(These
original projections of ours were extended over five times: we were
forced to do so by the continual extension of the FED's ZIRP - by the Panicked
Banking Authorities. Therefore, we were forced to extend the projected
timing of the ultimate Mother of All Crashes out to roughly the summer 2016!)
I have a friend who sent me an article by Bill
Fleckenstein some weeks ago that I posted to this Blog - on 5/21 - with full
credit to Mr. Fleckenstein. I had never
heard of Bill before that article was sent to me and I have never even been to
his site, i.e I simply have no time.
Today that same friend sent this article and it is SO
ABSOLUTELY CHOCK full of good-sense driven, fundamentally sane and prescient
observations that I just have to post this one too!
Now, one most essentially important comment and question - right here:
When QE3 (or what ever the FED would like to call their
stupidly insane Yield-Curve Twisting machinations) is finally set in motion, it
will result in the Stupid Banksters being relieved of a whole lot more of their
BbBDBB (Bad Bets of the Bad Debts of the Bad
Bansksters)* of probably around roughly $300,000,000,000, or so.
What do you think they will do with that new Electronic
Funny Money from the FMMM (FED’s Magic Money Machine)*
?
A. Lend
to the average cash-strapped American at low rates of interest (say, 3% to 4%) since the Banksters costs are
ZIP under the FED’s insane ZIRP?
B. Lend to small American businesses and start-ups (again say, at 3% to 4%) to help
alleviate the unemployment and horrific suffering in this country of 40,000,000
out of work Americans?
C. Vastly rewrite insanely structured principal and interest of
under-water mortgages for the average American?
D. IMMEDIATELY buy futures and call options on the Stock Markets and Commodities Markets, and then - a few days later - Invest
Long in the Stock Markets and Commodities Markets, as they have done every time that the FED has bought
up their garbage debt with our money over the past five years?
I vote for D, Folks!
In fact, I KNOW that’s it D, Folks!
And that is why the “Great Deception of 2012” (that
we have been predicting for over ten months) is just about to be kicked
off as all the Bad Banksters put all of that BRAND NEW money to work FOR
THEMSELVES, just as they did in 2009 and 2010 and 2011 and early 2012!
*for
a full list of Polestar’s Handy-Dandy
acronyms, go to the bottom of our Home Page,
Bill
Fleckenstein
The stimulus ship sets
sail
The pressure is
building on central banks worldwide to do the one thing they think works: print
money. Expect to see QE3 bond-buying from the Fed, and similar moves in Europe,
very soon.
By now everyone reading
this knows that this week's nonfarm payroll report was a huge bust, with
just 69,000 jobs created, versus expectations of 150,000. In addition, the
report's innards were all weak. That extended the string of weak data that we
have been seeing, and there is more to come.
As I have been saying
for some time now, the seasonal adjustments didn't adequately capture the warm
weather this winter, and therefore made the data appear better than they
actually were. (There's no point in going into a lot of detail here, as I went
on an extended rant on this topic, and others closely related to it, about a
month ago in "Investors,
it's time to face the truth.")
Caught red-handed
So many people have so
little understanding of the economy, and even less so of this post-bubble
period, that expectations of economic strength have gotten way out of hand,
including those regarding what the Fed might do, and what that would mean to
the dollar and everything else. Now, in the wake of the payroll report,
positions have to change in many markets.
To complicate matters,
China is slowing rather rapidly. When you add that to the slowdown in Europe
and the U.S., as well as knock-on effects and a dash of financial crises, one
of investors' first kneejerk reactions is to buy bonds. And in fact, increased
demand saw our 10-year bond trade a week ago to a yield of around 1.45%.
When you consider that
at the height of the financial crisis in 2008, the rate touched only 2.1%,
you can see that such a low yield is complete lunacy. Still, I don't
want to be short bonds until I see what the bond market looks like after Europe
weakens and people realize how weak our economy is as well. I never dreamed
that bonds could get to this level, but once they get stupid, they can pretty
much trade anywhere, as we have seen in so many other markets.
