Yesterday’s heavy selling in the shares of the Goldminer group is another indicator to me that the world’s most powerful central banks and commercial banks are in trouble. It’s time for people to be reading up on matters such as Target2 and blockchain (bitcoin). Yes, I remain a believer that the precious metals are in a long-term bull market with occasional bursts of selling like yesterday to create doubt of those who have the common sense to see that our financial system is indeed broken, masked by the melt-up in stocks caused by the central banks that have now become desperate. I will write more about this later in the day. Suffice to say that the selling of the Gold stocks that started a couple days ago, and picked up steam yesterday, and to continue today after some reactionary buying at the open, is likely to be the last major selling before lift-off. I also believe that when the Goldminers depart the dance floor following the peak of the next intermediate-term cycle, several months from now, that the broad market is likely to get hammered.
As you know, I have been preaching prudence. Now is the time for thinking about and discussing this matter.
ADDENDUM
There seems to be a universal belief that when the Dow Industrial index is higher for both January and February the remainder of the year will be positive. But is the December 31 close of these years always higher than the February 28 close? And, what about the lows during March through December that would have presented better buying opportunities than on February 28? Given that we trade in a continuum, why is the beginning month in our calendar (January) even more important than say the months to start other quarters (April, July and October)? Moreover, are the reasons for this January-February rally different than in previous years? I mean, is this just a seasonal phenomenon or entirely something different? You see, I think all the chatter about January-February is simply another story, one that I pay no mind to.
Is it different this time? Well, I think so. Close examination of thousands of stock charts shows the rally started on Monday November 7. From the close on Friday November 4 to the February 27 close, Goldman Sachs (GS) and JP Morgan (JPM) are up +41.0% and +33.8% respectively. These are the bankers that control the White House, the Fed and the US Military-Industrial Complex. I believe their algos had forecasted a Trump win on Tuesday November 8. Then on Wednesday November 9, the balance of the US Military stocks also began to soar. Check the stocks of Boeing (BA), General Electric (GE), Honeywell (HON), L3 (LLL), and so on. You’ll see what has happened here.
My point is this is clearly a White House rally. I believe that if the public were to get access to the phone records and travel logs of the weekend of November 5-6 for Jamie Dimon (JPM CEO) and Lloyd Blankfein (Goldman Sachs CEO) and Gary Cohn, the Goldman Sachs President and COO who soon after resigned GS (with a final payout of close to $300 million and all those tax freebies for joining the White House), you would discover some interesting evidence to support my claim.
I believe that on that weekend and up to the open of the market on November 7, the powers that be knew that Gary Cohn and Donald Trump were Palm Beach buddies and so they made their move and the rest has fallen into place. As usual, the public is always a step behind.
Now, about the move of one of the very top level bankers into a key White House role and the subsequent rally in the market, the last time we saw anything like this was when Goldman Sachs CEO Henry Paulson was parachuted into the White House and his associates into leading positions at the Fed, other key central banks, the SEC and anywhere that group believed was essential to their plan.
Btw, unlike the former Goldman Sachs leader Henry Paulson, Gary Cohn was born into a very middle class family and managed to succeed in school despite learning disabilities. He turned himself into a great trader and highly accomplished Wall Streeter. I’m happy for him and I think the country ought to be as well, and politics has zero to do with my statement here. This man is a winner and will help the country get out of many of its economic problems, not like Hank Paulson, the cause of so much pain.
The Paulson plan in June 2006, as I see it, was to orchestrate a market melt-up enabled by the great share buyback fiasco where they could off their stocks to an unsuspecting public before the financial system crashed. This time around the melt-up has put the GS and JPM shares in great demand by the public during which time I’m guessing that the aforementioned leaders have carefully protected their personal stock positions and those of family and friends. I do not believe this current stock market rally has much if anything to do with higher corporate revenues and earnings resulting from economic growth or the prospects of that. Time series analysis tells me something quite different.
What the US public has been led to believe is that the current market rally is happening because: (i) investors are expecting Quantitative Easing to spend $$$ on jobs programs, (ii) bankers will be getting less regulation, (iii) employers are going to pay less taxes, among other things. Maybe European investors have become unhinged over BREXIT, thinking it will all work out in the end, and maybe European bankers in Germany and Luxembourg will be expecting some relief for the $1 trillion in loans to southern European countries that are likely to never be repaid in full. But, as I see it, all these events take time to legislate and the market is smart enough to know it. There will be doubters and profit-takers, which will put pressure on market prices that are going to run into resistance soon. There will be extraneous events from other countries and even events within America that will weigh heavier than the constant hype about and by POTUS. Nothing is forever.
So, again, yes I think the market is in a melt-up and caution is urged before chasing prices higher.
Do I believe that President Trump is complicit in any of this? In my view, Trump is only the take-out agent for the powers that be – the Goldman Sachs and JP Morgan networks of associates in powerful positions around the world who have an excellent idea of the quite certain black swan events on the horizon. I think that Trump is a smart man who is going to work closely with the bankers through his able assistant Gary Cohn to get through the financial system mess they face as best he and they can. Yes, I think the bankers want their cake and eat it too like they always do.
Where does this leave market prices? I think reflation is essential. Oiler and Goldminer stocks will be the beneficiaries, later taking the blame of course. Today they are being knocked down in price, which facilitates accumulation by strong hands. The rest of the market, for the most part, will likely drift sideways in a rolling action until the powers that be have put into place: (i) the new Trump policies on infrastructure, homeland security and military, and (ii) accumulation of the Oiler and Goldminer stocks that will help offset the losses they’ll take elsewhere.
These are just opinions. We all have them. Mine come from 50 years in markets and dealing with bankers and promoters at a high level. Of course, I might also be wrong.
My gut says otherwise.
My computer system is coming along, but I tell you that nothing is easy these days.
All the best,
/Bill
