Since March, five major banks have collapsed. Pressure is building up in the economic system while our government crosses the Rubicon with how they handle policy. Something's going to blow.
Have you ever considered that the stock market now references its value as increasing due to the investment money that enters the market daily, the product of retirement and pension funds?
Ya. Good comment. I’ve heard this referred to by Bill Fleckenstein as the investment “robot” and he supports your theory that this is the only thing holding the market up. Passive flows.
One would think that as unemployment increases these passive flows will slow, but who knows. A massive % of the investing population has only seen up and up. And the vast majority of those have seen that through the lens of the 6% and the company match that flows into their 401k every month.
And we cannot forget the FEDs Plunge Protection Team. Some days they come in hung over from the night before, but on those days when the market seems poised for the big limit down day they go to work and all is well again.
Maybe. But unemployment from the govt does not replace the 120k one was knocking down as a logistics Mgr at UPS. And it doesn’t replace the 10% passive flow coming out of the paycheck every month. Nor does it make the mortgage payment for the to big of a house you FOMOd into at 2.8% cause the rate was low. And now you can’t cover expenses on your wife’s salary. And your kid starts college in the fall.
Right now everything is in place except for the employment issue. Housing is going to roll over. Orders (ISM) on life support. Profits are mixed, but if you dig beneath the surface things are not good. The missing piece is employment. And it’s slowly getting there.
The last time unemployment bottomed in 2006. By late 2009 it was over 10%. Peaking a full year or more after both equities and housing fell off the cliff. Foreclosures peaked in 2010 and into 2011.
Everyone has memory holed what really happened from 2005-2012. Just like they have memory holed 1989-1996. And 1979-1983. 98% of the people who comment, even many of the ‘experts’ consistently get their fact wrong.
You can go all the way back to 1800 and look at every single cycle, once per generation give or take. And if you take the time you will find that it’s never different. Names and faces and flavors change. But in the end it always the same.
Could it be different this time? Sure. There are no certainties. Only probabilities. And those are extremely high that this time will be no different than all the other times.
But, but, but...as Axios says, the Boomers started turning 70 in 2016, 10,000 a day. I just read that 6k die/day as well, (do the math) but at some point the TINA in effect since 2009 and as the result of ZIRP unwound at a torrid pace will result in (probably/maybe) selling and going to cash. Ya think? (I try not to)
Find a neighborhood dealer who takes cash and puts it in his pocket wand sells at a reasonable price. APMEX et. al. report everything. This is especially important when you sell @ $10k . I'm an idiot and never do what I say. Just sayin'.
As always I appreciate QTR's input. I completely agree with you. I personally like the junior miners like $GDXJ and $SILJ. I think that they are poised to benefit the most. Specifically because there is a lot of M&A and consolidation that needs to happen in the sector. I just wrote an article about this on my substack.
There is real wisdom in this thread and in the main post. I would suggest that ETH is another place that could see upside due to the circumstances you've brilliantly set out. ETH has a strong use case and a solid development base, and under certain circumstance (i.e., staking) it pays a nice yield.
Trust in a currency is like trust in any relationship. Without it, you don't have a relationship. The blind guides running our economic house of cards have squandered that trust on an international basis like dementia Joe has abused the SPR for political points. In the very near future we are going to show up at the international market and the seller is going to say, "no thanks - I don't trust your weaponized, toxic fiat - gold only". At which point the term "and suddenly" will harken back to the days of Lehman.
I've invested through several gold price runups, and was frustrated each time that the miners' stock price languished - or even fell. It's a small club, and they buy each other out (merge or buy deposits), issue stock like crazy - diluting shareholders but making themselves wealthier by soaking up huge numbers of new issue for executive stock options (not, heaven forbid, for the employees actually doing the digging). And worst of all, at the first sign of a price run-up, they sell their production forward for several years, and you watch the price run up for those several while the miners' revenue stream (forward earnings) stays constant. I vowed 'never again'
Don't believe me? Bring up the 'forever chart' back to before 2007 on Fidelity or whoever you use and pull up the graph of GDX and GLD (the fund that holds actual gold in vaults).
It's an eye-opener!
Mark Twain: "A gold mine is a hole in the ground with a liar standing next to it."