The dog days of
reckoning
Turning to the money-printing
department, here's where we stand so far this week: The likely easers, namely
the European Central Bank and the Bank of England, chose to do nothing.
Australia, which is actually doing relatively well, cut rates two days ago. On
Wednesday night, the People's Bank of China cut rates for the first time since
2008. That move was not really a surprise, but it nonetheless revealed a change
in character.
As for the masters of
the world's greatest money-printing machine (i.e., the U.S. Federal Reserve,
although the ECB is no slouch in this department despite all its tough talk),
we now have several signs of more printing ahead. There's a Jon Hilsenrath Wall
Street Journal story from Wednesday; Fed vice chair Janet Yellen's dovish
remarks to the Boston Economic Club Wednesday night; and Fed chairman Ben
Bernanke's Congressional testimony Thursday, in which he basically said Fed
governors would be discussing the next round of quantitative easing (i.e., QE3)
at the upcoming meeting of the Federal Open Market Committee -- although
no decision on that has been made, including what form it might take.
Obviously, the ECB
needs to do more. Anyone who has paid any attention understands that there are
bank runs as well as illiquidity and insolvency issues in the European banking
system, with Spain being the country people are most focused on at the moment.
And of course, governments there are swimming in debt, and folks actually care
about that. (I make that distinction because Japan, the United Kimgdom and the
United States are all awash in debt as well, but for the moment, the world is
not upset about those countries' debt levels.)
In any case, I believe
that before June is over, the ECB will have found a way to come up with more
stimulus, the Fed will begin QE3, and I would imagine the Bank of England will
find some way to get into the mix as well.
If so, I would expect
the usual kneejerk reactions in various markets, with stocks moving up, and I
will be particularly interested to see if bonds finally start to show some
post-stimulus weakness. If we don't get said stimulus, equity markets here and
in Europe will have a heart attack, and then we will soon get some emergency
stimulus. Given how the world's central bankers play the game, as long as they
are allowed to use the printing press, I just don't see that there is any
reason to believe that they will stop.
Return on investment
beats the return on ignorance
Turning to my favorite
money-printing antidote, gold, I would like to discuss a related topic, namely
mining shares. It has become the object of almost weekly scorn in most
major newspapers, particularly The Wall Street Journal, which of course was so
bullish during the stock bubble of the late 1990s that it referred to the
"New Economy" as a proper noun. Recently one of its
(presumably young) authors, Liam Denning, has written a couple of negative
articles on miners, and one of his favorite themes (as outlined in his latest
article) appears to be that the big miners have "outspent their cash flow
over the past decade in efforts to expand." That leads him to conclude
that it makes perfect sense that the miners "all lag behind the gold price
in that period."
This
just goes to show you how little anyone has to know to be a financial writer. In the early parts of
that period, there wasn't much cash flow, since companies were losing money.
As prices rose, miners decided to increase production and, in the case of
Goldcorp (GG)
(one of the companies he notes, whose stock I own), its production will have
doubled in the next couple of years. It takes a lot of money (and
time) to bring on so many mines, which then have long lives. The litmus test
is therefore not taking some arbitrary period and measuring cash flow during
that time. It is to evaluate whether the cash will have been spent wisely in
the coming years as production doubles (in the case of Goldcorp). It may turn
out that the money was spent incredibly wisely or not. We will have to see.
That is not to say that
mining companies have not made mistakes. A lot of them have made plenty. But if
you are going to write an article, it might be worthwhile to get the facts
right. The slipshod manner in which all things negative seem to be passed off
as knowledge in the metals sector reminds me, on the flipside, of how all
things were spun positively for stocks during the tech bubble, and for real
estate during its bubble. Sloppy journalism oftentimes equates with the mood of
the day, even though it is usually wrong.
At the time of publication, Bill Fleckenstein
owned gold and stock in the following copmpany: Goldcorp.
