The U.S. stock indices continued higher and are now approaching their recent highs after a brief shallow retracement of 3-4 weeks. All indices showed up strong in this past week with the Nasdaq Composite (3.44%) edging out the Nasdaq 100 (3.43%) and the Russell 2000 (3.43%), all with a burst higher on Tuesday based on a positive home sales report and a continuing rise in oil prices. Also thought to be weighing in the continued advance is the Fed’s belief that the economy is strong enough for multiple possible interest rate hikes this year. Individual sector standouts included PHLX Semiconductor (4.60%) and Biotech (4.17%) with the DJ US coal sector leading the charge at 12.76%. The biggest laggards were the DJ US Gold Mining sector (-4.49%) followed by the DJ US Mining sector (-2.08%).
The oil price continues to climb and has been the real basis of this stock market rally since mid-February. That oil has continued to climb despite the U.S. dollar also rising over this recent four week period demonstrates the strength of this move in oil. Both the U.S. stock and oil markets should continue to move higher as long as energy prices continue to show strength, which appears likely at this point. Oil demand is still at a relatively high level and supply going forward should be severely curtailed due to the large decrease in drilling, large decrease in other capital expenditures related to production, and unexpected production disruptions.
The dollar has been grinding higher over the last four weeks. As I have stated before, this just looks like a relief rally before the resumption of the main trend which appears to be down. For there to be a final confirmation that the downtrend is in place, the dollar has to take out its recent prior low of 91.88 on a closing basis. Last week the dollar closed at 95.72 so we have some time before we approach that level again. The continuation of the decline of the dollar will again fuel the recent commodity rally so you will probably see those sectors significantly add to their recent gains, if and when that happens.
Gold finished hard down last week and it looks ready to break out of its 15 week range to the downside. It needs to close below $1206 to confirm the downside breakout and it closed last week at 1215.3.
As I said last week, I think the Federal Reserve is seeing data behind the scenes that they are not sharing with the public as for the real reason that multiple interest rates hikes are becoming more probable this year. I would expect to see a rise in the long term (10 and 30 year) Treasury yields before the Fed reacts to it by raising the short term fed funds rate. The press will probably say that the long term rates are rising in expectation of the Federal Reserve raising rates soon but it will be the reverse. The long term rates rising will drive the Fed to react and raise rates to make it appear they still have control of the interest rates. This series of events will really be a sign of the market taking control away from the Fed and back unto itself where it belongs.
There have been numerous reports over the last year of Russia and China selling their U.S. securities and Saudi Arabia will likely not be far behind due to their increasing budgetary and fiscal mismanagement problems. Governments like the U.S., Saudi Arabia, and other western vassals like the EU and Japan think they can just continue on with their endless spendthrift ways that includes continuously poking their noses into places it does not belong without any life-threatening repercussions. In the case of Saudi Arabia, their increasing monetary misfortunes are due to the prolonged low oil price environment while maintaining high levels of spending on things that do not improve the nation such as large weapons purchases, unnecessary wars, strict control of its people, and support of global extremism. The same and much more could be said about the actions and spending habits of the U.S. government. The EU is more concerned with supporting their major banks than in rectifying the continual economic decline of Greece and Italy.
At some point the endless printing and spending of paper money in the U.S., EU, and Japan will start to drive up interest rates to where rates will represent the real risk of these hugely indebted governments. You cannot keep printing money endlessly, exponentially running up huge sovereign debts, and keep interest rates below or at zero forever. There will come a time when the SHTF no matter how big your military is, how many lies your government tells you to cover things up for a while longer, or how long you can keep these insolvent major banks and governments propped up.
Russia and China know that day is coming and it is not that far off. That is why Russia and China have shown extraordinary restraint each time the U.S. and its vassals have tried to provoke these countries into a passive aggressive response that would make them easy to portray by the western mainstream media as the bad guys. The U.S. is looking to destabilize Russia and China and sabotage its efforts over the last several years to establish an alternative currency network that will replace the dollar when it collapses. The U.S. in its now signature covert way has undermined and toppled the leadership of Brazil, one of the primary BRICS nations supporting the new and much more equitable system that has been set up to a large degree by Russia and China. Check out Dr. Paul Craig Roberts website, http://www.paulcraigroberts.org/, for more in depth coverage of this action. Russia, China, and other countries have prepared an alternative currency network along with associated institutions such as development and investment banks for its members. They have seen what is being played out by the U.S. and its vassals before, in the 2008 economic collapse that almost eliminated the major U.S. and EU banks as well as the existing international currency system itself. Even Canadian banks required secret bailouts by the Fed due to the 2008 financial crisis.
