The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, July 14, 2014.
While you have never likely dreamed the classic cult flick Highlander would ever be used to make social comment of this nature, still, here we are today. It's appropriate in my view because the unraveling of the West, Globalization, and America specifically is accelerating now - the economy, the markets, and the money. Along the way the US had its sword out beheading both friend and foe to gain more power and wealth, but now the brazen greed of American power Barrons has been exposed for all to see, again, causing a quickening of decentralization from untrustworthy influence. America has been exposed for not being the trustworthy policeman and economic savior of the world it was sold as, now viewed more as an opportunistic bully and juggernaut.
Of course there are several levels this all operates on, where some would characterize what is happening as the dismantling of Ango-American dominance in global finance, with the Russia / China axis seemingly gaining traction every day as new trading blocks, exchanges, and currencies emerge. Here, new Eastern centric and global (think BRICS) alliances are being both broadened and bolstered. What's more, even Western allies are getting into the act these days, with the UK, France, and S. Korea opening new trade relations with the East not involving the dollar($), and Germany telling its companies to cool relations with the US. And this trend could quicken more if Saudi Arabia (think petro$) follows suit, potentially triggering a waterfall event in the $, and a corresponding price inflation (hyperinflation) problem for the US. (i.e. as copious amounts of unwanted currency digits attempt to return home.)
And then there's the White House which appears hell bent on alienating just about everybody, including journalists, sovereigns, and even States - just anybody they come in contact with for one reason (pigheadedness) or another (being greedy pigs). The thing is though, like their fellow sovereigns, State level bureaucrats are not (completely) stupid, and now see that the feds are opportunistically working against them, which will do nothing but accelerate cessation movements across the country. Even California is 'getting the gears' from the Washington these days, joining Texas, Arizona, and New Mexico which at a minimum, will eventually cut the country in half at some point. All we need is for Chicago to get pissed off for some reason and the east coast would be isolated.
Of all the factors out there working toward the dismantling of the United States of America however, the one that could be the straw that breaks the camel's back is the bond market, because once interest rates start to rise in earnest, the 'every man for himself' attitude which has gripped the public consciousness will go manic, because financial collapse will arrive quickly when the money machine (think fiat currency economy) is shut down. Here, the feds will no longer be viewed as a 'necessary evil' because what little trickle down that now flows from core bureaucrats to the periphery will come to a grinding halt, instilling protectionist tendencies in localized economies. Oh yes, and expect non-payment and bankruptcy levels to skyrocket as well (it's already happening although up to date statistics are not published), finally robbing the feds (and oligarchs) of their power.
So it's quickening folks, meaning you should also be accelerating your preparations for making now rapidly approaching calamity. You know it's quickening because the lengths the despots are willing to go is accelerating, with this most recent immigration tactic by the feds a clear sign of desperation. The feds know that their days are numbered if they don't continue to dilute local power so they are bombarding State agencies and their constituents with an uncontrolled orgy of undesirables that will accomplish three things. It will make local authorities more dependent on the feds because they will need financial support (the feds control the printing presses), it will distract the locals, and it will introduce more sympathizers (the illegals) into the system (who will be given the right to vote.) That's why the oligarchs are pushing to legitimize the illegals.
Because the goal is total population control and proliferation of the clandestine totalitarian state, which is what the United States of America has become, and these types will do anything to maintain power. They are moral retards blinded by avarice and materialism. The most obvious example of this, and what is beyond words in terms embarrassment for any American's with a modicum of patriotism for the republic (a misplaced sentiment these days), is the eight year they have in the White House. Back in the 90's I thought it couldn't get much worse than Clinton, but was proved very wrong with the current clown. And Obama is becoming more tyrannical by the day in attempting to forward the Cloward-Piven Strategy to bankrupt the US, making the populous even more dependent on a corrupt State that is aiming at making them helpless tax / debt slaves for life.
The next big thing they can do to accelerate this is to crash the stock market, and with talk in Congress of reigning in the Fed's powers, this may be exactly what is in the cards. And if it's not this, it will be something else that pops the equity(s) bubble, which will bring the same result whether it was intended or not because far too many people think their savings in the stock market are 'safe', and are about to find out this is a fallacy derived by delusion and an ill-placed trust in the feds. People, the feds are there to help themselves at your expense, so to trust them with your saving is just plain stupid. Because sooner or later buybacks and money printing will slow sufficiently to pop the equity bubble(s) and this time around and some sort of accident (similar to '87) will likely result.
