Accelerating Junk Bond Collapse Portends Historic Financial Crash

Someday, the nightmare for Precious Metal holders will end – perhaps, in 2016 – for having not only been right, but for the right reasons.  Although, per what I wrote last week; yesterday; and countless other times over the past four years, not necessarily for “paper PM investments.”  The difference being, of course, that TPTB cannot manufacture gold and silver.  Conversely, they can “manufacture” as many mining, ETF, and closed-end fund shares; futures; options; and even unallocated bullion storage certificates as they want, in their aim of quashing PM sentiment amongst the millions of uneducated investors that have been brainwashed to believe dollars, Euros, and Yen are money; silver, an “industrial metal”; and gold, a “barbarous relic.”

That said, 2015 has actually been a good year to hold physical gold and silver; as to date, as we end the third quarter, gold has outperformed the stock market despite the worst 24/7 manipulation on record – as exemplified by July 19^th’s “Sunday Night Paper Massacre II,” when gold was taken down $52/oz in five minutes in the same ultra-thin conditions utilized for May 2011’s “Sunday Night Paper Silver Massacre”; for no reason other than to quash rising PM sentiment.  Which of course, backfired badly, as following said massacre, the U.S. Mint nearly immediately ran out of silver; whilst August and September were the two strongest months of global PM demand since, well, the April 2013 “alternative currency destruction” raids.  And before that, said May 2011 raid.  And before that, those launched during the late 2008 financial crisis; which, in all cases, led to dramatically increased uptake of real, physical metal.

Regarding silver, not only is the world (as with gold) on pace for yet another year of record consumption – as opposed to actual base metals like copper, lead, zinc, and aluminum, which are experiencing plunging demand – silver’s “paper losses” have been mitigated by rising physical premiums.  To wit, when incorporating the increase in silver premiums since said “Sunday Night Massacre” two months ago – of roughly 10% for Silver Eagles and Maples, and significantly more for “junk” silver – physical silver holders are roughly breakeven for the year.  As opposed to those holding mining shares, which are again amongst the world’s worst asset classes – with the GDX ETF down 28% YTD, and the GDXJ 20%.

Putting the gold “bear market” in perspective since September 6^th, 2011’s “Operation PM Annihilation I,” when the Cartel attacked mere minutes after the Swiss National Bank pegged the world’s last remaining “strong” currency, the Franc, to the dying Euro – “dollar-priced gold” is down 41%; dollar-priced silver, 70%; the GDX, 78%; and the GDXJ, 85% (actually, more so, when accounting for stocks that have been “de-listed” due to not meeting the fund’s minimum share price requirement).

Of course, physical silver premiums have risen since then, so said 70% decline is, in actuality, far more muted.  And oh yeah, every silver coin owned back then is still in existence, becoming more scarce and desirable each day.  As opposed to 2011’s “stock” of mining shares – many of which have been permanently destroyed; and many of which are headed that way shortly, even if the Cartel is imminently destroyed.  And don’t forget, with today’s quarter-end, the pressure on mining company executives – from their accountants – to start writing down bloated asset valuations (especially arbitrary at best, and fraudulent at worst, “resources”) will be substantial.  And even if miners can beg and plead their accountants to hold off, they have no choice but to evaluate said “assets” at year-end, when all miners are required to update resource statements.

Speaking of quarter-end pressures, said “powers that be” are clearly desperate to “window-dress” the world’s collapsing financial assets – down $13 trillion year-to-date, erasing two years of Central bank orchestrated “gains,” and counting.  Especially after the past week’s ugly declines, notwithstanding comically obvious PPT support; especially here in the States, where “dead ringer” and “Hail Mary” equity surges have been as ubiquitous as “Cartel Herald”-led paper PM raids at “2:15 AM” EST; 8:20 AM; 10:00 AM; 12:00 PM; “2:00 PM”; and all other “key attack times.”  Heck, this morning we’re told that the reason stocks and copper surged – and comically, PMs didn’t – were, in the words of Zero Hedge, due to “hopes for more Japan, ECB QE.”  To wit…

