Executive Summary

• Controlled markets can't be controlled forever
• Confidence is beginning to fail, even at the top
• The leading indicators to monitor closely
• The reason to get excited about gold & silver again

If you have not yet read Part 1: Who’s Going To Eat The Losses? available free to all readers, please click here to read it first.

As we recently covered in this week's special webinar, the geopolitical tensions across the world, alone, should have created some sort of ‘risk off’ response in the equity markets.  With China, Russia and North Korea all increasingly at odds with the US for a wide variety of reasons, it’s very hard to make a case that Everything is Awesome!

Instead, it’s very easy to make the case that the world is on the brink of a period of destructive trade wars, if not actual 'hot' wars. 

Again, that alone should be introducing some uncertainty, some ‘risk off’ behaviors by which we mean some sort of a selloff in equities. But that’s just not the case.

In fact, the current stock ramp-up is the second longest without even a 3% sell-off in all of US equity history.

(Source)

It's my firm belief that these calm markets do not represent the collective wisdom of millions of independent traders and investors.  They are instead the result of both direct and indirect support of said markets by monetary authorities and their proxies. That is, the central banks and the big banks they actually represent and look out for. 

But this lack of volatility will have a very painful cost some day. No different than in a political crisis where an oppressed people finally rise up, the suppression of market volatility will spill over and quite possible destroy entire markets, institutions and even sovereign nations before things stabilize at a new, lower level.

The suppression of volatility is, at best, the indirect consequence of central banks forcing too much money into the system while simultaneously driving interest rates to such low levels that the majority of market participants were forced into risky assets.  After all, if you cannot earn a return in safe vehicles (like savings accounts, CD’s, money market funds, T-Bills, etc.)  then you have to take risks in equities and junk bonds and Italian debt and the like.