The miners took a huge dump once the 2008 crash got going, the more speculative issues -90%. The carefully-crafted gold/miner portfolio that was supposed to make me really rich in the crash actually had the opposite effect. Thankfully in 2009-10 there was real estate to buy on the super cheap. Buy your miners AFTER the crash not before.
JPMorgan has spoken a lot so far. So I don't think that one word is historically valuable. Anyway, I agree with the writer that the dollar will collapse.
However, there is a lack of evidence as to why it is a rise in gold prices. What you're saying is based on the basis that gold increases when the dollar falls. However, the current status is stagflation, which is why the Fed is raising interest rates.
Raising interest rates slows down money. This lowers the price of all the basic items. So I don't think there's a direct link between the dollar value and the price of gold. Indirectly, rather, the opposite of what you're saying is that the dollar's depreciation and the gold price's depreciation are correlated.
As a result, the fall of gold and dollars, which were considered historically safe assets, is also expected.
During the 2008 financial crisis, quantitative easing and stocks fell and rose again. Again, interest rate hikes are slowing money down and inflation is coming down now.
Well yes, but...You used dollars to buy the gold. If you put the dollars into dollar denominated assets in almost any category since 1900, the investment would be worth far more than gold in Fiat. The Dow, housing, land (except in Baltimore), timber, oil, etc.
The inertia in this system is beyond the comprehension of most observers however according to the definition of a system, "a set of principles or procedures according to which something is done; an organized framework or method:" systems collapse when the principles are violated (fraud) or the procedures become subjective (politics). These aberrations manifest as instability and lead to systemic failure.
Spot on. We have normalized bank failures and are socializing losses through government “loans” that will never be paid back. Banks will continue to consolidate, leading to worse service (have you tried sending a wire transfer lately) and more government overreach into your financial life. This is the trend I see.
This is the most rational offering you've offered to date. Free of the usual Libertarian and ultra conservative talking points this financial/markets commentary is on target no matter one's politics. Both major political parties have been drinking from the same punch bowl, using during arguments for increasing the national debt, for a couple of lifetimes now. This writer believes you're on target. How close to the bullseye is yet to be seen.
You simultaneously covered both the attractive qualities that make gold an alternative solution (scarce; cost of production; track record), and exactly why it would fail at achieving individual wealth sovereignty (prone to confiscation; illiquid; third-party security). Very happy to hear that Larry Lepard has caught your ear on Bitcoin- which solves these issues while keeping the exact same commodity properties as gold (albeit in a digital space).
Also, if you were to sell your gold or miner equities in that sweet spot before nationalisation of miners- what exactly are you selling it for? Isn't the rationale for this exact price action in gold that the conventional currency is doomed / inflated / mistrusted ...
There are huge sums of money from overseas flooding into US assets right now out of fear keeping prices high as well. As Europe and Japan go into bankruptcy capital will flow in panic to the US like it did during WW2 as we are the best looking horse in the glue factory. It will drive the perceived, safest large US stocks quite a bit higher.
The US Treasury market is 10 x bigger than the stock market, where will all of that money go as we either default or print to infinity? Its going to go to the largest safest DOW blue chip stocks, the BRIC countries cannot even begin to handle these massive sums of money. Would you feel comfortable parking tens of trillions of dollars in China, India, Brazil and Russia?
But when the hyperinflation of the USD makes fuels too expensive for the power companies to buy, and the consumers of electricity, both homes and businesses of all kinds cannot afford to pay their light bills, what will happen to the banks? Don't the bank's computers run on electricity? How about the smart phones and card readers that are used to make purchases? EVERYTHING that either runs on or is dependent upon electricity in any way, will stop operating! ALL of the cryptos will go back to where they came from, which is nowhere! Without electricity to run the water pumps and processing plants, where will you get any water to drink? Where will you buy your food from? How will you get anywhere, if you have a place to go to? If you get stuck somewhere that is more than about 8 hours walking time away from your home, your chances of getting there will be almost nil!
