Asset Prices Are Rolling Over, Despite Massive Money Printing
My IDW through this past Thursday is pictured below on your left. Despite trillions of new money creation, this measure of asset price inflation that includes financial assets like stocks and U.S. Treasuries as well as commodities seems to be rolling over, and the index has now lingered below the three-year moving average for the past several weeks.
Most notable, however, in the “rollover” picture, as I pointed out in my monthly letter, are commodities that represent demand by the “real” economy as opposed to Wall Street’s mechanism of theft through the printing press. Indeed, it is the 49.81% of the four items of the real economy that is responsible for this flattening out and rolling over of the total IDW. With a 49.81% decline for the four items related to the real economy as opposed to a 45.54% gain for Wall Street and Washington’s “virtual economy,” the IDW is painting a picture that I think is very accurate. The big question is what happens to the economy when this very overvalued stock market crashes, sending the margin clerks to demand repayment, which begets further sales and a massive trip down John Exter’s inverted pyramid?
More Than Meets the Eye, “Collapsing Commodities Are Statements of Events”
 
My favorite technical analyst, Michael Oliver, showed several charts of key commodities that should be showing market strength if the markets were as good as the establishment is advertising they are. Who can argue that oil, steel, copper, and lumber are not core industrial commodities and that demand for those items should not be breaking down unless there is something bigger going on that is not being discussed, lest we lose all of our animal spirits. But check out these keys commodities. They are all in “breakdown” mode.
 
Here is what Michael wrote yesterday to his subscribers regarding these charts.
We are told by many talking heads, who are supposed to know, that the oil collapse has little or nothing to do with any dire global economic situation on the horizon. Oil is a “special” situation unto itself. The collapse in oil is due to increased supplies brought on by new methods and technologies, unleashed in recent years. And no doubt there is a great deal that is true in that statement. But if that widely known technology has been growing and supplying more and more energy over recent years in a measured but increasing manner, then why the market surprise and the collapse?
It was not a secret process, after all. Markets discount the known. Right? The new supply did not come out of nowhere, overnight. Therefore, why not simply a gradual decline in oil over time, as that new supply (measured by everybody, week-by-week) moved into the system? As a commodity futures analyst/broker back in the 1970s and 1980s, I learned that collapses in commodities were statement events. Not to be rationalized away. Perhaps the only collapse I ever enjoyed that was not connected to something in the real world was the 1987 stock market crash. Its major sin was simply an issue of technical pricing excess and need to return to its annual mean. But I have learned that a sudden and overwhelming downward re-pricing of an asset usually means something. Therefore, MSA is a bit troubled by the convenient “don’t worry” arguments put forward regarding the collapse in oil.
And then when MSA surveys other industrial/building commodities like lumber, copper, and steel, we see major breakage and major declines underway—all in the face of a glorious CB-sponsored economic recovery. (emphasis added by Jay)
As a good technician, Michael does not try to tell you what that something that means something is. But his comments got the wheels in my brain turning. Here are some of my thoughts.
Regarding oil, Saudi Arabia has been complaining that it is losing its markets in Asia. Well surprise, surprise! Guess who will be given most favored treatment in selling oil to China, where something other than U.S. petrodollars will be accepted? Might it not be the case that oil as quoted in dollars is weak because a large amount of it is now being sold outside of the petrodollar system with the likes of Russia and Iran selling to China in exchange for their own currencies, including perhaps gold?
Certainly the sanctions placed on Russia by the Anglo-American Empire have badly hurt the economies of Europe and reduced demand for industrial commodities there. Even the German economy is now heading toward zero growth! China is slowing down. The U.S. is slowing down. The whole world is slowing down, as John Rubino noted on my March 31 radio show. So I don’t know for sure. It’s just a hunch. But it seems to me that in addition to a slowing global economy, there are some basic geopolitical changes that may just now be starting to impact dollar denominated markets. There is no doubt that the BRICS are fighting the petrodollar. And while there will be grave consequences for all of us Americans the day the big petrodollar lie is revealed to the world, those who own gold should be in far better financial condition than those who do not hold nature’s money.
Jay Taylor |
