The "Drift" Before The Plunge

July 30, 2015

It’s 5:00 AM PST, and to say I’m tired is the understatement of the century. I’m in Vancouver for Eric Sprott’s annual investment conference, where the Miles Franklin crew is spending time with some of the continent’s smartest people. Last night was a particularly late one, and today Andy Schectman and I are giving two presentations. That said, I wanted to pen a few thoughts before heading to the conference – about not only the imploding global economy, but blindingly obvious upward “drift” of government-rigged “markets” ahead of this afternoon’s meaningless FOMC statement. Not to mention, equally blatant intervention to support the collapsing Chinese stock market; and of course, cap precious metals.

To start, let me just correct a mistake I made last week, in reporting that the world’s third largest gold miner, Anglogold Ashanti, lost $3 billion in the first half of 2015, and announced the intention to lay off 53,000 employees, or 35% of its workforce. As it turns out, said announcement was far uglier than I indicated; validating, in spades, what I wrote in last week’s “mining Armageddon” – as in reality, it isn’t just gold mining that’s suffering, but the entire mining industry. The reason being, it wasn’t AngloGold Ashanti that made the announcement, but “big brother” mining outfit Anglo American plc.

To wit, Anglo American is one of the world’s largest diversified mining companies – producing 40% of the world’s platinum, whilst owning the famous DeBeers diamond company and also being a major producer of iron ore, copper, and coal, among other key industrial commodities. AngloGold Ashanti was spun off in 2009, as its bankers convinced it the gold operations would receive a higher valuation independently. Of course, as usual, the bankers were wrong – as whilst Anglo American stock is down 71% from its 2008 high, AngloGold Ashanti is down a whopping 90% from its own high, in 2006. Forgive me for the mistake – as not only was I not home when it occurred, but the erroneous assumption was made principally because that very day, AngloGold Ashanti stock was plunging to an all-time low (which is being breached to the downside as I write). Which, as Bill Murphy of GATA would describe it, will just be “jacks for starters” if the Cartel isn’t broken very, very soon.

Speaking of plunging – I get to again write of my two “favorite” topics, Greece and China. Regarding the former, here we are three weeks after the supposed “saving” of the Hellenic republic, yet the only money that has changed hands is the €8 billion the ECB printed, added to Greece’s debt load, and promptly paid itself back with. As for the rest of the €86 billion Greece needs to survive a few more months, it hasn’t even been discussed yet – which is probably why the Greek stock market remains closed (although the National Bank of Greece’s ADR is trading at an all-time low); Greek banks, while “opened,” remain heavily capital controlled; and oh yeah, the Greek economy is in free fall, as new estimates suggest that since said Greece’s “saving,” retail sales have plunged nearly 70%. Yes, 70% – meaning whatever “bailout” number one has in mind, it probably needs to be dramatically increased.

Moreover, it appears that the IMF – i.e., one third of the “Troika” that will supposedly “bail out” Greece – appears unlikely to participate in said “bailout”; as will likely be the case with much of the rest of bankrupt Europe. And as for Greece, its political situation has gone from bad to worse – with embattled, lame duck traitor Prime Minister Alexis Tsipras threatening “snap elections” before said “bailout” is even negotiated. In other words, “GrExit” has never been more guaranteed than today – not just for Greece, but all of Europe’s “weak links,” starting with all the so-called “PIIGS.”

And by the way, kudos to Mark Grant of Southwest Securities, who did some major grunt work in piecing together what Greece really owes, outside the €350 billion or so of “on balance sheet” debt Wall Street and the Troika pretend is its debt load. As it turns out, Goldman Sachs did a far better job piling on “off balance sheet” obligations than even I imagined; as, in sum total, Greece actually owes closer to €575 billion – before said €86 billion of “bailout” funds are even considered. And, as mentioned above, said €86 billion likely way understates what in fact is really needed, especially now that the Greek economy is in free fall. And trust me, from the rest of the PIIGS to the United States of Derivatives and Accounting Lies, the amount of Enron-like “off balance sheet” debts and “unfunded liabilities” the world round is monstrous, the proverbial “tip of the iceberg.” Which we assure you, will “come out in the laundry” as history’s largest, most destructive fiat Ponzi scheme implodes.

Of course, Greece is “small potatoes” compared to the historic, world-destroying collapse ongoing in China. At 15% of global GDP, its horrifying economic implosion -aptly symbolized by the collapse of its PBOC-fostered equity bubble – is not only destroying “wealth” at a record pace, but setting up a desperate Chinese government to take the “final currency warnuclear by inevitably de-pegging the Yuan. Which, when it does, will not only be the most disastrous financial event of our lifetimes, but will likely mark the beginning of the inevitable, global mad rush toward physical precious metals – which frankly, has already begun in earnest. Not to mention, in China – where inevitably it must announce its real gold holdings; which likely, are far higher than most can imagine. And by “far higher,” I do mean far higher.