Like I warned earlier in comments: "The board of Australia's Newcrest Mining has recommended the latest takeover offer of bigger sector player Newmont, which last month valued the target company at $19.5 billion." I haven't seen one in the last 30 years that resulted in higher stock value for investors down the pike. As the gold price rises, there will be more - when you dig through details, with huge payouts to acquired company's managements.
I very much agree with everything you say, but I would like to add one comment regarding Brent Johnson's "milkshake theory". I certainly don't want to speak for Brent, but from what I understand of his theory, he believes that the dollar will maintain its value against a basket of other currencies until it doesn't. In other words, there will come a point where people around the world no longer want the dollar. At that point. some of them will sell out of the dollar into a BRICS coin or into their own fiat currency or into gold, etc., but many of them will bring their dollars to the US and use them to buy anything and everything. The flood of euro-dollars added on top of the massive amount of dollars printed (and to be printed) by the Fed will lead to hyper-inflation in the US and the eventual collapse of the dollar. So, not only with the dollar depreciate against gold as you say, but it will depreciate against all other currencies at the same time.
There are 12 trillion dollars floating around outside the US. After many years, decades even of the demise of the dollar 88% of all transactions worldwide are settled in dollars. Truly the cleanest shirt in a pile of dirty ones. The Euro? Pure imagination! Yuan? Not convertible no rule of law in PRC. Same with Ruble. Yen? Going to 300 per dollar. Amirite?
Excellent podcast with Lepard and Schectman, I really enjoyed listening to it on a long drive today in Europe. Lepard is a good guy, as long as he doesn’t start about his Bitcoin. 😂 I’m thinking about doing a solo podcast (I don’t have any friends 😢) about this topic, because when it comes to cryptos and their practical application I’m afraid that Larry if full of BS. Hint: Russia and sanctions!
Have you ever considered that the stock market now references its value as increasing due to the investment money that enters the market daily, the product of retirement and pension funds?
Ya. Good comment. I’ve heard this referred to by Bill Fleckenstein as the investment “robot” and he supports your theory that this is the only thing holding the market up. Passive flows.
One would think that as unemployment increases these passive flows will slow, but who knows. A massive % of the investing population has only seen up and up. And the vast majority of those have seen that through the lens of the 6% and the company match that flows into their 401k every month.
And we cannot forget the FEDs Plunge Protection Team. Some days they come in hung over from the night before, but on those days when the market seems poised for the big limit down day they go to work and all is well again.
Maybe. But unemployment from the govt does not replace the 120k one was knocking down as a logistics Mgr at UPS. And it doesn’t replace the 10% passive flow coming out of the paycheck every month. Nor does it make the mortgage payment for the to big of a house you FOMOd into at 2.8% cause the rate was low. And now you can’t cover expenses on your wife’s salary. And your kid starts college in the fall.
Right now everything is in place except for the employment issue. Housing is going to roll over. Orders (ISM) on life support. Profits are mixed, but if you dig beneath the surface things are not good. The missing piece is employment. And it’s slowly getting there.
The last time unemployment bottomed in 2006. By late 2009 it was over 10%. Peaking a full year or more after both equities and housing fell off the cliff. Foreclosures peaked in 2010 and into 2011.
Everyone has memory holed what really happened from 2005-2012. Just like they have memory holed 1989-1996. And 1979-1983. 98% of the people who comment, even many of the ‘experts’ consistently get their fact wrong.
You can go all the way back to 1800 and look at every single cycle, once per generation give or take. And if you take the time you will find that it’s never different. Names and faces and flavors change. But in the end it always the same.
Could it be different this time? Sure. There are no certainties. Only probabilities. And those are extremely high that this time will be no different than all the other times.
Stonks. Get it right, lol...
But, but, but...as Axios says, the Boomers started turning 70 in 2016, 10,000 a day. I just read that 6k die/day as well, (do the math) but at some point the TINA in effect since 2009 and as the result of ZIRP unwound at a torrid pace will result in (probably/maybe) selling and going to cash. Ya think? (I try not to)
GOLD
Find a neighborhood dealer who takes cash and puts it in his pocket wand sells at a reasonable price. APMEX et. al. report everything. This is especially important when you sell @ $10k . I'm an idiot and never do what I say. Just sayin'.
Correct. But I believe that many people have bought into the gold traders' marketing ploy that it is an "investment."
