The Burden of the American Worker

 

Happy Destiny

There’s great elation flowing from the various economic bureaus down through President Trump. They bring us good tidings. If you haven’t heard, here in the USA, we live, work, and play in the dazzle and delight of an economy in which GDP growth exceeds the unemployment rate.

The president has clearly had a hand in job creation. 🙂 Seriously, there can be no doubt that aggregate economic activity has increased as a result of the measures the government has implemented, including deregulation, tax cuts and increased deficit spending. Note that the latter is offsetting the salutary effects of the other measures in the long run, even though government spending is added to GDP and therefore provides a near term boost to official “growth”. It is just difficult to tell how much of this growth consists of genuine wealth creation and how much of it is simply masking capital consumption. [PT]

The last time we drank of elation this cool and sweet was in the pre-iPhone stone ages. Back when George Dubya was President. And when Lehman Brothers was still one of the titans of Wall Street.

Indeed, getting back to this agreeable place has been a long, hard trudge along the road to happy destiny.  But step by step, day by day, a paradise lost has been returned to Eden. Thank you, Ben Bernanke.

By all official accounts, things have never been better.  GDP, according to the Bureau of Economic Analysis, is growing at an annual clip of 4.2 percent.  The unemployment rate, as reported by the Bureau of Labor Statistics, sits at just 3.9 percent.  But that’s not all…

Pot stocks have become the new bitcoin.  The Dow Jones Industrial Average, after a six month hiatus, is marking new all-time record highs.  And, most importantly, the Dodgers are tops in their division going into the final week of the regular season.  What’s not to like?

Potting it – marijuana stock Tilray rises to a price/sales ratio of 846 intraday. Such moves have  become a regular occurrence in bubble-land. [PT

Another recent standout is this 5-day move from $1.50 to $10 in the stock of NBEV on the mere announcement that it may begin offering drinks spiked with marijuana additives. There is actually an important takeaway from this for investors. Such moves happen only in the final stage of major bubbles. This means that a) yes, it clearly is a bubble, b) it is on borrowed time and c) you8 can be certain the unwinding phase will be harrowing. [PT]

Discrepancies

The panoramic vantage from the present summit is both extraordinary and astonishing.  Here, standing at the heights of a quasi-centrally planned economy, we see distortions and discrepancies. There are pie charts and bar graphs displaying contrived and downright fabricated economic data. The garbage outputs are very much at odds with the reality of the situation.

The results are bizarre evidence of the determination of the central planners to depict a world that’s unfolding in accordance with an intelligent plan. A supposed reality where not only does your neighbor …read more

Gold and Gold Stocks – Small Rays of Light in the Vale of Tears

A Rebound Gets Underway – Will It Have Legs?

Ever since the gold indexes have broken below the shelf of support that has held them aloft since late 2016 (around 165-170 points in the HUI Index), the sector was not much to write home about, to put it mildly. Precious metals stocks will continue to battle the headwinds of institutional tax loss selling until the end of October, to be followed by the not-quite-as-strong headwinds of individual tax loss selling in the final weeks of the calendar year – a fairly regularly recurring script in recent years. Nevertheless, recent developments make it worthwhile to take another look at the situation. Here is a daily chart of the HUI:

The HUI daily, plus two proxies for gold investors shortly after looking at their end-of-August statements. As the annotation indicates, one reason to take a closer look is the recent strong divergence between prices and momentum oscillators such as RSI and MACD. But that is not the only thing that is of interest.

Apart from the divergence between prices and RSI/MACD at the recent lows it is worth noting that although it feels hesitant, the recent rebound was actually one of the most vigorous rallies of the entire year in a span of just seven trading days.  For the first time since early July just before the breakdown, at least two consecutive closes above the 20-day moving average (blue line) could be scraped together, and a third one seems likely at the time of writing.

We have added 50- and 200-day moving averages to the chart as well. These tend to be important for the index, but more importantly, we feel reminded of the situation in late August to late September 2015, when a similar set-up was in place. As we pointed out at the time, the sheer distance of the index to its 200-dma made a strong short term rebound highly likely, even if the medium to long term trend did not change.

