“Whenever you bought into the market when it was selling at the present multiple of, say, 22 times or higher, you’ve never really made any serious money one year, three years, five years out. I think that’s what we’re looking at.” – Leon Cooperman
USAGOLD note: As the late, great Richard Russell (Dow Theory Letter) used to say: “Trees don’t grow to the sky, and liquidity doesn’t expand forever.” Here’s another bit of wisdom from Russell: “[i]f all goes wrong, gold is real, time-tested wealth. Gold stands alone as money outside the central bank system. If the Federal Reserve was abolished tomorrow and the U.S. was to renege on all its debt — gold would still be money.” (Kitco,3/10/2006) That was roughly 18 months before the first signs of the oncoming credit breakdown emerged. The gold price was $540 per ounce.
Image: Dutch 10 guilder “Queen” gold coin
“Seth Klarman, the founder of hedge fund Baupost Group, has told clients central bank policies and government stimulus have convinced investors that risk ‘has simply vanished’, leaving the market unable to fulfil its role as a price discovery mechanism. The private letter to investors in his fund, seen by the Financial Times, amounts to a damning critique of market behaviour by one of the world’s foremost value investors.”
USAGOLD note: Nobody will be able to claim, as was the case in 2008, that they did not see it coming. We have had plenty of warning and it has not been across the fence in the backyard alone. It comes from many of the most respected minds in the financial game, including Baupost’s Seth Klarman. In 2008 during a visit to the London School of Economics Queen Elizabeth famously asked a question that was on the minds of many: “Why did nobody see it coming?” She asked the question again during a visit to the Bank of England’s gold room in 2010. Below Ed Stein captured the spirit of that moment in a 2010 cartoon:
Gold in six easy lessons
1. Don’t buy it because you need to make money; buy it to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
6. Don’t forget the golden rule: Those who own the gold make the rules!
“America’s economy is operating under the influence of performance-enhancing steroids thanks to unprecedented monetary intervention.”
USAGOLD note: Round and round we go, where it ends nobody knows …… This is a good synopsis of where we are at this point in time.
Repost from 1-18-2021
“China is a market of active retail investors with a strong affinity to gold. And there is a sizable pool of potential new investors. Our unique insights reveal opportunities for the gold investment industry to reach this audience, grab their interest and expand the market.”
USAGOLD note: This survey is aimed at the gold industry itself as an encouragement to pursue latent gold demand in China, but it carries implications for current and would be Western investors as well. Tapping this huge market could lead to stronger demand, higher prices. “24% of retail investors,” says the WGC, “have never invested in gold but say they would now consider doing so.”
Graphic image courtesy of World Gold Council
Repost from 9-9-2020
“The fundamental problems, he says, are a dark triad of social maladies: a bloated elite class, with too few elite jobs to go around; declining living standards among the general population; and a government that can’t cover its financial positions. His models, which track these factors in other societies across history, are too complicated to explain in a nontechnical publication. But they’ve succeeded in impressing writers for nontechnical publications, and have won him comparisons to other authors of ‘megahistories,’ such as Jared Diamond and Yuval Noah Harari.”
USAGOLD note: This lengthy article profiles the thinking of Peter Turchin, an historian who believes history is predictable through the application of mathematical models. He says we are guaranteed five hellish years but more likely a decade of bad news. ‘That sickening crunch you now hear –” writes Wood, “steel twisting, rivets popping – is the sound of the ship hitting the iceberg.” All in all, not a very encouraging read ……
Repost from 12-3-2020
“Fast forward four months and commodities are surging. Goldman Sachs, Bank of America Corp. and Ospraie Management LLC have all called for a bull market as stimulus kicks in and vaccines help the world emerge from the coronavirus crisis. JPMorgan Chase & Co. has also joined the chorus, advising clients to boost their exposure to materials while reducing investments in bonds.””
USAGOLD note: As we have mentioned previously, silver, which lays claim to seats at both the commodity and monetary metals’ tables in the investment realm, will be a likely beneficiary if the rally continues. Gold will not be far behind. What is worth noting is the spreading mantra among mainstream analysts to sell bonds and buy commodities……
Repost from 1-17-2021
Thinking in big numbers
Big numbers do not register with most people. Thinking in millions is difficult. Billions are a major challenge, trillions nearly impossible. The reason for this, says Wall Street Journal columnist Jo Craven McGinty, is that big numbers are usually offered in isolation without the benefit of comparison – numbers without an appropriate anchor, so to speak. People need some sort of measuring stick to give the numbers meaning. She recently offered some interesting tactics for making big numbers meaningful. Here is one of them:
“[T]hink of it [big numbers],” she says, “in terms of time, like Richard Panek, a professor at Goddard College in Vermont and a Guggenheim fellow in science writing. There are 1 million seconds in roughly 11½ days. There are 1 billion seconds in around 31 years. And there are 1 trillion seconds in around 31,000 years.”
Now the new Secretary of the Treasury is telling us that we need to ‘act big’ and worry about the $27,752,835,868,445.35 (as of January 19, 2021) national debt later.
“That’s the problem for Europe. Great idea… but not everyone is fully bought into the programme yet. The more I observe and think about it, I suspect the likely outcome for Europe is not a sudden collapse of the Euro, or a spectacular national default brought about by the mechanisms of the Euro and debt… but more likely nations just losing the will to bother anymore.. and that rather than move forward it slowly stagnates. Rather than the EU and Euro exploding in a catastrophic supernova, I suspect its more likely to bore us to death in a welter of regulations, bailout programmes and superstate controls… “
USAGOLD note: Looking to find a good place to park money, Blain offers a detailed look at what is going on in Europe these days touching on all the major players. What he sees is not a lot more promising than what is going on in the United States.