It is no more of an investment than any one currency that goes up or down for various reasons.
Will it pay off if the dollar or other currency in which you are paid collapses? Of course. But that's just insurance, not an investment.
As always I appreciate QTR's input. I completely agree with you. I personally like the junior miners like $GDXJ and $SILJ. I think that they are poised to benefit the most. Specifically because there is a lot of M&A and consolidation that needs to happen in the sector. I just wrote an article about this on my substack.
There is real wisdom in this thread and in the main post. I would suggest that ETH is another place that could see upside due to the circumstances you've brilliantly set out. ETH has a strong use case and a solid development base, and under certain circumstance (i.e., staking) it pays a nice yield.
Excellent summary.
Trust in a currency is like trust in any relationship. Without it, you don't have a relationship. The blind guides running our economic house of cards have squandered that trust on an international basis like dementia Joe has abused the SPR for political points. In the very near future we are going to show up at the international market and the seller is going to say, "no thanks - I don't trust your weaponized, toxic fiat - gold only". At which point the term "and suddenly" will harken back to the days of Lehman.
Great points.
I've invested through several gold price runups, and was frustrated each time that the miners' stock price languished - or even fell. It's a small club, and they buy each other out (merge or buy deposits), issue stock like crazy - diluting shareholders but making themselves wealthier by soaking up huge numbers of new issue for executive stock options (not, heaven forbid, for the employees actually doing the digging). And worst of all, at the first sign of a price run-up, they sell their production forward for several years, and you watch the price run up for those several while the miners' revenue stream (forward earnings) stays constant. I vowed 'never again'
Don't believe me? Bring up the 'forever chart' back to before 2007 on Fidelity or whoever you use and pull up the graph of GDX and GLD (the fund that holds actual gold in vaults).
It's an eye-opener!
Mark Twain: "A gold mine is a hole in the ground with a liar standing next to it."
The miners took a huge dump once the 2008 crash got going, the more speculative issues -90%. The carefully-crafted gold/miner portfolio that was supposed to make me really rich in the crash actually had the opposite effect. Thankfully in 2009-10 there was real estate to buy on the super cheap. Buy your miners AFTER the crash not before.
There is no reason to buy gold, except that it has been spotlighted as a safe asset in the past.
Bitcoin also seems to have gone up because of Fed's emergency loans, and I think it's going to go down again soon.
JPMorgan has spoken a lot so far. So I don't think that one word is historically valuable. Anyway, I agree with the writer that the dollar will collapse.
However, there is a lack of evidence as to why it is a rise in gold prices. What you're saying is based on the basis that gold increases when the dollar falls. However, the current status is stagflation, which is why the Fed is raising interest rates.
Raising interest rates slows down money. This lowers the price of all the basic items. So I don't think there's a direct link between the dollar value and the price of gold. Indirectly, rather, the opposite of what you're saying is that the dollar's depreciation and the gold price's depreciation are correlated.
As a result, the fall of gold and dollars, which were considered historically safe assets, is also expected.
Why is the current price of gold falling?
During the 2008 financial crisis, quantitative easing and stocks fell and rose again. Again, interest rate hikes are slowing money down and inflation is coming down now.
Gold is equal to dollars. Blind faith in something is likely to cause the same failure as now.
Well yes, but...You used dollars to buy the gold. If you put the dollars into dollar denominated assets in almost any category since 1900, the investment would be worth far more than gold in Fiat. The Dow, housing, land (except in Baltimore), timber, oil, etc.
The inertia in this system is beyond the comprehension of most observers however according to the definition of a system, "a set of principles or procedures according to which something is done; an organized framework or method:" systems collapse when the principles are violated (fraud) or the procedures become subjective (politics). These aberrations manifest as instability and lead to systemic failure.
Spot on. We have normalized bank failures and are socializing losses through government “loans” that will never be paid back. Banks will continue to consolidate, leading to worse service (have you tried sending a wire transfer lately) and more government overreach into your financial life. This is the trend I see.
The big banks are essentially an extension of government. They are so hyper-regulated they are scared of their own shadow.
When I withdraw more than $2k in cash, I feel like the bank teller is a government employee readying her report for the Agency That Watches.
