A Baker's Dozen of "Deflationary Bias" Charts

Fri, Oct 3, 2014 - 2:42am

We've asked a few times now, "what happened on September 1st"? It's time to revisit that question again today.

If you missed the previous two posts, you can find them here:



The basic premise is this:

Beginning in late August, the collective "market" finally began to anticipate to complete removal of overt Fed QE. (By the way, this was confirmed with the October POMO schedule, which shows QE3(∞) "ending" on October 28.) To understand how the "market" looks at this, think back to The Great Financial Crisis of 2008.

Back then, deflation was the big scare/risk. Asset prices were crashing globally and a global economy built upon debt and fractional reserve banking simply cannot survive in a hyper-deflation environment. Thus, QE1, QE2 and QE3(∞). Over the course of those money-printing programs, The Fed created nearly $3T in fresh cash, ostensibly to "help the economy".

Well that spigot will again be temporarily turned off in 26 days and the collective "market" finally began to anticipate just that back in late August. Without the constant dump of fresh greenback into the global banking system, we are right back to where we were in 2008. Namely, deflation.

If I'm right about this, what should we be seeing across the global financial markets? Mainly three, simple trends:

  • The U.S. dollar should be rallying as a prospective future of less dollar supply makes the supply of today's dollars more valuable.
  • The U.S. bond market should rally as a forecast for deflation makes even 30-year bonds at 3% look pretty attractive.
  • Every dollar-based "commodity", from the metals to crude to stocks should be falling as demand wains, liquidity reigns and the economy strains under deflationary pressure.
  • And what do we see? Let's start with the dollar. If we go back to mid-late August, what do we find?

    The US dollar as measured by the POSX:

    The euro and yen:

    OK, those charts seem to verify bullet point #1.

    How about the U.S. bond market? Are bond prices rallying, too? Well not at first and, while they were falling, they were the "missing link" in this equation. Ahhh, but look what happened two weeks ago! Bond prices suddenly reversed and prices began to rally...sharply. In fact, yields on the 10-year note and the 30-year Long Bond are now back to within a few basis points of the 2014 lows seen on August 28.

    So, whaddayaknow? The change in trend and rally from mid-September seems to be verifying bullet point #2!

    I guess that means we should now consider bullet point #3. Is nearly everything else falling? See for yourself:

    U.S. stocks as measured by the S&P 500 and Russell 2000:

    The most important "commodity" in the world at present, crude oil:

    And all five metals:

    Hmmm. Well those charts certainly seem to confirm bullet point #3.

    So, here's the point:

    IF I'M RIGHT ABOUT THIS, things are going to get even worse before they get better. Why? Because hardly anyone else is talking about it! By the time the world outside of Turdville finally figures out what's going on, the stock market will be crashing, crude will be near $80 and the metals will be even lower, particularly silver.

    The point is this:

    As things begin to unravel in October and November, The Fed will be forced to act. Remember, their primary stated mission is prompt employment and inflation. Deflation is their number one enemy and they will do anything (and this includes QE4) to avoid it! After or slightly before this deflationary bias finally runs its course, all of the "dollar-based commodities" listed above will bounce, turn and rally back higher. Until then, however, we must expect continued pressure, even on gold. And if $1180 gold gets taken out, there will even be spike downward as sell-stops get run below the current range, similar to the events of April 2013, though not quite as dramatic.

    In the end, this means you must be mentally prepared for what lies ahead. The next few weeks are going to be increasingly volatile and panic-filled, not just in the metals but across the board. Recognize it for what it is and realize that your stack of physical will be just as shiny and valuable with each passing day, regardless of the changing paper price. As I've been stating for weeks, at The End of The Great Keynesian Experiment, the paper price shenanigans/machinations of September 2014 will be long forgotten. You should continue to use this time wisely and prepare accordingly.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    · Oct 2, 2014 - 11:46am

    Just a heads up

    I'll likely make this a public post later today or tomorrow.

    Marchas45 · Oct 2, 2014 - 11:50am

    Public Post

    Shee I can't see myself on there, what about my reputation. LMAO

    CPE · Oct 2, 2014 - 11:50am


    the hell is Gideon Gono?

