Guest Post: "The VIX, Andrew (not the prince) Red Queen, by AGXIIK

13
Mon, Apr 27, 2020 - 9:43am

As the new week begins, please see this from your fellow TFMR member, AGXIIK.

"The VIX, Andrew (not the prince) Red Queen, by AGXIIK

Ok. Fair warning. I can think of far more than 6 impossible things before breakfast. Brekkie's done and I'm working on bucket o' coffee numero dos.

This rambling is based on too much gin and enough of quinine-based club soda to float the entire USS Debt Fleet. A much better writer told me that gin is the best thing to jump start the creative juices. Must be the juniper berries.

The VIX was my indicator back in 2007 shouting the market was going to hell. The VIX jumped off my screen and beat me around my head and shoulders, screaming at me to GTFO of the market. Not deaf moi, just ignorant.

I didn't realize the significance of VIX racing from 20 to 60 and back in a day or two. What was it telling me? The market was pricing in a drop in DOW S&P and NAZ of 50-75%. I didn't exit market and took a 65% loss. In dog years that around $1.5-2,000,000. The exact number is not known, but my loss carry forwards are still sitting in the 1040 waiting to be used when silver goes to the moon.

The crazy part of it was I hadn't yet gone cold turkey on the market in 2009. In no particular bit of trading wisdom I got into triple leveraged financial and silver gold ETFs. You know the names. The rise in all markets from 2009 to 2011 recovered around 50% of my losses.

Then April 2011 hit. Trading silver and gold ETF at the moment that metals dropped off a cliff handing me a beefy loss, I decided to exit paper and go 100% physical gold and silver. I've been there since. A small exception was trading JNUG and DUST during their wild rides of 2016 built a very profitable and very fast return. I added to my stack and bought our home debt free with that boon.

A quick trip in the wayback machine to the tech wreck of 2001 showed the same effect on my portfolio but far worse for the market. The DOW down 50% and NAZ was off 80%. It's pretty telling that across the boards the unicorn market makers dropped over 50-80% causing $6 trillion in cumulative losses yet people rode those losses into the ground. They thought this time would be different. Just a wafer thin clip of the net worth.

But now people are saying "This Time It's Different". I hear them. They populate every radio and TV station; every internet channel touting sure winners. They shout
"This time it's different"

Yes. Hell yes it's different. By at least half an order of magnitude it's different; and worse

The systems that were damaged and bloated and corrupted over the last 12 years are like a 70 year old 350 lb man on a whisky binge. BP 180 over 120, pulse thready, diabetic, suffering COPD, sustained only by massively expensive medical intervention. Fat man just caught COVID 19, aka The Bug.

That man is the stock market. That man is the currency market. That man is the bond markets. That man is all the banks in the world.

Fat boy's down heavily in March, with a slight rebound in April because any level of health was better than the dead-man-walking condition when he first caught the bug. This man is now laying on a hospital bed, wires and IVs in each arm, intubated, on a ventilator, going through the extremis that others describe as the end of life condition for those many who expire from the virus.

This market is not a bear trap. It's on death watch. The 2020 2nd and 3rd quarters of every market, every country, every bank, every bond, every loan and every live human will suffer from the worst crash in human history.

There might have been worse crises. A few come to mind

Maybe the VEI 7 explosion of Santorini that changed world history around 1,600 BC.

It could be like the opening of the Bosphorus strait that flooded the valley in what is now the Black Sea, filling up 7500 years ago. Noah's Arc fabled great flood resulted from the violence of that event.

Not as bad as the Toba VEI8 explosion around 76,000 years ago that almost caused extinction of human life as we know it. Or a Yellowstone Super volcano eruption that's been talked about recently.

It'll probably be worse than the global deep freeze of 1812-1816, a period dubbed the Year Without Summer, a time when VEI7 Krakatoa went off. Our coming deep freeze, failures of crops and collapse of human population that will result from the Solar Global Minimum that we are entering now will be dramatically exacerbated as the EROI of oil goes under 10. Civilization starts at an EROI of 11 and above.