As for the Chinese “stock market” – which for the second time in eight years has been clumsily hyper-inflated by its moronic Central bank, it’s become even less “freely traded” than the “Dow Jones Propaganda Average“; or, for that matter, the Dow’s sister “last to go” markets, paper gold and silver. To wit, despite furious, blindly overt PBOC support, Monday’s historic 8.5% plunge in the Shanghai exchange was followed with another 1.7% decline Tuesday. And if not for this morning’s PBOC-sponsored “Hail Mary to end all Hail Maries,” it would have been another day of horror for China’s 258 million, massively hemorrhaging retail margin accounts. Which, by the way, was matched “dollar for yuan” by the U.S. PPT’s prototypical goosing of the “Dow Jones Propaganda Average” ahead of today’s FOMC boondoggle – “dead ringer” algorithm and all; as has been its modus operandi for years, if not decades.

Yes, quite the stable, “run of the mill” 190 point Dow gain – on a day when bond yields plunged amidst one of the ugliest “consumer confidence” collapses in memory – not to mention, an equally “unexpected” decline in the Case-Shiller home price index (validated, by the way, by this morning’s “unexpected” pending home sales index decline.) And if you think U.S. real estate is weakening, you should see how many “for sale” signs are posted here in Vancouver!

Not to mention, equally prototypical Precious Metal capping at the same 2:15 AM EST (open of London paper market), 10:00 AM EST (close of global physical trading), and 2:00 PM EST “key attack times” as always, via the same “Cartel Herald” algorithm as we have witnessed for at least 15 years. Which, by the way, were followed by identical paper attacks this morning – at 2:15 AM, as always; the 8:20 AM EST COMEX open; and even the 9:30 AM EST NYSE open. And take a look at what price “coincidentally” marked the top. Yep, exactly the round number of $1,100/oz, on what was a COMEX options expiration day. Gee, I’ve never seen that occur before – as in, essentially every COMEX expiration of the past 13 years. And by the way, if anyone still pays heed to the comical propaganda claiming paper markets represent what’s going in in the physical world, not only is the U.S. Mint on a pace to have one of its strongest ever months of gold Eagle sales; but since it re-started “allocated” sales of silver Eagles on Monday, it has sold a whopping 2.6 million ounces. Which, if such a pace continues a few more days, will likely cause it to suspend silver Eagle sales again!

And one more point regarding silver, as discussed in last weekend’s Audioblog, “has the big one commenced?” In it, I discussed a trade I personally made Friday morning, in selling some gold Maple Leafs to purchase the last of the Canadian silver “Birds of Prey” series’ available, the “Red Tailed Hawk.” Well, lo and behold, it too SOLD OUT yesterday, demonstrating just how powerful physical silver demand has become – at today’s ridiculously suppressed prices, whilst fiat currencies the world round collapse. To that end, we are told the next Bird of Prey series will be issued in the coming weeks; and when it does, I’ll immediately relay the details.

OK, on to today’s primary topic – as if the other topics aren’t worth of “primary topic” status themselves. Which is, yet another reminder of just how imperative it has become for the Fed to “prime markets” before its policy statements – using all available manipulative tools, from its own “bond managing” operations; to the PPT in stocks; the “Exchange Stabilization Fund” in currencies; and of course, the gold Cartel. To wit, yesterday’s pitifully obvious Dow goosing, amidst horrific economic data and not a shred of reason for stocks to be higher – or for that matter, Precious Metals to be lower.

Notwithstanding the PBOC’s equally blatant support of the Chinese market – and likely, Central bank support, both overt and covert – of equity “markets” the world round, the U.S. PPT was simply continuing its “unwritten” policy of pushing the market up ahead of FOMC statements – such as today’s at 2:00 PM EST. Which, by the way, I spoke of in said Audioblog, in referring to likely “pre-FOMC drift” trading this week.

Essentially, said “drift” was discovered by the Fed’s own research, in realizing that between 1994 and 2011, roughly 80% of all cumulative S&P 500 gains were achieved in the 24 hours preceding FOMC statements. Which, given the fact that the Fed has been wrong about essentially everything it’s predicted – in the process, destroying the global economy – all but conclusively proves that the only reason stocks rise before he Fed speaks is its desire to keep markets “calm” and “happy” when “Maestro” Greenspan, “Helicopter” Ben, or “Whirlybird” Janet step to the podium. And trust me, the comically manipulative results demonstrated in this data covering 1994-2011 are no different in 2011-15, if not more so.

Amazingly, amidst the all-out collapse of global economic activity – including here, in the United States; as well free falling commodities, currencies, and even many stock markets, mainstream propaganda still calls for the Fed to – in the words of Yahoo! Finance – “push ahead with its rate hike plan.” To which, I can only shake my head in incredulity; as not only would a rate hike be unprecedented amidst an environment of collapsing economic activity and commodity prices – not to mention, stocks – but with the world largest, and rapidly rising, debt load; and most overvalued stock, bond, and real estate markets; the absolutely most devastating event possible for America would be rising interest rates (which, by the way, would decidedly NOT be “negative for Precious Metals“). And thus, we can only advise you to look through the pre-FOMC “drift” toward the “plunge” occurring in the real world – not to mention, explosive, record high Precious Metals demand – and “act accordingly.”


Courtesy of Courtesy of

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

The melting point of gold is 1337.33 K (1064.18 °C, 1947.52 °F).
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