This time Russia, China, and their cohorts will be prepared and some will even benefit by the demise of the dollar based world currency system that is the last remnant remaining of a once mighty country. The dollar has been used as a club to beat, threaten, and coerce other countries as well as its own citizens to kneel down and swear fealty to the tyrannical U.S. government.
The U.S. government as do all governments invest a lot of their paper money and power into propaganda, controlling the school system, and mainstream media to portray themselves as the good guys who know what they are doing. Governments need the support of the people to a large degree for their system to work effectively despite their overwhelming weaponry, wealth, and power that these governments and their cronies illicitly acquired to a large degree. It is not a level playing field because if it was then the government would be answerable to the people. The government and its cronies like their exclusive, perpetual hold on power and wealth without checks and balances and without representing or answering to the citizen’s interests and concerns. This subversive, perpetual condition of covert oppression and control is becoming more evident to the citizenry as the system continues to degrade and grossly fails a growing number of them.
In the U.S., you get two hand selected pro-establishment/pro-status quo candidates to choose from. One or more of them may be made to look like “outsider” candidates but they are at heart more of the same with maybe a few twists. Trump is made to look like a true “outsider” that is independently wealthy and is his own man so to speak. The two key power groups in the U.S., the military industrial complex and the big banks have nothing to fear from this guy getting into office. Trump has already said he wants to build up our military into the biggest, baddest military in the world. Has not that already been the overriding theme and goal since World War II. Where has that gotten us? It has gotten us into a lot of unnecessary wars, it has greatly contributed to the humongous debt burden, and supports and conducts a number of secret, destructive (that is what a big, bad ass military does- it destroys stuff as well as forcefully takes over regions and people, it is not about spreading freedom and democracy or even defense at this level) programs being conducted.
The big banks helped make Trump. Big banks love real estate developers who they can make huge loans to. They have real collateral that the banks can often sell in many cases if the developer goes bankrupt. In a country with a growing population with a half decent economy, well planned real estate loans are probably some of the safest big loans to make. The problem with the U.S. and many other places, is we do not have a half decent economy anymore (and have not had one for a long time) but we do have a growing population that is economically left behind. Even Trump, a seasoned businessman, has been bankrupt a few times, demonstrating the scarcity of economic opportunities and the riskiness of taking on large economic endeavors in a failing economic state.
I believe the Deep State and its economic oligarchs realize this rigged game is about over and that they need a presidential candidate schooled in business to try to right the ship before or after it goes down. This period is somewhat similar to when Jimmy Carter was President and the U.S. experienced prolonged economic stagflation, high interest rates, gold went to $800 in early 1980 (the year of the election against Reagan), and the failed Iranian hostage rescue attempt (which Carter later said was the primary reason he did not get re-elected).
Right now we have a stagnate economy with little if any growth other than high priced areas that the 1% can afford; interest rates have not risen because central banks are doing everything in their power to suppress rates to keep the heads of these highly indebted governments above water, the major banks solvent, and this zombie economy going; and gold has already had a historic bull run from about 2002 till its top in 2011. Inflation has been seen in selected areas such as college education, healthcare, beef and other food prices but not in a across the board fashion that is likely still to come. Asset and financial markets have seen extreme price inflation over the last seven years beyond what any reasonable fundamental valuations would typically support without QE 1-3 and bank bailouts.
Practically the only positive economic reports that come out are released by the government and those reports have been constructed and/or tailored to portray the healthiest economic picture possible. Other independent economic reports including quarterly company earnings reports paint a much different and much more ominous view of the economy, both domestically and globally.
The gold price has obviously been suppressed to a large degree through paper contracts on the Comex and LBMA when you see high physical demand over the last year but until early this year a gold price that continued to decline. You will see gold turn up (I do not think this latest rally is the beginning of the renewed bull market in gold as the dollar is still strong so TPTB still have firepower left to manipulate the markets to keep this rigged game going for a little longer). A large rise in the gold price is a sign that the markets are losing confidence in the government(s) and their fiat currencies (they go hand in hand). The government(s) who have the most to lose in this Ponzi, fiat money system will do everything in their power to keep the system alive for as long as they can. The U.S. and many of its vassal states have been successful so far through market machinations and money printing in keeping this dying system on life support since the 2008 crash but the end is getting much closer.