You will remember we discussed such an outcome at length the other day. And just to expand on this train of thought here today, it should be noted that even CNBC talking heads are looking for a correction now, which is bringing in more put buying from new sources - momentum players, etc. What this means is the market will have to chew through these shorts / hedges before any appreciable weakness in stocks can be expected because the algos will pick up on these positions and squeeze them out. Please, don't be fooled by any short-term weakness here, as again, either stocks squeeze higher into month's end in order to get the risk adjusted indexes into a sustainable topping sequence this month, or the rally will keep going into August until the short sellers / hedgers are finally exhausted, as discussed last week.
Then, and only then, will we be in position for a swoon in stocks. And that swoon should come fast, and it should be violent, again, like 1987. This is because with money supply growth rates still buoyant and the machines constantly on the job, one should expect only a very narrow window to open in order to allow for a proper value correction. And this can only happen when the mania in fear has run its course, as brief as any lull here may be once (if) stocks crash. What's more, and in line with our thinking on the subject the other day, this sentiment also applies to precious metals shares (not bullion), where like in '87, the XAU bottomed in June and rallied into early September (see here), and then crashed into October, where they were halved in one month, with the rest of the stock market. (See Figure 1)
Again however, this sentiment does not apply to gold bullion, which should be the go to asset to some degree under such circumstances given it won't take long for traders to figure out QE will be back in vogue quickly - only this time it will be more directly aimed directly at the stock market. A vexing of gold below the channel in Figure 1 above would be sufficient to spark such a panic - a panic that would take gold back to $2,000 in short order, and silver back to $50, or beyond. In '87 gold was the go to asset in the crash (see here), not bonds (which will be the case again this time around as well), which meant its price was stable to higher. This time around, with the 2008 template to work off, traders might be scared into selling their gold initially, causing the channel breach discussed above, however serious downside past last year's lows is not anticipated. (See Figure 2)
And while anything is possible depending on how bad an equity meltdown might get, because speculators could become stubborn on buying the dip (which would cause more derivatives / algo related selling); still, once the dust settles gold and silver should snap back into bull market mode running into the 2021 (Fibonacci 21-year bull market from 2000), making any volatility over the next six-months or so seem like a blip on the screen before its all over. This is especially true of silver, which as you can see above in the weekly plot, only needs to better Fibonacci resonance related resistance at approximately $21.50 to get back on track. It closed Friday at $21.48 cash basis, but is overbought on a short-term basis, accounting for the pullback this morning. If the broader equity complex (the stock market) does not suffer any significant setback this fall, silver would continue rising until it does, taking in (educated) liquidity coming out of stocks. (See Figure 3)
To say silver has a long way to go in the relatively short period of time remaining in the bull market (5 to 6 years) is an understatement, however you should be confident it will attain its true value metrics within this time period once faulty and fraudulent Western markets are no longer the primary price discovery mechanisms. As you can see above, it's all been to keep the stock market at the forefront, which serves the interests of Western oligarchs and bureaucrats, one and all. The time is coming however, where all the energy stored in the stock market will be unleashed on silver, which has been the bureaucracy's 'whipping boy' for too long now. And when this happens silver will pull a bitcoin in my estimation, going from $20, where it is now, to $1,000 in a year, considering the fundamentals are much stronger.
You may remember me mentioning this a few months back. Nothing has changed since then regarding silver's prospects. Just wait until the fracking fallacy passes and the geniuses 'running things' figure out they have fallen way behind the curve on energy alternatives, with silver being the best electrical (energy gathering) conductor in existence, making it an essential component in the manufacture of solar panels. Both China and India are embarking on major programs to fast track the expansion of solar energy that could soak up much of now declining silver mining production in coming years, causing a serious squeeze that the bankers will not be able to stop. And this is not the only good news for silver, but a good indication of why its improving prospects continue to evolve, again, which will eventually overcome efforts of Western bankers to keep it contained.
So again, while silver might continue to be volatile, and this is sentiment is especially pertinent in a liquidity event, still, its improving fundamentals are both undeniable and firm, where no matter what happens in the stock market in coming days, demand will continue to escalate in the full measure of time. And although it may take some time to have an impact on pricing with Western markets still apparently in control, with factors like WWIII breaking out as we speak, time is quickening in this regard as well; where again, once it gets loose, silver would play serious catch-up to where it should be trading based on the totality of true fundamentals, likely discounting the future at some point (in the eventual blow-off), never mind the past. (i.e. it's presently trading far below inflation adjusted pricing.)
The quickening will ensure such an outcome.
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