“Days after Japan returned to deflation for the first time since 2013, confirming Abenomics 1.0 was a failure; and after reporting even more abysmal industrial production and retail sales data, which in turn prompted a bevy of banks to cut their Q3 GDP forecasts to negative, and unleash yet another technical recession for Japan, the fifth since the financial crisis, the Yen plunged following the latest round of loud, renewed calls for a boost to the BOJ QE, and JP Morgan in fact made the October 30 BOJ meeting its base case for further central bank easing. Abe advisors Honda and Takenaka both confirmed more BOJ easing is just a matter of time, as a result pushing the USDJPY solidly above the market critical 120 level.

And then, just a few hours later, we got the latest inflation, or rather deflation, data out of Europe, where consensus hoping for an unchanged print was once again disappointed when the September CPI print came in negative once again, confirming the latest inflationary impulse from the March launch of QE is officially over.  As a result of Europe’s relapse into deflation, hours ago Standard & Poor’s announced it believes the ECB will more than double its QE program, from €1.1bn to €2.4 bn.” 

Yes, my friends.  We’re to believe, amidst the global carnage of collapsing stocks; commodities; currencies; and faith in Central banks, politicians, and other “leaders’” ability to “save” us – and oh yeah, record physical gold and silver demand; that more money printing will boost stocks, commodities, and currencies – whilst reducing demand for Precious Metals.  Yep, if you believe that – other than the actual reason for today’s “market action,” blatant manipulation – I’ve got a bridge in Brooklyn to sell you.

Speaking of carnage, it’s truly amazing how, despite global bond markets dwarfing stocks in both size and importance, essentially zero media coverage of their ongoing, accelerating collapse can be found – except on Zero Hedge, of course.  And while, for the most part, sovereign credits have largely been able to tread water due to the aforementioned, massive QE programs that, for all intents and purposes, “monetize” everything not nailed down, the largely “un-manipulatable” (due to its large size) “high-yield” market is collapsing.  Or, as “layman” know it, the “junk” bond market.  Which is quite the ironic name, as “junk” silver could not be more valuable, whilst many junk bonds are worthless.  And many more will become so shortly, whilst said “junk” silver may well become the world’s most sought-after asset.

Generally speaking, bonds of all types have ridden the globally destructive “QE wave” for years.  Ironically, generating their best gains after the 2008 financial crisis, when the global economic collapse really accelerated – to the point that, as we speak, the world faces its worst-ever economic environment and highest-ever debt load, with no chance of either catastrophic trend reversing.  To wit, economic fundamentals have never been worse, and PPT-supported financial asset valuations never higher.   Moreover, care of said “QE”; “ZIRP”; and even “NIRP” schemes; interest rates have been forced – for “too big too fail” banks, NOT you – to their lowest-ever levels.  Consequently, they have no way to go but up – perhaps, much sooner than most can imagine.  Unless, of course, said Central banks opt for hyperinflation.  Which, per today’s “news headlines” above – and 1,000 years of Central banking history – is clearly what they intend to.  Which, in turn, will ultimately yield skyrocketing rates anyhow, even if said “day of reckoning” is temporarily staved off, at least for losses in nominal terms to be as ugly as those in real terms.

Either way, the one mathematical law that cannot be manipulated away is that higher rates equals lower bond prices – and particularly for “high yield” bonds that represent the market’s riskiest credits.  Heck, many junk bonds go down during good times – which we decidedly don’t have today; and many, despite plunging rates.  Hey, that’s the nature of investing in weak companies, with weak finances – particularly in today’s environment of record low, dramatically weakening global economic activity; and record high, parabolically-rising debt.  Which again, is why it’s so amazing that even dyed in the wool MSM cheerleaders are so blatantly disregarding the accelerating collapse not only of soon-to-default sovereign bonds like Brazil, for instance; but “un-QE-able” corporate bonds – as discussed here, and here, and here, and here.  Or how about here – as amidst all the ado about the publicly-traded “commodity Lehman to be,” Glencore, essentially no coverage – other than on Zero Hedge, of course – is to be found of what is going on with its evil, privately-owned twin, Trafigura.  Trafigura, which is as large and systemically dangerous as Glencore, may not have public stock to watch – but it certainly has publicly-traded bonds; which, like Glencore’s, are collapsing.