The index promptly spiked by almost 40% in early October 2015, which was not even enough to reach its 200-dma; obviously it failed to attain “escape velocity” and fell back almost as fast as it had rallied (aforementioned tax loss selling pressure was a likely culprit). And yet, it was certainly a playable move for nimble traders. Such huge moves in such short time periods rarely (never?) happen in other market sectors.

Futures Positioning – Speculators at Odds With Each Other

According to the legacy CoT report large speculators have completely abandoned  their net long exposure to gold futures, going slightly net short for the first time since gold prices crossed the $270 level to the upside more than 17 years ago. The disaggregated CoT report splits large speculators into two major groups – and it turns out these groups strongly disagree on the future direction of prices.

The “managed money” category (which includes CTAs, hedge funds, etc.) has amassed the largest net short position in at least the history of the …read more

US Equities – Approaching an Inflection Point

A Lengthy Non-Confirmation

As we have frequently pointed out in recent months, since beginning to rise from the lows of the sharp but brief downturn after the late January blow-off high, the US stock market is bereft of uniformity. Instead, an uncommonly lengthy non-confirmation between the the strongest indexes and the broad market has been established.

The chart below illustrates the situation – it compares the performance of the DJIA (still no new high since January, although it has come close), the NDX (one of the best-performing indexes, along with the Russell 2000/ RUT) and the NYA (our proxy for the broad market):

DJIA vs. NDX vs. NYA – this rather glaring and very lengthy divergence is a symptom of a narrowing market. The vast bulk of the uptrend in benchmarks such as the S&P 500 was due to the surge in the “FAANG” stocks (FB, AAPL, AMZN, NFLX, GOOGL) – but even this group of stocks is no longer in uniform tracking mode, as FB has fallen out of bed and NFLX and even GOOGL have begun to look wobbly lately. File under interesting trivia: AMZN and AAPL, the two strongest stocks of the group, reached their highest closing levels to date on September 4, the day after Labor Day  (the year-to-date closing high in the NDX was recorded on August 29). In 1929, Labor Day fell on September 2 and the DJIA topped out on September 3.

On Monday the NDX pulled back to its 50-day moving average, which has contained all short term pullbacks since early May. If we were looking only at the daily price charts of NDX or RUT, we would definitely not call their patterns bearish. Per experience rising wedges like the one that has recently formed in the NDX (the Nasdaq Composite looks similar) more often than not lead to further upside – contrary to the conventional wisdom on these chart formations.

But these indexes do not exist in isolation. A further advance in the near term seems unlikely, in light of a recent sharp rise in bullish sentiment (consider e.g. Mark Hulbert’s Nasdaq sentiment gauge in this context). Most sentiment and positioning indicators recently returned to very high levels relative to their history, but failed to eclipse their January highs.

The next chart compares two major developed market indexes – the S&P 500 Index and the Euro-Stoxx 50 Index. The divergence between these markets has grown enormously. You may be surprised to learn that European stocks actually topped out in early 2015 (a few country indexes surpassed their 2015 peaks, but the same cannot be said for Europe-wide indexes).

SPX vs. EuroStoxx 50 (STOX5E). European stocks already peaked in early 2015, when the initial enthusiasm over ECB QE started to wane. They remain well below their 2015 peak to this day – and this has created what is easily their biggest ever divergence vs. the SPX.

If anything, the EuroStoxx Index shows that superficially obvious fundamentals often count for very little – after all, …read more

Dubious Prophecies & Perverse Incentives – Precious Metals Supply and Demand

Suspect Predictions, Ill Wishes and Worthwhile Targets of Scorn

This price of gold fell three bucks, and the price of silver fell ten cents last week. Perhaps because of the ongoing $150 price drop so far since April, we saw some doozy email subjects and article headlines this week.

Panic on the inflation Titanic. [PT]

One notable one, from the man who confidently asserted we will have hyperinflation by the end of the year — in 2009 — now says that the dollar is close to losing its reserve currency status. Clearly, if the dollar goes down, the price of gold (measured in these going-down dollars) will be up. For those that want profit$, that number again is 1-800-BUY-GOLD!

