May 10, 2017
“How did you go bankrupt?” “Two ways. Gradually, then suddenly.”
– Ernest Hemingway, “The Sun Also Rises”
I was chatting with a friend two days ago who was agitated by the insanity of the markets. Look at TSLA, for instance. This thing loses $13,000 for every car sold. Soon the tax credits – i.e. the taxpayer subsidies – will expire and TSLA will lose even more per car because it will have to lower the price to entice buyers. Its balance sheet is a ticking time bomb in the form of residual value guarantees issued by TSLA used to induce buyers into paying up for a car that has depreciated in value considerably more than the value of the guarantee. Those poor saps don’t realize it yet, but they will be unsecured creditors to a bankrupt corpse of a company. And yet, the market has pushed the market cap above the market caps of GM and Ford.
To say this is absurd is an insult to the word “absurd.” I’m still trying to decide whether TSLA or AMZN is the biggest Ponzi scheme in U.S. history. I have not had a chance to dissect TSLA’s financials and operations to the extent that I have done so with AMZN. With AMZN the market doesn’t seem to care that, on a net income basis, in its latest quarter AMZN’s product sales business (it’s non-cloud, or AWS, business) lost money (that’s right, if you subract the operating income of AWS from total net income, AMZN lost money – AMZN manufactures net income for its non-AWS business via GAAP gimmicks) . But why focus on the facts? The operating income of its AWS cloud business dropped 29%. Once GOOG, MSFT and ORCL have fully implemented their attack on AMZN’s cloud market share, AWS will become irrelevant. I would bet every single entity that bought AMZN stock since it released its Q1 earnings does not know these facts. AMZN, pure and simple, is a Ponzi scheme.
Amusingly, there’s a contest on CNBC over whether AMZN or GOOG hits $1000 first. This is the surest signal that the end of this fiat currency-driven credit and stock bubble globally is about to collapse.
Given the inability to manipulate its market via paper derivative instruments and short selling, this is the message that Bitcoin is signaling:
In the absence of the ability to manipulate the market, this is the same message that gold and silver would be sending to the world, only the scramble for gold and silver bullion in any form would be more frenzied and it would be widespread. There actually is a somewhat frenzied scramble for gold and silver in eastern hemisphere markets based on the premiums to melt being paid for refined products in places like India, China, Turkey and Viet Nam.
At some point the western Central Banks will lose the ability to manipulate the gold and silver price and the Comex will default. That’s when chaos will break out in the physical gold and silver markets. That may be what it will take to trigger the collapse of the U.S. Ponzi scheme. Apparently JP Morgan understands this inevitability. Prior to 2011, JPM did not operate a Comex vault. It had zero Comex silver. Currently JPM is holding nearly 108 million ozs of silver, or 54% of the total silver reportedly held in Comex silver vaults. This tells us, or at least me, that smart insider money is loading up on precious metals – not Bitcoin – and that silver is a better bet than gold.
Hemingway’s “slowly” method of going bankrupt has nearly run its course. There’s no way to tell the timing on the “all at once” side of this trade but the price action in Bitcoin is signaling to the world that the obviously inevitable draws near.