In a nutshell, the below chart of the HYG ETF is badly breaking down, having fallen to two year lows with a lot of rapidly dissipating, Central bank-created “hot air” to plunge through.  Don’t be surprised when it falls through the bottom of this chart – and then some.  And when it does, I hope you will have already prepared yourself for the next worldwide financial nightmare – which I assure you, will not be “reversed” by additional money printing.

By the way, speaking of “pressure,” now that Martin Armstrong’s much ballyhooed “2015.75” has arrived, he has no more excuse to say “it is coming” (as if it hasn’t already, for most of the world).  In other words, if something cataclysmic doesn’t happen NOW, he’ll need a new marketing platform.  Heck, Larry Edelson has actually called for “worldwide governments to crash” starting on October 7^th – i.e., one week from today.  I mean WOW, those are some pretty specific forecasts!

To that end, for those that fixate on what Edelson’s so-called “accurate” predictions” have actually been, here’s what he said in a July 14^th, 2014 interview.  Like the warnings you see on YouTube videos showing ugly sports injuries, be warned – this is graphic, gory stuff.

1. Edelson:  “First, the stock market has topped. All the evidence I am studying tells me we are now in a bear market that could last anywhere from three to 10 months.”

REALITY:  The Dow peaked, ironically, 9½ months later, after rising another 8% – whilst the NASDAQ surged 18%.

2. Edelson:  “Don’t accept any common wisdom about the markets, like gold must go down if the dollar is strengthening.  Or that mining shares must fall if the broad market slides.”

REALITY: Since then, the dollar index has surged 20% whilst gold has plunged 16%.  Meanwhile, the Dow and NASDAQ are down 6% and 1%, respectively – whilst the GDX and GDXJ are down 49% and 55%, respectively

3. Edelson:  “Crude oil is now building a stronger base than I had expected, and will likely soon launch higher. I do expect one more pullback in the price of oil, which we are getting now. But soon, oil could jump to $112, then even higher, to $124, before it takes another breather.”

REALITY:  WTI crude was $100/bbl at the time.  It never traded a penny higher, before plummeting 63% in the next 12 months.

And for the coup de grace…

1. Edelson:  “Mining shares — also as I have warned you — are now soaring like a rocket. Some mining shares are up 20 percent in just the past week. Thirty percent, even 40 percent over the past month. Don’t say I didn’t tell you so. I did.  Mining shares are among the most undervalued equities on the planet. Over the next few years, I see many of them (not all), doubling and then doubling again, while others soar 500 percent, 600 percent and more.

REALITY:  As noted above, the GDX and GDXJ are since down 49% and 55%, respectively.  Countless miners have gone bankrupt, and the entire industry is on the verge of collapse as we speak.

But don’t worry, I’m sure the Dow will surge to 31,000 in the “next few years,” as he predicts.  And that he’s dead on in his belief that theories that markets are manipulated are “pure hogwash.”  Which just goes to show, you must not only be very careful who you listen to, but eminently conservative in how you invest your life’s savings.  Particularly during the worst economic environment, and ugliest financial backdrop, of our lifetimes (no matter how old you are).  Let alone, when blaring red warning signals like the “accelerating junk bond collapse” portend an “historic financial crash.”

BTW, WOW, WOW, WOW.  As I edit at 9:45 AM EST, here’s what the Chicago PMI Index reported about the U.S. “recovery”…

Similar Posts:

None Found