The debtors of the world can’t “replace” their dollar debts. What would this even mean? The creditors of the world can’t find any other irredeemable currency that comes remotely close in terms of liquidity. And that is aside from the issue that the system will fail first in the periphery, so it will be better to hold dollars than dollar-derivatives (e.g. the pound and the euro, much less toilet paper such as bolivar and lira).

Another popular theme is that stocks and bonds will have their comeuppance, when stocks crash and gold skyrockets. This is openly wishing other investors ill (as distinct from analysis of the debt problem or the Fed’s credit cycle). Does one party’s gain depend on anothers’ losses? We believe this is part of the reason why so many normal people want nothing to do with gold (the other being, prior to Monetary Metals, gold did not have a yield).

For our part, we try to say as often as we can that our dire prognosis for the monetary system or even our conclusion that rising assets are a process of capital consumption, is not based on blaming people for speculating. The Fed applies perverse incentives, and everyone is forced to make the best of those incentives, like it or not. We reserve our condemnation for apologists of irredeemable currency, central planning, socialized credit, and collectivized resources.

Fundamental Developments

The dollar will resume its fall (not measured in terms of its derivatives, but in terms of gold) soon enough. Indeed, the Monetary Metals calculated fundamental gold price had bottomed in late June at around $1,300, and started to rise in late August. Now, it looks like the fundamental silver price may be bottoming at over $15.50.

We will look at the supply and demand fundamentals of both metals. But, first, here is the chart of the prices of gold and silver.

Gold and silver priced in USD

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). It rose further, to yet another record high this week.

Gold-silver ratio

Here is the gold graph showing …read more

Honest Work for Dishonest Pay

 

Misadventures and Mishaps

Over the past decade, in the wake of the 2008-09 debt crisis, the impossible has happened.  The sickness of too much debt has been seemingly cured with massive dosages of even more debt.  This, no doubt, is evidence that there are wonders and miracles above and beyond 24-hour home deliveries of Taco Bell via Door Dash.

The global debtberg: at the end of 2017, it had grown to USD 237 trillion. Obviously this is by now a slightly dated figure, as debt issuance has continued with gay abandon this year. [PT]

But how can dosages of more debt be the cure for too much debt?  Can more Cutty Sark be the cure for a dipsomaniac?  Certainly, in both instances, and after some interim relief, the cure always proves to be much worse than the disease.

Without question, a moment of clarity is approaching that will bisect the world of today from the world of tomorrow, like the Patriot Act bisects the present world from its prior state of bliss.  Thus, what follows is a rudimentary preview of what’s in store.  But first, some context is in order…

The fake money system – a system centered on debt based legal tender and centrally fabricated interest rates – produces booms and busts of greater extremes with each progression of the business cycle.  This century alone we’ve experienced two iterations of these boom and bust scenarios.  First the dotcom bubble and bust.  Then the housing boom and crash.

The “well-contained” end of the housing boom…  [PT]

Make no mistake, these booms and busts were anything but garden variety gyrations of the business cycle.  In fact, the Federal Reserve’s finger prints are all over them.  The booms originated from Fed monetary policy misadventures.  The busts were triggered by Fed monetary policy mishaps.

Anatomy of a Mishap

Presently, we are closing in on a decade’s long economic boom and bull market in stocks. This boom, like the boom of the mid-2000s, advanced during an extended period of monetary policy misadventures. This was the ZIRP and QE misadventure from 2009 through 2015, which distorted financial markets and disfigured the economy.

The last several years of this boom and bull market, however, have been a monetary policy transition period. First the Fed tapered back QE. Then the Fed began ever so slightly reducing its balance sheet and raising the federal funds rate.

Total assets held by the Federal Reserve system and the federal funds rate. It will be interesting to see at what level the next bust will be triggered. In fact, busts have already been triggered elsewhere in the world, as a number of emerging markets have recently gone over the cliff. [PT]

Obviously, the Fed’s tightening operations over the last several years have been done with kid gloves.  The tightening increments have been subtle. They have also been telegraphed from a mile away.  But that doesn’t mean a monetary policy mishap, and subsequent bust, will somehow be averted.