Oil is everything. The last 150 years of human progress, population growth, agriculture, technology and industrialization of the planet stems from oil. Without oil we heated our homes, cooked our food and lit our way with wood, coal, buffalo chips and bees wax.

The destruction of pricing mechanisms coupled with 50-90% drop in oil consumption will cap off the toll on human life, the global economies, the banking system as we know it and all forms of debt when oil is not worth pumping out of the ground

OK. Admittedly that's grim. Maybe it won't be that bad. Maybe. I sure hope not. Maybe it's the gin talking. But aside from the ELEs noted above, this stock market, all banking--central or otherwise, all debt and much of our DIGIFIAT progress over the last 50 years will go Tango Uniform in this era.

The center is not holding. It's not going to hold. It cannot hold because all sides of the human equation are in total disagreement as to who's fault this is. We are barely evolved life forms who cannot agree on much of anything including what to order on a menu or the color schemes in a brand new $90,000 Ford F 150 financed at 0% for 7 years.

We cannot afford even a 0% rate loan because someone didn't run the numbers as the F and I slickster talked us into the fact that it's only money and THIS is a mighty F-150. It's bigger than mere money. As if the impact of that $1,100 monthly payment on our budget is a bagatelle when compared to putting food on the table and unemployment payments cover only half that. My neighborhood is filled with F-150s.

F-150tards!!

With this crisis I doubt if the market is going to be supportive of our calamitous stupidity as the repo men cruise the 'hood looking to hook up a lone Ford in the driveway

The markets are honey badgers. They don't care; they're honey badgers.

The honey badger market will go to ground. That badger market will shit on your bed, eat your food, destroy your personal lives and everything you built. It won't care because it's honey badger. We'll see DOW maybe 5,000 and NAZ at around 1,200 when the honey badger has its way with us. DOW 5000 will be a good day in the trading pits but gold at $5,000 might stave off even more serious harm

This self fulfilling cycle of market devastation feeds on its destructive cycle like Worm Ourborous. It'll continue until it, like the virus, has burned its way through every market, every bank, every country, every state, every bank account, every center of government and every human being on the planet.

This unvirtuous cycle; call it the Fourth Turning or just a total FUBAR, is a turning without any virtue. It will not end until it ends and we'll not be able to jack shit about it. The Long Now is about to get really real. We're just proles riding in steerage aboard the Snow Piercer as it circumnavigates a world encased in ice.

Basically nothing will save us from the wreckage that is coming our way. The greatness AND the excesses of the last 500 years are coming home to roost. That is unavoidable if the Global Solar Minimum is as bad as I think it might be.

Andrew McLeod is right but is not thinking big enough. If he did he'd not be doing podcasts. He'd be taking all his gold and finding a warm weather island and GOTS. Rob Kirby sees it and knows gold is the metal place to be, safely aboard a 14 passenger jet owned by one of his billionaire clients, off to a far away country where the rule of law still operates. Marin Katusa knows what is happening. He sees the long game. John Rubino's been talking about this even for the last 5 years.

We've been peddling in place on our Peletons, hoping to get somewhere.

This market's hard on people. You can't stop what's coming. It's not waiting on you, if you think it is, that's just vanity. This market's got some hard bark on it.

And if you're wondering where to git yer gold. You git it at the gittin' place

AGXIIK

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  13 Comments

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chrtoo
Apr 28, 2020 - 5:53pm

Thanks AGXIIK!

Great sense of History!

CHR.

bmorrowSteveW
Apr 27, 2020 - 6:00pm

Oil

Well said Steve. Hope the timeline for said unsustainability is more than 20 - 30 years 'cause I don't wanna be around when that realization dawns on Boobus Americanus & Boobus Canadianus.

SteveW
Apr 27, 2020 - 5:26pm

Oil

I was doodling around last week concerning the energy content of oil. It seems that there are 31,000 Kcal in a US gallon of oil. It is often stated that for our food consumption in the developed world we use 10 calories of oil to produce 1 calorie of food. Thus a gallon provides 3,100 Kcal of food or about enough for 2 adults for one day.