    We need some "wealth effect" up in here, can I get an Amen?

    rl999 · Oct 2, 2014 - 11:55am



    TF...it is bad manners to steal the first comment...jk

     Michigan State Spartans 1 Ounce of .999 Fine Silver Silver Round

     Michigan State Spartans 1 Ounce of .999 Fine Silver Silver Round

    Marchas45 · Oct 2, 2014 - 11:59am

    Well Hell

    If the metals are going down some more then I guess I'll buy some more. Mmmmm cheeky Yep that's what I'll do. Keep stacking

    crylandjr · Oct 2, 2014 - 12:14pm


    Tell it like it is Gideon!

    Gamble · Oct 2, 2014 - 12:17pm

    They will need to have a reason to act

    Which probably means black swan , they need to blame the crashing markets on something . This is all scripted and carefully planned out , for all we know there are a handfull of people sitting in a room high fiveing and giggling like 12 year old school girls.

    Gamble gamble

    Texas Sandman · Oct 2, 2014 - 12:19pm

    Hidden virtue of stacking in deflation

    A deflationary collapse is precisely the scenario where you'd see bail-ins. So, while what we've seen, and what we're likely to see, may be unpleasant, just know full well in your hearts the gold/silver held outside the banking system (very important) is safer than money at the bank.

    Return of capital becomes more important than return on capital. And if the capital gets stolen that's impossible.

    Orange · Oct 2, 2014 - 12:21pm

    Hope you are right

    I did not sell our house, however rented it and bought another one. It really pissed me off that I had to sell uslv at a loss in July around $52 leaving my investable amount considerably reduced. Lucky I did as its now about half that.

    Hence change of strategy, invested in faz a triple bear. Back in 2008 it peeked at around $29,000 and can be bought today for around $17. Looking for a sharp correction on the dow of about 30%. Sky rocketing faz while metals are under pressure.

    Sell at the right time and return to uslv for the move to silver at $100. 

    Should make me happy if I can time it right and get back in physical.

    Time frame, all before the end of the year would be nice.

    Ensues · Oct 2, 2014 - 12:25pm

    Moar QE

    The Fed is going to start printing again so fast it will make our heads spin. They tried a full taper to QE1. Then a full taper to Twist. And lastly a full taper to QE3. What do you think they will call the new "asset purchase program?" We should start a pool. I also predict the Fed will start writing citizens checks within 5 years.

    The sad part is the zombies will never get it. They will look at QE8 or QE14 and just smile knowing the Government is taking care of the economy. The educated folks watching CNBC and reading the WSJ on the airplane are going to get decimated. Gold is getting crushed but has never went to zero. Nearly all fiat currencies have.

    Seems like simple math for my simple mind.

    Stack on.

    ag1969 · Oct 2, 2014 - 12:29pm

    Swiss Demand Global Gold Recall despite Central Bankers

    Swiss Demand Global Gold Recall despite Central Bankers - Charles Goyette
    · Oct 2, 2014 - 12:30pm

    So lemme get this straight...

    The FedRes needs to implement QE to recapitalize banks and to monetize UST debt to allow continued deficit spending and low interest rates. When the specter of ending QE is raised, the market's reaction is to... Buy more bonds? Whose primary supporting buyer, the FedRes and proxies are supposedly withdrawing from the market, presumably meaning lower demand for the same in the future? Not sure I fully grok this one. Unless, of course, there is a general realization that CBs will keep if not increase UST purchases, tapertalk notwithstanding.

    usk · Oct 2, 2014 - 12:31pm


    The same algo has been running for 12 weeks in a row in Silver.

    This is a unprecedented massive, coordinated attack.

    I am really wondering what's behind this move. I hope to learn who and why.

    · Oct 2, 2014 - 12:33pm

    Recall that in yesterday's

    Recall that in yesterday's podcast, we discussed this:

    Here's an updated chart:

    So, is 1905 next? If so, it had better hold or things are going to get pretty freaking dicey, pretty freaking quick.