The crossover into the monetary policy mishap stage is never …read more

Corporate Credit – A Chasm Between Risk Perceptions and Actual Risk

Shifts in Credit-Land: Repatriation Hurts Small Corporate Borrowers

A recent Bloomberg article informs us that US companies with large cash hoards (such as AAPL and ORCL) were sizable players in corporate debt markets, supplying plenty of funds to borrowers in need of US dollars. Ever since US tax cuts have prompted repatriation flows, a “$300 billion-per-year hole” has been left in the market, as Bloomberg puts it. The chart below depicts the situation as of the end of August (not much has changed since then).

Short term (1-3 year) yields have risen strongly as a handful of cash-rich tech companies have begun to repatriate funds to the US.

Now these borrowers find it harder to get hold of funding. This in turn is putting additional pressure on their borrowing costs. At the same time, the cash-rich companies no longer need to fund share buybacks and dividends by issuing bonds themselves.

The upshot is that the financially strongest companies no longer issue new short term debt, while smaller and financially weaker companies are scrambling for funding and are faced with soaring interest rate expenses – which makes them even weaker.

As Bloomberg writes:

“Once the biggest buyers of short-dated corporate debt, Apple along with 20 other cash-rich companies including Microsoft Corp. and Oracle Corp. have turned into sellers. While they once bought $25 billion of debt per quarter, they’re now selling in $50 billion clips, leaving a $300 billion-a-year hole in the market, according to data tracked by Bank of America Corp. strategists.

The reversal is adding pressure to a market already buffeted by Federal Reserve rate hikes. Yields on corporate bonds with maturities between one and three years have jumped 0.83 percentage point this year to 3.19 percent, close to the highest in almost eight years, Bloomberg Barclays index data show. That increase has happened at a faster pace than longer-dated bonds, which tech companies bought less frequently.”

What is really noteworthy about this is that as these corporate middlemen are getting out, the quality of fixed-rate securities available to the rest of the investoriat continues to deteriorate in the aggregate.

Risk Perceptions vs. Risk

Meanwhile, despite the fact that euro-denominated corporate debt is reportedly still selling like hot cakes, both spreads and absolute yields have increased markedly in euro as well since late 2017 (as yields on German government debt are used as sovereign benchmarks for the euro area and remain stubbornly low, credit spreads on corporate and financial debt have increased almost in tandem with nominal yields).

Euro area yields are mainly of interest to us because they were leading to the downside (driven by the ECB’s QE program) and may now be leading in the other direction as well.

Consider the following charts. The first two show spreads and nominal yields on the ICE BofA-ML Euro High Yield Index. While the spread is back to levels last seen in mid April 2017, effective yields are at levels last seen in late 2016 – about 20 months ago.

Since late June, spreads and yields have essentially …read more

Gold-Silver Ratio Hits 10-Year High – Precious Metals Supply and Demand

 

Fundamental Developments

The price of gold dropped five bucks, and that of silver 40 cents last week. But let’s take a look at the supply and demand fundamentals of both metals. Also, we continue to follow the development in the gold-silver ratio.

One can buy a lot of silver for one’s gold these days. Silver has become extraordinarily cheap, but keep in mind that it was even cheaper vs. gold in the early 1990s (see the section on silver further below for the details). Nevertheless, it seems clear that the risk-reward probabilities are increasingly favoring silver.

First, here is the chart of the prices of gold and silver.

Gold and silver priced in USD

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). It rose to a ten year high this week.

Gold-silver ratio – a ten year high! The only time when this ratio was substantially lower was in the early 1990s

Here is the gold graph showing gold basis, co-basis and the price of the dollar in terms of gold price.

Gold basis, co-basis and the USD priced in milligrams of gold.

The October contract is under selling pressure, as longs must close their positions in the next few weeks before First Notice Day. The Dec contract shows rising scarcity, but not this much and is not close to backwardation.