Repost from 1-17-2021
(USAGOLD – 1/22/2021) – Gold gave up much of its gains over the past week this morning as commodities in general sold off and recession thinking regained the upper hand in financial markets. The yellow metal is down $31 at $1841. Silver is down 80¢ at $25.21. Matterhorn Asset Management’s Matthew Piepenburg sees opportunity in the precious metals’ market sell-off of the past few weeks.
“Although it’s normal to expect a correction phase within a larger bull market for both silver and gold,” he explains in an article posted at King World News, “the price retracements of late signal a buy opportunity for precious metal investors, not grounds for a bearish panic—unless you’re a gold trader blind to technical buy/sell signals. The broader bull market in gold today is much different than the bull markets of 1971 to 1978, or 2010, which saw very little interest/demand from western buyers. Demand going forward will in fact be driven more by western than eastern buyers, though current investors can’t ignore declining demand from China, Russia or India going forward. That said, the gold-silver dance described above will be very different going forward as both assets rally in synch rather than two steps up, one step back.”
Chart of the Day
Sources: St. Louis Federal Reserve [FRED], ICE Benchmark Administrtation [IBA]
USAGOLD note: Most of our readers know that gold had a very good year in 2020 but few know that it posted its highest average annual price ever – $1770 per ounce.
“But that doesn’t mean the U.S. central bank won’t face pressure as it looks to navigate its way through a new administration. Challenges ahead include the coronavirus pandemic, as well as demands for a more inclusive economy and a stronger approach toward social issues, such as racial equality and climate change.”
USAGOLD note: Not to mention keeping the printing press running at full tilt to cover the costs of all that……Some interesting new dynamics come into play as Biden moves into the White House, Powell remains at the Fed and former Fed chair Yellen moves to Treasury. The upshot, though, is that the new act taking the stage has a far more ‘progressive’ agenda than the one that has just exited. And the one that just departed was not exactly conservative in its approach to economics.
“Heading into what looks like a monetary-policy gap year, with neither bond purchases nor benchmark interest rates expected to change in 2021, the Fed is far more worried about the risk of long-term scars — which could develop from a slow recovery — than about the risk of overheating the economy.”
USAGOLD note: History shows that once the inflation genie is out of the bottle, it is very difficult to get it back in.
“Ironically, the beggar-thy-neighbor implications of competitive devaluations will almost certainly incite a response from countries who may not originally even have needed to resort to currency debasement in the first place, raising the potential for full blown currency war. How should one position for such an endgame? As is probably evident, any nominal instrument will be devalued in real terms, so the solution is to hold an asset that maintains its real value – an asset that cannot be printed.”
“Forget about the amount being borrowed, Yellen, a former Federal Reserve chair, told members of the Senate Finance Committee. Focus instead on the interest rate being paid and the returns it will generate, an approach that argues the country’s future economic potential can support more borrowing today and makes the roughly $26.9 trillion in U.S. IOUs seem less formidable.”
USAGOLD note: Famous last words …… It would be regrettable for investors to forget that the debt – however large – will need to be repaid (with interest), inflated away, or repudiated. One of those options is unlikely. The other two suggest a practical need for portfolio diversification.
Additions to the U.S. National Debt
(Quarterly through Q3-2020, in millions of dollars)
Sources: St. Louis Federal Reserve, U.S. Department of Treasury, Fiscal Service
Degussa Market Report/Thorsten Polleit/1-14-2021
“It is against this backdrop that we remain bullish on precious metals. We believe (and of course acknowledge the uncertainty that surrounds such a statement) that the price of gold could reach 2,450 USD/oz towards the end of 2021 (based on current prices, a 32% gain); the silver price could go up to 47 USD/oz (+87%); the price of platinum may increase to 1,280 USD/oz (+17%), and the price of palladium may well hit 2,710 USD/oz (+14%).”
USAGOLD note: That backdrop is radically aggressive monetary policies across the globe to combat the economic ill-effects of the coronavirus. We cited this report in yesterday’s DMR and repost it here for those who may have missed it.
What you need to know before
you launch your gold and silver IRA
“A customer of mine who is 55 years old recently asked if it was not too late for him to get into precious metals. The answer is no – it is not too late to invest in gold and make a profit at any age. Quite the contrary, with the market showing the early signs of a correction, it is, in my humble opinion, a perfect time to invest in precious metals.” – Oliver Garret, Forbes
Time to diversify?
As the ultimate asset preservation vehicles, gold and silver are important retirement investments, especially in these precarious times. Find safe harbor –– and some retirement peace of mind.
“There is little doubt as to what is fueling this insanity. In 2020, there was nearly $5 Trillion of fiscal stimulus pumped into the United States economy. There was an additional $3.25 Trillion of monetary stimulus and zero interest rate policy added as well. President elect Biden is seeking an additional $1.9 Trillion in fiscal stimulus in the coming month, and the Federal Reserve will add another $1.4 Trillion in monetary stimulus this year.”
USAGOLD note: O’Rourke doe not pull punches in this review of what is driving financial markets – “a $21 trillion economy,” he says, “digests $10 trillion of stimulus.”
Repost from 1-16-2021
“The damage from COVID-19 is concentrated among already challenged groups. The K-shaped recovery remains highly uneven, with certain sectors and groups experiencing substantial hardship.”
USAGOLD note: The timebomb ticking underneath the U.S. economy …… Brainard, like the rest of the Fed, is looking to the federal government to keep a lid on the problem.
Repost from 1-16-2021