    Gamble Ensues · Oct 2, 2014 - 12:35pm

    They will call it

    Yellen 4 moar!

    gamble gamble

    Hawkman · Oct 2, 2014 - 12:38pm

    Spot on analysis TF

    And it squares with what we 'know' about the true state of this sham economy.

    Looking forward to a little 'dollar cost averaging' as Ag takes a dive and I can dilute some of the cost of the ozs I bought in the 20s.

    Bottom line is, the Central Bankers are caught in a trap of their own making. Instead of letting the system crash and begin to heal, they kept upping the dose of monetary morphine. Now the patient couldn't get clean if it wanted to. The only option left is more QE.

    New CostCo just opened near us - time to make another trip in advance of the looting that sooner or later is sure to come.


    perdman · Oct 2, 2014 - 12:41pm

    Great Post

    Thanks TF

    TasSTL · Oct 2, 2014 - 12:44pm


    Recently I posted that a lower silver price would induce more metal onto the market. SRSROCCO has the proof to back this up:


    Understand, I am not selling and I'm guessing neither are you. But the miners are bringing record amounts to market at these prices. Others will panic and do the same. I don't understand the reasons behind this, not can I understand what the miners are doing to their investors. But, the facts speak for themselves. Someone is in need of physical metal, so the easiest way to get it is to crash the price.

    Works until it doesn't. Bottom line, you want physical silver there is plenty out there for you to buy....


    · Oct 2, 2014 - 12:46pm

    Another thing we've been discussing for weeks

    This "flight to yield" is real and it is being caused by the $2.7T in excess reserves held by US banks along with all of the other CB-created cash out there.


    Texas Sandman · Oct 2, 2014 - 12:49pm

    TasSTL --- stacker dishoarding with low prices

    I think we've seen further anecdotal evidence of that from the (recently) slashed premiums on junk. Now, they aren't making any more of that stuff, so the only place it comes from is other stackers recently carried out on a stake. But while the SDBULLION premiums were 75 cents over spot, I was stocking up on the stuff.

    I do note, however, the premiums have more than doubled from that already and are rising. So, while I think you're correct, dishoarding is a largely transient phenomenon and leaves the "strong hands" remaining.

    AIJ · Oct 2, 2014 - 12:50pm



    1. NO Way silver was going down to 15-16 NO Way

    2. Now, Look out below!!


    Most likely the Opposite is going to happen.

    Hawkman TF · Oct 2, 2014 - 12:58pm

    Buy when the blood is running

    Buy when the blood is running in the streets.
    Buy when everyone is selling.
    Buy when nobody wants it.

    And that's why they call us contrarians.

    nadgeskaul · Oct 2, 2014 - 1:11pm
    Levon · Oct 2, 2014 - 1:11pm

    Deflationary cycle


    Do you really think that this deflationary cycle can last months? With interest rates at zero, Pimco pulling the plug etc. things can and are unraveling quite quickly and can accelerate even more so ala 2008. Don't you think Fellen will panic and unleash QE to infinity and beyond sooner than later? The US cannot handle a high dollar and rising rates with the economy and employment so weak.

    Danforth Coxwell · Oct 2, 2014 - 1:13pm

    Had a chance to review proper handwashing....

    techniques of late????? Contact your local Public Health Department for more details. If you live in Hawaii, I am talking to you!!!!

    rl999 · Oct 2, 2014 - 1:15pm

    @ Orange

    I started trading this year (foolishness, I know). One of the first things I noticed/learned during my study of the 2008 crash is that a few things really did go to the moon. You mentioned FAZ and I tried to find my first notebook for stocks to find the other stocks that went to the stratosphere. I know vix/uvyx was one of them was well. There were at least a half dozen that went from pocket change to $10K +.

    Perhaps the housing crash will be another potential play to create generational wealth.

    Dr. P. Metals · Oct 2, 2014 - 1:24pm

    going to need a new land bigger ake

    to lose all this stuff in...

    CPE · Oct 2, 2014 - 1:25pm


    The plunge protection team is on the job! Up, up and away!

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