A barrel is 42 US gallons and so will support food for 84. The world production of oil is in the region of 100 million barrels a day or in food terms enough for 8.4 billion people at the level of consumption in the developed world. I think the US consumes about 10 million barrels daily, food for 840 million.

I think this is not sustainable.

zman
Apr 27, 2020 - 2:52pm

Seriously, a potentially

Seriously, a potentially temporary lower price of oil isn't the end of the world. Some producers will stop pumping and price will recover, this isn't anything new. This isn't going to destroy the banking system, not gonna happen.

People have to recognize that this isn't the 'free market' system of old. Banks are companies that privatizes the gains and socializes the losses. That means it's 'their' system and 'their' rules, and collapse isn't on the table anymore.

The day of reckoning is a false narrative, it's already here. The working class already has been destroyed and will suffer even worse in the months and years ahead. There's a reason why the 10 year bond trades at .60% today, that means there's no chance of economic growth or inflation in the years ahead. That means the working class is screwed and entitlements will be cut in the years ahead.

Will asset prices suffer in the future? Nobody knows for sure, but I give the benefit of the doubt to the people that manage fiscal, tax, trade and monetary policy. They're not stupid people and they're going to own even more resources when this virus mess is over. In my opinion, don't look for some big market event to change this trend, it's not going to work that way.

Wizdum
Apr 27, 2020 - 2:33pm

200K mile....

'oo Excursion here.
YE-HAAA...Runs well.
Took her out this weekend up & down hills..

silverseekerTexas Sandman
Apr 27, 2020 - 12:15pm

Its different this time...

Well, speaking in generalist F-150 terms; it is different:

  • The 2018 F-150 in my driveway; (company truck); has 57k miles; was $45k; has warped front rotors, a cracked windshield due to chassis flex, a computer based operating system requiring SAE certification else it is a 3 ton paper weight, and won't likely exist in 10 years.
  • The 1979 F-150 sitting next to it;(mine); has 270k miles, a rebuilt engine and trans; is 100% steel- coated in Fluid Film; so zero rust; and will likely be road worthy for as long as someone with a few brain cells and simple tools has the notion to keep it there.

Let's translate the generalist view to finance:

  • The 2020 soft money economy is marked to fiction and priced to perfection under assumption that MMT has no consequences; and every gaping hole can be refilled with digits. EVERYONE is nearly 100% invested in soft currency based 'assets'; including Bonds which are debt obligations from bankrupt Govn'ts masquerading as money; trading at par.
  • The hard asset/ Commodity complex is trading at generational lows, with nearly zero recognition from the soft money world of the ratio trade which exists par excellence if you simply take the Soft Money as Numerator and the Hard Money Assets as Denominator... (the sea of currency masquerading as money is a few orders magnitude overweight the available hard assets).

The only thing different this time is the scale of the ignorance and peril unrecognized in the present 'market'.

Marcusmrcic
Apr 27, 2020 - 11:38am

mushrooms

Dude, the general public are the mushrooms. Kept in the dark and fed plenty of BS.

Mintmoondog
Apr 27, 2020 - 10:51am

Greatest 3 day trade of my life!

Okay,

I bought 35k shares of MAG on margin last Thursday (WTF was I thinking) - hoping for a small rise in Ag.

Friday after hours they announced a 250million dollar 2year dilution and I sat through the weekend shitting my pants.

This morning SPROTT announces that they bought a 60M increase in shares non-brokered...the share price jumped to over 11.00 from 9.60

I sold all 35k shares around the open for a 53,000.00 profit!

I still own 20k shares and 10k in August options as this has always been a long term favorite of mine.

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mrcic
Apr 27, 2020 - 10:36am

Grand solar minimum

So if crops are going to fail...

Better start planting mushrooms.

Marcus
Apr 27, 2020 - 10:36am

honey badger, eh?

"That badger (market) will shit on your bed, eat your food, destroy your personal lives and everything you built. It won't care because it's honey badger".

Reminds me a bit of my ex.

Good write-up, AGXIIK, as usual.

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