2.3 & 4.5 +

The impact of the European Central Bank’s $2.3 trillion and the Federal Reserve Bank’s $4.5 trillion asset purchase programs on inflation targets (by their measure) has fallen well short.

Bond purchases have kept Interest Rates low, a very large distortion in and of itself.

The warning goes – “we are concerned about inflation.”

Of course, and this should go without saying, this is the last thing they are concerning themselves with… inflation.

U.S. Corporate debt holdings are piling up as Central Banks are purchasing at the periphery – Junk namely. Only the Central Banks know the real amounts on a monthly basis. Their public admission fall well short of actual absorption.

With Debt managed – the FED can, for now begin to feign a cooling off period – the “Make them Gag for It” moment that will arrive one day. For now, Equities appear to be setup for a rather large melt-up as Capital Stock opportunities remains weak in both Treasuries and Housing.

All that remains – Equities.

Pensions, 401K’s, Defined Benefit Plans… etal… they must remain supported until the entire edifice crumbles – and that appears to be ahead. Although it would be foolhardy to project when, IF is assured.

Summer has provided cover for the pranksters to begin their hawkish ways – the Credit cycle is sustained ONLY by these buyers of last resort. The Public at large remains sidelined, having been bitten twice and then some.

How this mess unravels will be an amazing site. It should concern us all – very much so.

Too much is made of the Federal Reserve’s ignorance, they know precisely what they are doing. It’s not ignorance that has permitted us to arrive here.

Cleverbridge

Low cost options remain the Derivative Du Jour – witness the Vix and it’s attendant mis-pricing of risk(s).

Distortions within the “Capital Stocks” continue to disregard broad Economic fundamentals. Central Banks disregard for soundness the very structure of Capital Markets has peaked.

Seemingly, that was then… the past. Presently Central Banks around the Globe are engaged in broadcasting a hawkish tone – issuing warnings from both Dove and Hawk alike.

Experts in “Bubble Manifestation” – they are equally adept and releasing pressures accumulated when it’s time to remove copious quantities of punch from the bowl.

Time does not favor those late stage hanger-on.

Are we there yet, the point in time when CB’s begin to relieve a large amount of the accumulated stresses?

The Debt Pileup has brought a tightening – albeit slowly, it’s evident it has arrived.

Precious Metals prices have more often then not acted as the Barometer for conditions within Credit Markets.

Acuity remains a lagging, often “oh shit!” moment, rarely does it align with Policy. It significantly lags to the point whereby – “it’s too late.”

I am presently looking for the Precious Metals Complex to accelerate to the downside – it should begin within the next few hours to a week.

Inversion(s)

Credit Supply is quietly contracting.

Yield Curve inversions assure this effect.

Bank Liabilities (Loans of any duration) produce less income than bank Liabilities (Time Deposits) –  Banks reduce Credit exposure.

Credit Velocity contracts quickly.

Two important points above:

  1. Banks have no real liquid Assets, ONLY Liabilities.
  2. “Money” Supply is irrelevant, as the “Moneyness” of Money was replaced a long time ago.

Consider your options carefully.

The “Make them Gag for it moment” will require immense Credit destruction.

Over-Valued “Assets” are simply a promise to pay upon an extremely leveraged Financial edifice.

Possession is 10/10ths – although CAF is making tremendous inroads to seize those assets outsize the Credit System(s).

Pay close attention over the coming six weeks – it may well determine your future success as the Political Institutions are following orders.

Mining Equities

These paper promises – should be avoided – they will decline precipitously. GDX/GDXJ charts and money flows are quite bearish.

I hold No positions and haven’t for over a decade.

Many of the Juniors will be hard pressed to survive without continued capital which will be constrained.

We need this final sentiment flush to setup the Real lows for a healthy Bull market in Precious Metals.

ETH has been a pure luck play – Simply going with the momentum and letting it run – profits run, losses curtailed quickly.

A number of Analysts are suggesting Real Interest Rates bottomed in February and have been rising ever since – this is WHY Gold & Silver are behaving accordingly – an inverse relationship… “Real” rates remain negative.

100 Bips of Federal Reserve increases does not qualify as a substanial increase in Interest Rates.  Precious Metals rose for the initial 75bps -incongruent would aptly describe the relationship.

Sentiment is what will flush the Complex, it is needed as the hangers-on remain believers, cultists who have been radicalized. I believe it will happen quickly, a precipitous drop to retest the prior lows would perform the necessary exorcism.

July 27th is an important timeframe, it should provide direction for the Metals.

Patience wins.

Summer has always been a Low Volume period – Price adjustments come with minimal effort.

 

Apathy Purchase

After the most recent low volume rise and reversal – by all appearances we have setup the decline I have been patiently waiting to arrive.

All the elements were there – choppy trading with little conviction. A long term downtrend that failed on the Daily Chart and did not materialize on the Weekly & Monthly charts – time is as important as price.