This, by the way, is one proof that there is no massive naked short selling of futures. If there were, bullion banks would be buying the expiring contract with urgency. They would be pushing its price up.

Instead, we see its price going down. Bullion banks are arbitrageurs, happy to make a small spread without betting on price direction. It is the naked longs who must sell the contract with urgency. Thus the expiring contract always has a falling basis, which means a falling price relative to spot (basis = future – spot).

This week, the Monetary Metals Gold Fundamental Price fell $5, from $1,376 to $1,371.

Now let’s look at silver.

Silver basis, co-basis and the USD priced in grams of silver

There was not a lot of change in the scarcity of silver. The Monetary Metals Silver Fundamental Price fell $0.22, from $16.08 to $15.86.

Last week, we said:

This is the best time to trade gold for silver in the last three months, alright. But if basis ratio gets over 1.05 then it will be the best time in the last three years (this ratio hasn’t spent more than two weeks or so above 1.05 since 2009).

This time, the gold-silver ratio is higher, currently 82.7 as of Friday’s close.

Correction: the above should have said 1.005.

This week, the ratio of gold to silver closed at 84.65. And the ratio of the gold basis …read more

Thirteen Reckonings Hanging in the Balance

 

A Fake Money World

The NASDAQ slipped below 8,000 this week. But you can table your reservations.  The record bull market in U.S. stocks is still on. With a little imagination, and the assistance of crude chart projections, DOW 40,000 could be eclipsed by the end of the decade.  Remember, anything and everything’s possible with enough fake money.

Driven by a handful of big cap tech companies, the Nasdaq Composite has made new highs – but the broad market (here shown in the form of the NYSE Index) has not even made it back to the January blow-off peak. It is a good bet the return of the average investor’s portfolio mirrors that of the latter. Such divergences are typically a sign of steadily weakening market internals which are seen near major trend changes.  When such a glaring divergence in performance persistently fails to be invalidated and keeps dragging on for many months, it tends to be particularly concerning for the longer term outlook, Note that even more glaring divergences exist now between US stocks vs. European and EM stocks. Despite the fact that US economic indicators remain strong and no obvious recession warnings are evident, we have yet to see such large divergences resolve without a hiccup. Usually the hiccup turns out to be quite a doozy. [PT]

Still, we consider DOW 40,000 to be about as probable as having a dinosaur step on our car as we drive to work today.  More than likely, a return to DOW 10,000 will first grace the front page of the Wall Street Journal.

In the interim, while still in the delight of this “permanently high plateau,” we’ll turn our attention to another equally suspect record that’s presently unfolding with imperfect precision. If you haven’t noticed, the current economic expansion  is approaching its own record in terms of duration.  At 111 months and counting, this it is closing in on the post-World War II record of 120 consecutive months of growth that occurred between March 1991 and March 2001.

One thing economist Irving Fisher will inter alia always be remembered for is that he called for the stock market to have reached a “permanently high plateau” shortly before the crash of 1929 – not exactly an example of fortuitous timing as it turned out. It is actually a valuable illustration of a general principle: the herding effect that drives stock market bubbles to previously unimaginable heights and extremes of valuation eventually ensnares almost everybody, from the shoe-shine boy to the academic economist. A handful of skeptics will of course always remain, but most will have uttered warnings for quite some time already – by the time the catastrophe is close at hand, almost no-one will listen to them anymore. This is a pity, but then again, the class of investors as a whole cannot escape the losses that follow the bursting of a bubble anyway. [PT]

If all goes according to plan, the economic expansion will enter its 121st month by July of 2019.  Amazing! Certainly, this should equate …read more

Jayant Bhandari – The US Dollar vs. Other Currencies and Gold

 

Maurice Jackson Speaks with Jayant Bhandari About Emerging Market Currencies, the Trade War, US Foreign Policy and More

Maurice Jackson of Proven & Probable has recently conducted a new interview with our friend and occasional contributor to this site, Jayant Bhandari, who is inter alia the host of the annual Capitalism and Morality seminar.

