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Out of Keynesian Ammo – says The Economist!

February 22, 2016

The world economy appears to be ‘out of Keynesian ammo’ and punch. This is what the February 26 edition of The Economist says on its front cover. Then we have Barron’s on February 22, 2016, reporting in Streetwise that “The Soldiers Are in Retreat”…suggesting that stocks are heading into a bear market! The evidence seems overwhelming that our markets are misrepresenting what our real economy is experiencing. Central banks can pump up the daily market indexes even while the real economy is tanking. Algorithms and Central Bank trading can deceive traders into thinking that all is well when (in reality) all is NOT well. Let’s review a few items of evidence which support the above rhetoric!

The February 26 edition of The Economist has it right! Our Central Planners are soon OUT OF AMMO!

The Baltic Dry Index is currently at 315 suggesting that global trade is declining/crashing. The MSCI World Index is down some 25.7% from its peak in 2015 and the MSCI Emerging Market Index fell some 37.5% from its peak in 2015. Sandra Ward of Barron’s says “the recent breakdown in financial stocks is another sign that something serious is afoot, as financials tend to lead at tops and at bottoms”. Sandra also says that market breadth has weakened and the soldiers are not following the generals up. This is a sign of a full-scale retreat which could eventually lead to a 20% decline in the Dow and the S&P 500. I think her evidence is rather solid. At some point, Central bank trading must reflect reality and all the pump priming must cease.

This Central Planner, however, says that “there are no limits do what he can do”! Is Mario for real?

When the trend reverses seriously, then we should see gold and silver increase (even with Central bank manipulations). Until this event, however, gold and silver will likely be manipulated downward on a daily basis via trading robots, algorithms, and the tool of ‘naked shorts’ on the Globex electronic exchange. The so-called ‘paper gold market’ is still effective in creating an increase in the digital gold supply so as to rig the spot prices downward. This can continue as long as traders have confidence in the increasing stock markets globally. China is also doing Central bank manipulations to keep their traders deceived on the real economic situation. Our computer driven markets have basically allowed a decoupling of prices from the reality of physical wealth and this game fools many!

The real economy will eventually prevail over Central Bank manipulations! This could happen rather soon!

Ira losebashvili, of Barron’s, thinks that gold prices will likely respond to fears in the markets as weak growth becomes recognized by the trading community. He says that Exchange-traded funds that buy gold have started accumulating the metal again after a long period of selling. Holdings at the SPDR Gold Shares (ticker GLD) is up some 11% since the end of 2015 to 713.63 tons. He thinks that any correction in the gold price will be temporary and prices should hold well above $1200 an ounce going forward. Chris Dieterich, of Barron’s says “investors all around the world are panning for gold via ETF’s and this will help keep gold’s luster”. The evidence for a slowdown in global growth is now here and it is unlikely that our rigged markets can continue to go UP and UP in this environment!

China is slowing and this trend is now obvious! At some point the PBOC must recognize reality and stop the pump priming! Reality will prevail sometime in 2016 (I assume)!

The next few weeks could reveal a change in trend from Bull to Bear which convinces the bulk of our traders. When this happens, the Central bank rigging and manipulations will prove fruitless. Eventually, our markets will prevail over deception, rigging, and price manipulations. Now is the time to prepare for the coming crash cycle. This cycle is much overdue and the bubble must burst at some point soon! My analysis supports the sentiments above and I also have reported these facts in my blog for many months. The leading indicators point to a market crash in the very near future. Give this missive some reflection going forward! I am:



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