The Precious Metals Media Mafia – true to form – began yet another campaign of hype, BS, fear mongering and “this is it” moments. Where those selling you Precious Metals and Subscriptions – fucked the pooch once again. Their track record remains one of repeated, dismal failures for six straight years.

They have something to sell and it’s clear panic is setting in within the bonfires of Goldburg & the Silver Suicide Cultists.

While the usual suspects were touting a Gold breakout – Congress was busy choking the exits with expansive proposals to impede protection of wealth in any form.

CAF’s cast net is growing, the exits are being strangled with severe penalties and incentives for American to spy on their fellow citizens.

No good deed will go unpunished.

There is more work to be done, for clarity’s sake – our 10 day window closed and we now have the formation of opportunity over the coming weeks on into August.

Price will remain the arbiter, as always – irregardless of “Manipulation(s).”

The real issue will be availability of physical metals in the not too distant future. Supply and Premium spreads will further serve to discourage investment. As inventories are whittled down with each successive decline in price, Primary Dealers will resort to wider spreads on the Metals. This will take time, but it is as certain as the Sunrise.

I believe we will see a quick retest of the December 2015 low @ $1045. A rapid descent in price would surprise and disgust even the most ardent cultists – a waterfall event would perform the necessary flushing of sentiment.

A further decline will swing the remaining sentiment to the point whereby the pendulum had swung enough to store potential for a dramatic reversal. Exhaustion will have occurred and an entirely new paradigm will have arrived.

This is needed for a true, Long Term Bull Market.

Opportunity is ahead, patience and a well defined IF/THEN matrix should be clearly defined and obeyed well in advance.

Plan your Purchases and Purchase your Plan.

August should remain a pivotal month, serving to provide adjustments to how far the pendulum will swing.

Further adjustments can be made during this timeframe. Change remains the only constant and being able to mentally tack when needed is the very foundation of Precious Metals Investing.

Patience will serve to insure we arrive at a reasonable entry point.

 

 

 

Persistence

Patience – is the unheralded key to success in Precious Metals investing. It is a slow moving behemoth, which requires a lengthy process of unwinding at the swing of the pendulum.

The end of an uptrend is an event, it is dramatic and is over quickly. Without exception – price has behaved in accordance with steep peaks and large valleys.

The Price of Gold has little to do with the Business Cycle, nor commodity Cycle. It has everything to do with the Credit Cycle – specifically the expansion of Fiscal Stimuli – which remains muted presently.

Credit stimuli have been the domain of Money Center Banks and Political transgressions. TARP, TALF, QE V.x and Operation Twist reset the Balance sheets of the Money Center Banks.

Little to nothing was done for the Hi Polloi – you and yours while $300 Billion has poured into the support the edifice each and every month. The above number is likely low, in reality we have little to no idea what supports the present arrangements Globally. It’s all simply a WAG.

Fiscal stimulus is simply tax cuts or new government spending that increase aggregate demand.

Almost any deficit increasing policy: reduced corporate taxes, more generous food stamps, added infrastructure spending can stimulate demand, but the exact impacts depend on the structure of the spending and timing.

By example – tax cuts aimed at the less fortunate can boost the economy in the short run. Tax cuts for the well heeled do not provide a real lift. The lower income strata spend a higher percentage of what they receive than the wealthy.

Building a new Carrier Group five years in the future will not have an effect on demand in the short run. It simply guarantees the MID cash flow for a defined period.

Fiscal stimulus (Credit/Debt) can improve imbalances when unemployment is high and economic output is less than desired. When the economy is at full employment – irregardless of actual fact – fiscal stimulus is more likely to lead to higher prices than to higher output.

Traditionally, the Federal Reserve would raise interest rates to keep higher government spending or lower taxes from producing an observable increase in prices of the things our arrangements require.

Of course, the above is tradition, conventionally scripted wisdom(s).

Nowhere does any of the above represent our present circumstance.

There are a great many elements to the above function(s) which are missing, absent and wholly unrepresented.

The current Credit Cycle has developed along a very different path.

Long economic expansion accompanied by the multiple-bubble Capital Stocks (Stock, Bonds, Real Estate) created an effortless buffet for corporate America to raise vast sums of Credits. Productive capacity expanded well beyond the rationale. Excess Capacity is and shall remain a burden for generations.

The “Wealth Effect” permitted the consumer to borrow and spend, but not enough to cause any real reported (CPI) inflationary problems since the output of corporations was more than enough to meet all demand.

Of course, the essentials to our arrangement did rise in price – Food, Water, Energy, Shelter and Security. Security could easily qualify – Insurance, Tuition… more beyond the MID malinvestment(s).

Returns on Savings plummeted as 10 interest rate cuts took incentives from engaging in building a cushion for the future. Consumption was conspiciously encouraged by Politcos, Corporate Media and programming via aspirational imagery.