Maurice Jackson (left) and Jayant Bhandari (right)

A wide range of topics is discussed, from the strong US dollar and its collapsing counterparts in emerging markets, to the looming threat of trade wars, to US foreign policy and the importance of gold as an insurance policy. As is his wont, Jayant brings a perspective that is often characterized by a refreshing dose of contrarian thinking.

Last but not least, Jayant names several companies in the junior mining space he believes to represent interesting opportunities at the current juncture. We urge readers to always do their own due diligence, but we also believe it cannot hurt to occasionally get a few pointers on where to look, especially if they come from someone who is well-known for his expertise in the sector.

Below is the video of the interview – the duration is approximately 15 minutes. A transcript can be found here.

Maurice Jackson speaks with Jayant Bhandari

…read more

September – The Most Dangerous Month to Invest

The Biggest Crashes in History Happened in September and October

In the last installment of Seasonal Insights we wrote about the media sector – an industry that typically tends to perform very poorly in the month of August. Upon receiving positive feedback, we decided to build on this topic. This week we are are discussing several international markets that tend to be weak during September and will look at what drives this recurring pattern.

Mark Twain, a renowned specialist in how not to get rich, opines on dangerous months to invest in the stock market. We should mention that he didn’t have access to the Seasonax app. [PT]

When you ask investors what they believe to be the worst month of the year for the stock market, most would probably reply that it is October. Most of our readers probably know about Black Friday (1929) and Black Monday (1987). In both cases stock market panics in the US led to global contagion and worldwide market crises.

These two events were the most dramatic declines in stock prices in the 20th  century – and both happened in October. The conclusion that October is a tough month to invest seems logical. However, the data indicate that  finding profitable investment opportunities is even more difficult in September.

According to Lim (2017), the S&P 500 has lost an average of 0.7% during September since World War II. The worst economic downturn since the Great Depression of the 1930s was triggered by the 2008 financial crisis, and fittingly, the Lehman Brothers bankruptcy – which is routinely blamed for bringing the crisis to a head – was announced on September 15.

The market crash of 2008 spawned a number of memorable magazine covers. This one apparently depicts the moment when the eyes of Wall Street denizens are beginning to bleed upon spotting Nancy Pelosi waving a recent chart of the DJIA. [PT]

Reasons for Market Weakness in September

Why are the markets typically struggling in September? There is no definitive  answer, but we believe there is more than just one reason. Firstly, like most people in the Western hemisphere, investors tend to go on vacation in the summer. August is a traditionally the month in which many financial markets enter their summer break.

Since most investors simply tend to leave their positions unchanged during this time, trading volumes decline. Once they get back to work, the first thing they tend to do is exit positions they were planning on exiting anyway (Gallant, 2018). Since this behavior is widespread, it often triggers price declines.

Another potential reason is that for many mutual funds the fiscal year ends at the end of September. They typically sell losing positions before the end of the year in order to claim tax losses and to prettify their portfolios, which generates additional selling pressure.

September syndrome: the graph from Wall Street breaks through in rural China… [PT]

Analysis of International Indexes Validates the Theory

We have analyzed this phenomenon with the Seasonax web app, in order …read more

Gold-Silver Ratio Message – Precious Metals Supply and Demand

 

Fundamental Developments

Last week the price of gold fell three bucks, and that of silver fell a quarter of a buck. But let us take a look at the supply and demand fundamentals of both metals. Also, we have an interesting development in the gold-silver ratio, a topic we have not addressed in a while.

First, here is the chart of the prices of gold and silver.

Gold and silver priced in USD

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). It rose further this week.

Gold-silver ratio

Here is the gold graph showing gold basis, co-basis and the price of the dollar in terms of gold price.

Gold basis, co-basis and the USD priced in milligrams of gold

The October contract shows an increase in scarcity (i.e., the co-basis) of gold, though it should be noted that the December co-basis increased less, and the gold co-basis continuous did not increase.

This week, the Monetary Metals Gold Fundamental Price rose another $10, from $1,366 to $1,376.

Now let’s look at silver.