This is the most rational offering you've offered to date. Free of the usual Libertarian and ultra conservative talking points this financial/markets commentary is on target no matter one's politics. Both major political parties have been drinking from the same punch bowl, using during arguments for increasing the national debt, for a couple of lifetimes now. This writer believes you're on target. How close to the bullseye is yet to be seen.
I'm curious...what do you consider to be "ultra conservative?"
You simultaneously covered both the attractive qualities that make gold an alternative solution (scarce; cost of production; track record), and exactly why it would fail at achieving individual wealth sovereignty (prone to confiscation; illiquid; third-party security). Very happy to hear that Larry Lepard has caught your ear on Bitcoin- which solves these issues while keeping the exact same commodity properties as gold (albeit in a digital space).
Also, if you were to sell your gold or miner equities in that sweet spot before nationalisation of miners- what exactly are you selling it for? Isn't the rationale for this exact price action in gold that the conventional currency is doomed / inflated / mistrusted ...
There are huge sums of money from overseas flooding into US assets right now out of fear keeping prices high as well. As Europe and Japan go into bankruptcy capital will flow in panic to the US like it did during WW2 as we are the best looking horse in the glue factory. It will drive the perceived, safest large US stocks quite a bit higher.
The US Treasury market is 10 x bigger than the stock market, where will all of that money go as we either default or print to infinity? Its going to go to the largest safest DOW blue chip stocks, the BRIC countries cannot even begin to handle these massive sums of money. Would you feel comfortable parking tens of trillions of dollars in China, India, Brazil and Russia?
But when the hyperinflation of the USD makes fuels too expensive for the power companies to buy, and the consumers of electricity, both homes and businesses of all kinds cannot afford to pay their light bills, what will happen to the banks? Don't the bank's computers run on electricity? How about the smart phones and card readers that are used to make purchases? EVERYTHING that either runs on or is dependent upon electricity in any way, will stop operating! ALL of the cryptos will go back to where they came from, which is nowhere! Without electricity to run the water pumps and processing plants, where will you get any water to drink? Where will you buy your food from? How will you get anywhere, if you have a place to go to? If you get stuck somewhere that is more than about 8 hours walking time away from your home, your chances of getting there will be almost nil!
How can the electricity issue be solved? Who will solve it? I worked for SoCal Edison for 15 years, so I know a few things about the subject.
Like I warned earlier in comments: "The board of Australia's Newcrest Mining has recommended the latest takeover offer of bigger sector player Newmont, which last month valued the target company at $19.5 billion." I haven't seen one in the last 30 years that resulted in higher stock value for investors down the pike. As the gold price rises, there will be more - when you dig through details, with huge payouts to acquired company's managements.
I very much agree with everything you say, but I would like to add one comment regarding Brent Johnson's "milkshake theory". I certainly don't want to speak for Brent, but from what I understand of his theory, he believes that the dollar will maintain its value against a basket of other currencies until it doesn't. In other words, there will come a point where people around the world no longer want the dollar. At that point. some of them will sell out of the dollar into a BRICS coin or into their own fiat currency or into gold, etc., but many of them will bring their dollars to the US and use them to buy anything and everything. The flood of euro-dollars added on top of the massive amount of dollars printed (and to be printed) by the Fed will lead to hyper-inflation in the US and the eventual collapse of the dollar. So, not only with the dollar depreciate against gold as you say, but it will depreciate against all other currencies at the same time.
There are 12 trillion dollars floating around outside the US. After many years, decades even of the demise of the dollar 88% of all transactions worldwide are settled in dollars. Truly the cleanest shirt in a pile of dirty ones. The Euro? Pure imagination! Yuan? Not convertible no rule of law in PRC. Same with Ruble. Yen? Going to 300 per dollar. Amirite?
Excellent podcast with Lepard and Schectman, I really enjoyed listening to it on a long drive today in Europe. Lepard is a good guy, as long as he doesn’t start about his Bitcoin. 😂 I’m thinking about doing a solo podcast (I don’t have any friends 😢) about this topic, because when it comes to cryptos and their practical application I’m afraid that Larry if full of BS. Hint: Russia and sanctions!