The Federal Reserve was never required to raise rates to control inflation. All you wanted to consume was presented on a Credit platter.  The Federal Reserve raised rates 1 per cent between the summer of 1998 and the peak in 2000.

One percent.

Demand in the present Credit Cycle did not decline because of interest rate increases. Consumers are spent and excess capacity remains.

Capital Stocks are holding up a narrowing portion of what remains of the Consumer Economy .

These factors all feed upon one another – Capital spending broke down dramatically and has sent the economy into its present tailspin.

Excess Capacity remains a Global issue and will persist for many years.

Traditional, post Bretton Woods, economic cycles were typified by a monetary policy response to rising inflation resulting from a supply shortage, while the current cycle arose from Excess Capacity, Credit Excess and a Faux Wealth Effect which ignited a collapse in capital spending as profit margins narrowed.

Central banks will be unable to bail out their economies using conventional practices. Consumers and corporations are not likely to borrow and spend in significant amounts for some time to come.

They are, by all accounts grossly over-leveraged.

A global recession is already well advanced, it will be far longer and much steeper than most will be willing to accept.

The Socio-Economic divisions are immense.

Politically, the Nation has been secularized to an extreme.

An entirely new paradigm has arrived from the shadows, it is taking shape right before our eyes.

Some see it, but a great many do not – and therein lay the risk to a monumental shock.

 

Energy – Qatar – War

Escalation – airspace, maritime, border access have been cutoff.

Food supplies have been cut from SA – Qatar receives 42% of its agriculture supplies (Food) from Saudi Arabia.

Alignements are being finalized in the region.

Accusing Qatar of extremism – to isolate the Nation for its support of Syrian extremists.

The region has entered a Cold War. Qatar wedged between Saudi Arabia and Iran – resides directly in the path of War.

The Price of Oil deserves close attention – the price should become extremely volatile and this in turn will provide the Precious Metals Complex with directional amplitude.

The Agenda has been set, Qatar is the focal point – ruin lay ahead.

Critical of the United States, Qatar has been isolated from the UAE.

June 11th a break should occur. Why? The anti-Qatar campaign is extremely serious as it seeks to destabilize the regime through contrition.

The date above represents the day of acceptance among regional partners aligned to conspire against Qatar, targeted by leaks – the first significant steps are well advanced.

The propaganda war has tossed truth to the wind.

Sub 1280

A retracement is overdue for the Precious Metals Complex.

The broad commodity index or CRB is weighted to the Energy & Agriculture Complex. A breakdown is developing within the CRB.

The CRB is at 42 year lows.

We see Gold’s attempt to breakout from a six year downtrend flagged today.

Caution is warranted – the usual suspects are touting Metals with abandoned – while premiums remain at near record lows.

IF we see Gold sustain it’s recent move above the downtrend into the Federal Reserve’s meeting – it can be considered Bullish.

1280 is the Line in the Sand (LIS) – failure to hold above for concurrent 3 days is a sign if weakness.

The mining equities would sustain 50% losses in short order were we to revisit 1170 (Target 1) and then 1140 (Target 2).

Should we break 1140 the lows will be retested, should the lows fail… the 750 or 1500 query suggests a move towards 750.

Pay close attention into the Fed, August timeframe remains key to amplitude.

Which way will it break?

That answer is just ahead – the next week to 10 days will provide a high probability answer.

 

 

$0.125 per Billion $

$4 Bilion was sold – 30,400 contracts.

Leverage is not what it used to be – $1B in sales typically would move the POG $0.70 – $0.80.

50SMA is holding.

$40 Billion will be required to significantly move Price.

More interesting gyrations ahead, this appears certain.

The ECB confirmed its lowered inflation targets:

2017: from 1.7% to 1.5%

2018: from 1.6% to 1.3%

2019: from 1.7% to 1.6%

The Euro was sold while inflation continues its rise.

Makes sense somewhere.

June & July are going to be extremely interesting months for the Precious Metals Complex.

I remain on the sidelines with one exception – ETH was purchased via CoinBase @ $130.00.

Letting it run for now.

The focus presently is upon Energy & Agriculture, more on this later.

August remains the month for the break in non-sense, with reality hitting home with a rather large swing.

Patience and positioning for this important shift.

June FOMC

Consider the potential for disruption and increasing volatility within the Precious Metals Complex.

The June FOMC meeting will set the stage for the pivot I’ve discussed in August.

Confidence will be placed squarely within sight. The cross currents have begin a strong undertow – what gets sucked into the divide will be obvious, it may well create and intentional panic.

It represents the potential basis for SDR incursion into the credit Pyramid as early as 2018.

It is best to be positioned ahead of this restructuring, as it will be rather rapid and disorderly when it arrives.

Tier 1 Assets will be in extraordinarily high demand.

Isolationism is on the Agenda for the United States, this does not bode well for the medium of Currency exchange – the Dollar.