Silver basis, co-basis and the USD priced in grams of silver

The December silver co-basis looks like the October gold co-basis (50bps lower in absolute magnitude than Oct gold, but higher than Dec gold), indicating rising scarcity. And the same occurs in the silver cobasis continuous.

The Monetary Metals Silver Fundamental Price rose 30 cents, from $15.78 to $16.08. This is the same level it held on August 13. So we are potentially seeing a fundamental price bottom, after a falling trend that began May 21 and lasted almost three months.

A Close Look at Gold- Silver Basis Ratio Signals

Now let’s turn to the gold-silver ratio. Here is a picture of the gold-silver basis ratios. It is the ratio of the gold basis to the silver basis, and the gold co-basis to the silver co-basis.

Gold-silver basis and co-basis ratios

Being ratios, they are telling us about the relationship between the gold fundamentals and the silver fundamentals. If the gold basis is rising relative to the silver basis, it means the abundance of gold is rising faster.

If the gold co-basis is falling relative to the silver co-basis, it means the scarcity of gold is falling faster. Or the abundance of silver is falling faster, and scarcity of silver is rising faster.

This chart is suggesting that now may be a good time to trade one’s gold for silver.

However, before you place that order, let’s zoom out and look at the three-year chart (also on our website).

Gold-silver basis ratios, long term

This is the best time to trade gold for silver in the last three months, alright. But if the basis ratio gets over 1.05 …read more

The Degrading Facts of a Fake Money Hole in the Head

 

Squishy Fact Finding Mission

Today we begin with the facts.  But not just the facts; the facts of the facts.  We want to better understand just what it is that is provoking today’s ludicrous world. To clarify, we are not after the cold hard facts; those with no opinions, like the commutative property of addition. Rather, we are after the warm squishy facts; the type of facts that depend on what the meaning of ‘is’ is.

Fact-related pleas… [PT]

The facts, as far as we can tell, are that we are presently living in a land of extreme confusion.  The genesis of this extreme confusion is today’s fake money system.  And the destructive effects of this fake money system have spread out like a virus into nearly all aspects of daily life.

Plain and simple, central bank fiat money creation, multiplied by commercial banks through fractional-reserve banking, propagates financial and economic chaos.  The experience of long periods of money supply expansion punctuated by abrupt, episodic contractions, has the effect of whipsawing the working stiff’s efforts to get ahead. This trifecta of offenses has debased the rewards of hard work, saving money, and paying one’s way.

Quite frankly, these facts are insulting. In particular, they are insulting for those running in the rat race for their family’s daily bread. These facts are also insulting for retirees, who worked for four decades only to have their life savings extracted by the depredations of the fake money system.

Early rat race conditioning [PT]

Short-Sighted Decisions

The facts are that on August 15, 1971, Tricky Dick Nixon stiffed the world unconditionally.  He defaulted on the Bretton Woods system, and terminated the agreement that allowed member nations to redeem their paper dollars, acquired through trade, for gold.  But that’s not the half of it…

The facts are that the seeds of Nixon’s default were sown years before with LBJ’s program of guns and butter.  Nixon merely brought the default to harvest.  Moreover, since Nixon’s default there has been near unrestricted growth of debt based money.

The facts are that over the last half-century the world has constructed a magnificent edifice of debt.  In fact, according to the Institute for International Finance, global debt in the first quarter of 2018 reached $247 trillion.  Moreover, the global debt-to-GDP ratio has exceeded 318 percent. These are facts.

Global debt is going bonkers. The vast growth in corporate debt since 2008 looks suspiciously like a replay of the Japanese credit expansion of the 1980s. Even the rationalization forwarded for buying into one of the most overvalued stock markets of all time by invoking the unstoppable power of financial engineering in the form of stock buybacks sounds oddly similar to the zaibatsu/keiretsu rationalization for buying Japanese stocks in the late 1980s. There was no happy end for those who believed it. [PT]

What’s more, the facts are that debt – public, corporate, and consumer – has exploded higher over the last decade during an era of extreme monetary intervention.  This extreme monetary intervention artificially suppressed interest rates …read more