To get back to the elections, I think Clinton will not be allowed to be elected to the Presidency just like Carter was not allowed or positioned to be re-elected by the Deep State (the failed Iranian hostage attempt failed because it was designed to fail to make Carter look weak and incompetent-do not have time to expand on that right now). The Deep State needs the economy to be rejuvenated in some form if this fascist system is to be resurrected once it totally hits the skids. Corrupt, career politicians just do not have any knowledge about how a thriving, vibrant economy should work (although they become very well-schooled early on in how to make the system work for them in gaining wealth, power, or at the very least a high paying cushy job somewhere). I think you will see before the election that Hillary will be purposely torpedoed by the DS in her efforts to gain the Presidency. She has so many vulnerabilities due to her crooked/criminal past that it is hard to choose just one that will end up doing her in.
Another thing is if Trump is elected, watch who is selected for vice president. When Reagan was first elected, the Deep State engineered one of their own in that position, ex-CIA head, George H.W. Bush. Then 61 days into Reagan’s first term, he was shot with Bush taking over much of the agenda from that point on. Other key posts would be the cabinet level positions. Also, part of Reagan’s agenda was to increase the defense budget and outspend the Soviet Union into oblivion which the U.S. did while running up a huge amount of debt. Reagan’s goal was to end the Cold War, which is not what the Miltitary Industrial Complex or Big Banks wanted, so that is probably why he was shot.
The huge military-industrial complex always needs an enemy to justify the huge size of its expenditures and its department. To make the far-fetched idea of Islamic based terrorism seem like a plausible substitute for the Cold War with its purported nuclear implications (more so for the U.S. to be the instigators of a first strike use of nuclear weapons rather than the Soviets) they had to do something extraordinary and within the U.S. to make its citizens react emotionally with fear and patriotically while gaining huge support for its military. Thus the 9/11 was an inside job and did just that for the military industrial complex while at the same time allowing the government to “legally” take away more of its citizenry rights through the euphemistically named “Patriot Act”.
The U.S. government does not have the economy or the room to run up debts at that rate any longer. Large amounts of money, that the U.S. does not have to give any longer, taken to support a huge military that we have never needed if its purpose was to provide just defense, will just further add to the problems (this is a huge understatement) when the dollar is no longer the world’s primary reserve currency.
The sad thing about this whole election process is that it is evident that the American citizens are waking up on some level but still think that this election will make a significant difference in their lives and the country at large. American citizens are starting to realize that they are getting severely screwed by this system although they probably do not have a good grasp of how innately evil and criminal this system actually is. Many still want to believe that the system can be reformed or is not purposely out to get them. The system is purposely out to get them, oppress and suppress them, and use them for fodder to make profits and war for the benefit of a largely self-selected few who gain exorbitantly from this criminal system. Not everybody who gains from this system is a crook or criminal but the main players are – military-industrial complex including many of the 3 letter agencies that have grown and prospered over the decades, big money center banks, and crony big corporations (particularly some in the pharmaceutical industry as many of their products and drugs disastrously affect the health of the populace in many critical ways).
The citizens are so vested and dependent upon this system that it is extremely difficult for them to see through the propaganda and indoctrination. They need Medicare, Social Security, food stamps, unemployment/disability benefits, government jobs, government spending, and government contracts to survive on a long term basis. A populace that is so dependent can be easily frightened or coerced by the government to believe or at least to go along with anything the government tells them. The citizens are hoping against hope, when in no prior elections, did the elected politicians do anything to successfully reform this criminal fascist system in any significant manner. The system will have to collapse, which it is getting ready to, for there to be a chance of significant change and progress for the citizens.
If the American public continues to look to the politicians and ultimately the DS for solutions when the economic collapse comes then more than likely you may get just another down-sized version of the current system. You need to get rid of the central banks and fractional reserve banking for there to be a chance for real, sustainable change that benefits everybody instead of a self-selected few. Anybody who has a monopoly on creating money out of thin air will have a decided and long term advantage over those that do not have that ability, which is the citizenry at large. There are no real checks and balances on power and profits for those who possess that capability with their cronies who support them next in line to benefit. This system ends up being largely the modern version of a feudal system whereby the rulers have developed and used technology/pharmaceuticals to underhandedly control and oppress the citizenry for their own gain, to prevent competition, and to keep the status quo in place.