the potential for World War III breaking out is high. And thus, for those believing gold and silver require a “catalyst,” we present Exhibit A.
Next, we have a collapsing global economy as emphasized by the stock markets and currency of China – i.e., the “world’s growth engine” – falling to new multi-year lows this morning. I’m not going to spend significant time on this topic today but suffice to say, with Mario Draghi last week stating the ECB may shortly launch a $1.4 trillion QE program – as headlines such as “French joblessness hits new record high” cross the tape – it’s a safe bet Precious Metals demand can only increase in the world’s third most populated region, after only China and India.
This, of course, is occurring worldwide, given China’s massive, record-breaking January gold imports – atop 2013’s shattering of the previous record, set in 2012. Not only that, gold forward rates have been in backwardation for an astounding 14 of the past 15 trading days, including an unprecedented backwardation of the six-month forward rate. And as for silver demand, the U.S. Mint continues on pace to shatter last year’s record silver Eagles sales, despite rationing roughly 1.2 million ounces per week. Better yet, Chinese silver supplies are draining faster than the dying, corrupt COMEX; as Shanghai Futures Exchange inventories have plunged by an incredible 55% in the past two months alone – to record lows valued at just $160 million. Add that to the supposed COMEX registered silver inventory of just $1.0 billion and combined, two of the world’s largest silver depositories hold a whopping $1.2 billion worth; i.e., the amount the Fed prints (overtly) every 16 hours, the Bank of Japan every ten hours – and the Chinese government, according to its January data, every two hours.
Amidst this ocean of money printing, financial bubbles of epic proportion have blown up – everywhere. From the Manhattan, London, and Vancouver property markets being bought up by dollar-fleeing Chinese and Russian oligarchs; to incomprehensible levels of pre-2008 style financial leverage and yield-chasing lunacy in the ultra-dangerous junk markets – per Felix Zulauf’s quote below – money printing has created the most ominous financial and economic outlook of our lifetimes and by some metrics, all of recorded history. Better yet, “TBTF” banks are living solely on free Fed money and lax FASB accounting rules, as exemplified by today’s news that Bank of America cancelled its stock buyback because a ‘slight accounting error’ resulted in its capital ratios being significantly lower than thought. Readers, the line between “strong earnings” and bankruptcy in these zombie-like, government-supported institutions is as thin as it’s ever been and we assure you, it will only grow thinner.
When you look at the quality spreads between junk bonds and Treasuries, we are back to the extremes of 2007, at the last cycle peak.
Even the bankers themselves are starting to “jump ship”; per what we wrote last month in “The Ultimate Insider Tells It Like It Is”; let alone, this quote from the soon-to-be Chief Economist of the Bank of England, Andrew Haldane – amidst a scathing criticism of Central bank policies, general speaking.
The crisis has also laid bare the latent inadequacies of economic models with unique stationary equilibria and rational expectations. These models have failed to make sense of the sorts of extreme macro-economic events, such as crises, recessions and depressions, which matter most to society. The expectations of agents, when push came to shove, proved to be anything but rational, instead driven by the fear of the herd or the unknown.
And thus, on a day when the headlines feature the aforementioned, plus, China’s plans to trade oil and gold contracts in Yuan, Deutschebank and Bank of Nova Scotia facing further scrutiny regarding the London Fix gold price rigging scandal, and collapse of the proposed Barrick/Newmont merger, which will likely drive mining costs up further, we think it quite relevant to discuss the 38th “Sunday Night Sentiment” PM raid of the past 39 weeks; as well as the 211th “2:15 AM” EST raid of the past 238 trading days; the DLITG, or “Don’t Let it Turn Green,” algorithms that stopped gold and silver from turning positive just after the COMEX open at 8:20 AM EST and the prototypical 10:00 AM EST waterfall decline; i.e., the second global physical markets closed.
Again, our goal is to speak truth – and nothing but. This is why the Miles Franklin Blog is so popular – and why it will continue to grow, in the coming terrifying economic times. Understanding said truth will mean the difference between long-term prosperity and insolvency; and when it comes to asset allocation, Precious Metals have never been more fundamentally undervalued – care of said manipulation, via the “New York Gold Pool”; while conversely, financial markets like the “Dow Jones Propaganda Index,” the U.S. Treasury bond, and the U.S. dollar itself – care of Fed, PPT, ESF, and other “manipulation operatives” – have never been more overvalued. Thus, we believe a unique confluence of events is upon us which in nautical terms, would be deemed the “Perfect Storm”; but in the economy, the “Convergence of Doom.”
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