first majestic silver

Has The "Big One" Commenced - And Can You Afford To Assume Otherwise?

January 21, 2016

It’s early Wednesday morning – and with oil down to $27.50/bbl; commodities; currencies, equities, and high-yield bonds crashing; and the 10-year Treasury yield – “rate hike” and all – back below 2%; only gold and silver are higher.

To that end, anyone who regularly reads or listens to me knows I never predict the exact timing of events – with good reason, given how unconscionably manipulated markets have become. That said, in the past week, on numerous podcasts, I have definitively stated my newfound belief that it is unfathomable that the world escapes 2016 without the “next 2008” swamping the political, geopolitical, economic, and social landscape. Only this time, there will be no Central banking backstop – although god knows, they’ll try; no bailouts (although they’ll certainly be bail-Ins); and no “fiscal stimulus,” from the most bankrupt nation in global history.

Let alone, the rest of the world – which care of two years of accelerating capital flight – faces not only the complete implosion of their respective economies (particularly, commodity-based ones); but disintegrating currencies, which are already at, near, or below their previous, all-time lows. In other words, the “Big One” I have long warned of; which, frankly, will not only redistribute the world’s wealth – much of it, to those prescient enough to have ditched fiat currency in lieu of real money; but change, for the worse, the quality of life of the vast majority of the world’s 7.3 billion denizens.

Today’s title is self-explanatory – but before I emphatically highlight it, I want to show you just how dire the situation has become, care of just a handful of “horrible headlines” from the past 24 hours alone. Each, in and of itself, a terrifying omen for the global financial markets; and cumulatively, indicative of a world on the brink of political, economic, and social chaos.

  1. Freefalling Japanese equities, careening the Nikkei stock market into an official “bear market” – amidst a surging yen, following last week’s stunning Bank of Japan comment that Abenomics, for all intents and purposes, has run out of stocks and bonds to monetize.
  2. Saudi Arabia, like China last week, launching capital controls to prevent “nasty speculators” from betting on a Riyal de-pegging from the dollar. Which of course it will, as described in last week’s Audioblog, “Fiat Ponzi history is being made, so protect yourself now”; in which, I described how one after another, manipulative Central banks are losing control of both their official and “offshore” (i.e., black) market exchange rates.
  3. On the topic of desperate Central banks, the Bank of Canada may well launch negative interest rates at its regularly scheduled meeting this afternoon, following last week’s comment from BOC governor Stephen Poloz espoused “the effective lower bound for policy rates is around -0.5%.” And when it inevitably does – be it today, or later this year – it will be “no holds barred” on the “left side of the pond.” Or, for that matter, the depths the “Loonie” can plunge to.
  4. A Zero Hedge article depicted an essentially 100% correlation between Chinese “offshore Yuan” outflows and high-end real estate in New York City, London, and other bubblicious markets. That said, now that the Chinese economy is crashing, the Chinese government is instilling capital controls, and the U.S. and other governments are starting to crack down on offshore money laundering, the mirage of prosperity in the world’s “most desirable” real estate markets may well be in for an extremely rude awakening.
  5. The expanding realization that lawlessness and racial hatred is taking over Europe, particularly in Germany; i.e., the “glue” that holds the Eurozone together. To wit, amidst an ugly racial riot in the Netherlands, one of the regions’ top politicians opined – in what I view as an ominous portent of what’s to come – that European officials should “lock up male refugees in asylum centers, to save the bloc’s women fromIslamic testosterone bombs.”
  6. Whilst the IMF slashed its global “growth” outlook for the fourth time in the past 12 months – citing “great challenges” ahead; the IEA, or International Energy Agency, warned the crude oil market could “drown in oversupply” for the foreseeable future. Which, as you know, I whole-heartedly agree with.
  7. In one of the most shocking articles I’ve come across, I learned that – if you can believe this – U.S. equity markets comprise a whopping 52% of the entire global market capitalization. This, from a country with just 4% of the world’s population, and 22% of its GDP. Not to mention, 28% of its debt – not including of course, its massive “off balance sheet” debts, derivatives, and unfunded liabilities. Not to mention, U.S. stocks are trading at essentially their highest-ever valuation; with their highest-ever level of margin debt; and the highest-ever level of corporate debt, amidst an expanding earnings recession. And while the S&P 500 doesn’t trade at over 60x earnings, as the doomed Chinese market does, if there’s one thing I’m certain of, it is that this hideous divergence will come crashing down in the years to come.
  8. Donald Trump, who I increasingly believe will be the next President, is dramatically stepping up his rhetoric about imposing 30%-50% import tariffs on essentially all foreign goods. Which, if they were to actually be enacted, would utterly devastate the global economy – and likely, catalyze World War III. Oh well, at least a billionaire will likely be more sympathetic to Precious Metal owners than a socialist.
  9. The not-so-shocking, but completely under-the-radar information Zero Hedge dug up; of how the Fed, by simply maintaining its “reinvestment of Treasury bond interest and maturing Treasury proceeds” policy, is scheduled to “QE” a whopping $1.1 trillion of Treasuries in the next four years, even if “QE4” isn’t announced. Which of course it will be – likely, this year – at levels far greater than $275 billion/year.
  10. Yet another “unexpected” plunge in housing starts, as the U.S. real estate “echo bubble” commences its inexorable plunge to the 2008 lows, or lower.
  11. Last but not least, the utterly blistering start of the year for U.S. Mint gold and silver Eagle sales – particularly the latter, where a whopping 950,000 ounces were sold yesterday alone. Both metals are on pace to shatter their all-time annual sales, and the “Big One” hasn’t even started yet. Which, when it does, will undoubtedly trigger product shortages like we haven’t seen since 2008; although in silver, we certainly had a glimpse of them last summer.

To that end, has the “Big One” indeed commenced? Ah, that is the question. One which I whole-heartedly believe has, with every ounce of my being. To that end, I know I have prepared, to the best of my ability, for the political, economic, and financial cataclysm to come. Hopefully, you have too. And if you haven’t…what are you waiting for? As whether the “Big One” has or has not indeed commenced, can you afford to assume otherwise?

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 Federal Reserve Bank of New York holds the world's largest accumulation of monetary gold.
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