Today a 40-year market veteran sent King World News an incredibly important piece that discusses more disturbing developments, the war on cash and the endgame. This piece exclusively for KWN also covers what is happening in the key markets, including energy, stocks, gold and silver.
By Robert Fitzwilson of The Portola Group
April 26 (King World News) – While last week left us with the impression of “same old, same old” as far as the attacks on the price of gold and the mainstream media trumpeting the excitement of new highs for the popular stock indexes, the reality is that the year is playing out in similar fashion to last year.
While you will never hear it from the mainstream financial media, the leader in both years has been the HUI Mining Index….
Continue reading the Robert Fitzwilson piece below…
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While the NASDAQ Composite is out in front of the HUI at the moment, it took a week of dramatic earnings announcements, horrific short-covering by those betting against traditional technology and biotech firms, and two punishing attacks on the metals and miners to push the NASDAQ out in front.
For the current quarter and month, the star performer remains the HUI. The Index is up 9%, while the S&P 500 and NASDAQ are up 2% and 4%, respectively. The headlines tout the stock market, but the value inherent in the metals and miners is being recognized. At least some of the market participants understand the deep value embodied in these assets.
While manipulation can be seen in all markets, there is a stubborn rationality behind what we are seeing. In the bond market, there has been tremendous volatility in the last year and a half, but that volatility is dampening out as the reality of too much money chasing yield and no place to put it incessantly drives yields lower and further negative in many parts of the world.
Disturbing Developments
Reports of refusals by banks to allow cash withdrawals as well as a burgeoning institutional and academic attack on the concept of cash itself are disturbing developments. Those holding demand deposits at banks should become increasingly concerned about the safety of their funds. Those concerns will further drive capital into short-term fixed income and out of banks, making the Fed’s goal of raising rates irrelevant. People will be concerned about getting their money back, not the trivial interest rate being paid on cash. Short-term fixed income will be the preferred alternative.
This trend will also feed the corporate stock buyback frenzy. Free money and free excess cash flow will force companies into more M&A activity and shrinking their float. The price of stocks might be going higher, but the valuations being used to justify the higher prices are often a function of such stock repurchases. Reducing the outstanding stock makes the earnings per share number look better, but the trend in sales is down. That is a game that will come to an end soon unless sustainable sales growth can be restarted. Nothing on the horizon suggests that as a possibility. The stock indexes can keep going up, but the moment the sales declines negate the stock buybacks, there will be trouble.
Propaganda, Energy And A Fall Guy
Another area of focus has been energy. Following the dramatic decline in price that began in the middle of last year, it appears that oil did reach a bottom in the mid-40s. Despite the continuing propaganda about lack of demand and storage facilities being at capacity, the reality is that global demand is growing at a substantial pace and has caused the price of oil to keep rising despite the attempts to drive it lower. Saudi Arabia continues to play games with their press releases about increasing production, forgetting to mention that substantial capacity has been unilaterally shut in for the “neutral zone” jointly operated with Kuwait in the past.
The good news from our prospective is that it feels as if the manipulation and the propaganda are being exposed to an ever-widening audience. The vast majority of people are unaware of what is swirling around them and could care less. Tragedy is when their favorite contestant is voted off Dancing With The Stars. The rest of us who care are trapped in an echo chamber, the loudest voices in which have been the central planners, the mainstream media and the manipulators.
The recent “revelation” about the fellow in London being the cause of the Flash Crash would have been taken for fact not too long ago. In contrast, many suspect that he is just the latest “fall guy”. He probably flew too close to the system and had to be taken down. If there is any hope for a less than catastrophic conclusion to the path upon which we find ourselves, it will take more exposure of the perpetrators, their mechanisms and their methodologies.
In our distorted financial world, there is a rationality to the performances we are seeing in the markets highlighted above. We expect that the metals, miners, energy and legitimate high growth companies in the stock market will continue to be the most attractive allocations. For those with significant amounts of cash held by banks, the ominous developments suggest that time is very short to get as far away from those financial institutions as possible. ***Also, KWN has just released John Mauldin's remarkable audio interview and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO RELEASED: A Stunning Look At All-Time Record Margin Debt Investors Hold CLICK HERE.
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