This Week in Barrons – 6-12-2016:
“’You're like Jesus, if he was arrogant and all of his
miracles were fake… I'm just trying to create
a space for wisdom.” … Merritt McKinney - Now You See Me 2
Thoughts:
Recently I saw the movie
‘Now You See Me 2’ and it dawned on me that society is making the individual,
global FED players ‘rock stars’, only all of them are “arrogant and all of their miracles are fake”. We are doing this at the expense of the
actual markets, and the companies within them.
The stars are now: Janet Yellen, Mario Draghi, Haruhiko Kuroda, Zhou
Xiaochuan, and Mark Carney of the United States, Europe, Japan, China, and
England respectively. Unfortunately, over
the last decade the FED heads have decided that it was their ‘obligation’ to decide
the winners and losers. The losers would
be the savers, pension funds, and insurance funds that have seen interest rates
plummet. The winners are every
corporation that has even the slightest political intention. Nobody realized that by manipulating interest
rates, you would effectively manipulate everything. In fact by pushing interest rates negative, you
force ‘savers’ to increase their risk tolerance and enter the stock market. Instead of ”trying to create a space for wisdom”, investment decisions are being
made on guessing what the various FED heads will do next.
The Bank of Japan (after
introducing negative interest rates) is now actively purchasing Japanese
stocks. They are now a top ten
shareholder in 90% of the stocks traded in Japan. Not to be outdone, the European Central Bank
(ECB) has also moved on from negative interest rates and is purchasing
corporate bonds. This means (for
example) that the citizens of the EU are actually funding the Bayer acquisition
of Monsanto. Bayer (in an effort to
accumulate the funds necessary to purchase Monsanto) sold billions of dollars
of Bayer corporate bonds. The ECB then
printed the appropriate amount of money, and immediately bought the bonds from
Bayer. Therefore, Bayer just received billions
of dollars to buy Monsanto directly from the ECB. If you were Bayer, you never had to increase
sales, or change any business practices.
You acquired Monsanto because the ECB printed money out of thin air and
gave it to you. There is no precedent for that amount of FED head
authority or intervention.
We’ve never seen anything
like it. Switzerland, China, Japan, and
the European Central bank all admit to buying stocks. Corporate earnings could go to zero, and
stocks in these areas would still rise just as long as they are being purchased
by money that is simply printed into existence, instead of money that has been
earned and saved. This type of FED head action is being termed the
‘Hidden Hand’.
Marc
Faber of the ‘Gloom, Boom and Doom Report’ said: “Central banks are only interested in their own
prestige. If a particular element did
NOT work in the past, they will do it again and increase the dosage. Eventually, (for example) they will buy all
the bonds, and all the shares outstanding. And when the housing market goes down, they will
buy all the homes – and then the government will own everything."
I have no idea when or how
this all ends, though I'm fairly certain that it won't be pretty. The crazy thing about these FED heads is that
they are all academics that have never worked a day in their lives. However,
their game is not without risk. Goldman
Sachs estimates that a 1% increase in U.S. Treasury yields would trigger over
$1 trillion in losses – exceeding all of the losses from the last financial
crisis. I believe that gold and other
hard assets will be the spectacular winners of this manipulation. George Soros and other semi-retired investors
have also voiced their opinions on the side of buying gold and gold miners. So far this year the Gold Miners (GDX) are up
90% as compared to a 3% increase in the S&P.
To that end I would like
to recommend a FREE precious metals seminar taking place on the 16th,
17th, and 18th of this month. It’s a collection of 20 interviews from the
how’s and why’s of buying precious metals, to identifying fakes and frauds, and
even touching on where to ‘hide’ them. This
online seminar is FREE to listen to, and is $20 to purchase the podcast. It only requires a first name and e-mail to
enter and you can review the speaker list and content at: http://cdi.ontraport.net/t?orid=98572&opid=55.
I have it on excellent authority that it will be the best, free education
you will ever get on the precious metals.
The Market:
Factually:
-
China’s
financial defaults are rising significantly,
-
Another $2B left
the market last week – making it 10 out of the last 12 weeks where money has
been fleeing the stock market.
-
The amount of
global sovereign debt with negative yields surpassed $10 trillion for the first
time in May. It is spread across 14
countries, with Japan by far the largest source of negative-yielding bonds.
-
Businesses accumulated
debt in the 1st Quarter of 2016 at the fastest pace in three
quarters. Business debt grew at a
blistering 7.9%, and has expanded by almost 8% in three of the last five
quarters.
-
Household debt grew
at a much slower 2.7% pace, with student and auto debt leading the way and
credit card debt growing by 6.1%.
Mortgage debt grew at the slowest pace of 1.6%.
-
DS informs me
that for the past 54 consecutive months, rent increases have exceeded pay
increases. This is crushing seniors and
the lower middle class as in many cases – they are spending 40% of their income
on rent.
If you listen to the
market carefully you can almost hear the creaks and groans. The distortions from so much pushing and
pulling on a market that clearly doesn't belong at these levels, are causing
all kinds of problems. In the middle of
the week, the DOW and the S&P were trying to ‘fade lower’, but that ‘Hidden
Hand’ kept powering them back up. On
Friday, the ‘Hidden Hand’ showed up in the final hour to take us off the lows,
but the DOW ended down 119 points and the S&P lost 20.
One of the issues that hit
on Friday was that a new poll in the UK showed 55% of the respondents are
leaning toward a ‘BrExit’, or (in other words) leaning toward having the UK
leave the European Union. The Global Elites
definitely don't want any part of that because it would trigger other nations
following suit. And this is where their ‘one
world government’ plot would start to dissolve in the test tube.
A theory that surfaced on
the back of the BrExit poll concerned the FED meeting this week. The FED has a scheduled meeting focused on interest
rates on Tuesday and Wednesday of this week. Currently, the market is giving the FED a ZERO
chance of doing a rate hike. But if our
FED had inside knowledge that the UK was indeed going to BrExit (leave the EU),
then it could freely raise interest rates and blame the market’s behavior (falling)
on Britain. I'm not saying that is what's
going to happen, but rather a rumor circulating around the trading floor.
On the downside of things,
the S&P has to hold 2085, or we are going to the 50-day moving average at
2076, and then to 2065. On the upside,
if we can gain back all of Friday’s loses and see the market over 2109, then we
could see them try and pull off another run at the old highs.
Remember, this week we
have the FED meeting and ‘triple witching’ on Friday. After that, we have an upcoming vote on
BrExit. Hang onto your hats, as all heck
could break loose over the next two weeks.
TIPS:
I would look at some of
the silver miners whose profit per ounce of silver is moving higher. The ones that I see that have a relatively
low cash cost of mining an ounce of silver from the ground and are increasing
their profit margins are:
-
Fortuna Silver
Mines (FSM),
-
Avino Silver
& Gold Mines (ASM),
-
First Majestic
Silver (AG), and
-
Hecla
Mining (HL).
Avino, First Majestic and
Hecla Mining each produced an ounce of silver at about $5 per ounce, in the first quarter of this
year. Fortuna (FSM) produced at same
ounce for $1.44.
I am:
-
Long various
mining stocks: AG, AUY, CDE, FFMGF, FSM, NGD, and PAAS,
-
And Long an oil
supplier: REN.
To follow me on Twitter.com and on StockTwits.com to get my daily thoughts
aand trades – my handle is: taylorpamm.
Please be safe out there!
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