Author Archives: Opinion

Where are we in the market cycle?

TheFelderReport/Jesse Felder/10-15-2021

chart showing cycle of emotions from optimism to euphora to despondence and back eventually to optimism again
Click to enlarge

“Animal spirits have clearly sustained a damaging blow in recent months; whether that blow proves fatal, though, will be revealed in time. The fact that interest in day trading is plummeting stands in direct contrast to the fact that interest in getting help for stock market gambling addiction is soaring.”

USAGOLD note: By associating stock market investing in some quarters with gambling addiction, Felder goes where few in the mainstream media dare tread. He equates the current mania with the 2000 tech bubble and reminds his readers that some of the most highly traded stocks lost 90% of their value. He believes that we are now well past the “‘euphoria’ stage [of the market cycle, see above] into the ‘anxiety’ stage, headed for the ‘denial’ and ‘fear’ stages.”

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Transitory leads to permanent mistakes

Blain’s Morning Porridge/Bill Blain/10-19-2021

photgraph of Fed chairman Powell being interviewed for 60 Minutes

“Policy mistakes are a massive market risk. Don’t believe Central Banks and Politicians are omnipotent. The issue is defining what would be a policy mistake and what is a POLICY MISTAKE.”

USAGOLD note: Blain believes that central banks have “tripped themselves.” By selling the public on the idea inflation is transitory, they have made it permanent. Perhaps tripping themselves is not the correct description. Better said, they have tricked themselves into believing inflation is transitory, and that, in the end, could undermine the one thing central banks really rely upon to carry out monetary policy – the good faith of the public.

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Current energy crisis is the ‘revenge of the old economy’

MarketWatch/Mark DeCambre

Repost from 10-18-2021

graphic image of 1970s reducs coming soon to an economy near you“‘It’s almost like everything that could go wrong, did go wrong,’ Helima Croft, global head of commodity strategy at RBC, told MarketWatch in a phone interview. ‘It’s a multifaceted story,” said the energy specialist and former senior economic analyst at the Central Intelligence Agency.”

USAGOLD note: An overview of the factors driving the current energy crisis reminiscent of the 1970s. Goldman’s commodity research head Jeff Currie calls it “revenge of the old economy.”

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Gross says intermediate and long term bonds are in the ‘trash receptacle’

William H. Gross

Repost from 9-7-2021

image of bear peaking from behind a tree“Cash has been trash for a long time but there are now new contenders for the investment garbage can. Intermediate to long-term bond funds are in that trash receptacle for sure, but will stocks follow? Earnings growth had better be double-digit-plus or else they could join the garbage truck.”

USAGOLD note: Bill Gross, the investment guru who built Pimco, is bearish on the bond market. He thinks things are likely to go south in a hurry once the Fed takes its foot off the quantitative easing accelerator – a prospect he sees as happening “sometime in mid-2022.” He asks how will markets will absorb the 60% of net Treasury Department issuance now being absorbed by the Fed. That is a question worth pondering ……

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Silver through the ages

Visual Capitalist/BlackRockSilver

Repost from 9-7-2021

photograph of a silver statue from ancient times“Silver is one of the most versatile metals on Earth, with a unique combination of uses both as a precious and industrial metal. Today, silver’s uses span many modern technologies, including solar panels, electric vehicles, and 5G devices. However, the uses of silver in currency, medicine, art, and jewelry have helped advance civilization, trade, and technology for thousands of years.”

USAGOLD note: A quick look at silver’s importance in the wider world of science and technology – a foundational visualization for newcomers to the silver investment. (We are getting quite a few first-time silver buyers visiting the site and taking advantage of our online ordering venue.)

 

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The funding challenges ahead

Seeking Alpha/Alasdair Macleod

Repost from 10-15-2021

image showing the blur of high speed money printing press running at full tilt“Funding any term debt in a rising interest rate environment is going to be considerably more difficult than when the underlying trend is for falling yields. There is the additional risk that foreigners overloaded with dollars and dollar-denominated financial assets are more likely to become sellers. Not only are foreigners overloaded with dollars and financial assets, but with bond yields rising and stock prices falling, foreigners for whom over-exposure to dollars is a speculative position going wrong will undoubtedly liquidate dollar assets and dollars. If not buying their own national currencies, they will stockpile commodities and energy for production, and precious metals as currency hedges instead.” [Emphasis added.]

USAGOLD note: Macleod explores the complex machinations behind massive money market mobilizations – in progress even as you read this post. The financial markets, he says, are having difficulty absorbing the massive stimulus created by the federal government and Federal Reserve. Eventually, in his opinion, as global entities and individuals gain a better grasp of the problem, they will move to preserve their purchasing power. He sees precious metals, as noted above, among the beneficiaries.

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Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load

MoneyWeek/Dominic Frisby

Repost from 10-15-2021

Photo stacks of silver bullion coins
“I did something I haven’t done in what feels like a long time yesterday: I bought silver. Quite a lot of it. You know my views on silver: it might have bucket loads of potential – almost more than any other metal – but it never delivers.”

USAGOLD note: Welcome to the logically illogical world of Dominic Frisby ……

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The Roman Empire reminds us that confidence in the currency is crucial

Real Clear Markets/Rob Smith and George Maher/10-18-2021

“If someone is worried that the $1,000 they have stashed away in an account for a rainy day will not be worth as much as in three months, they will go out and spend that money. Increased spending will drive prices up further making existing savings worth less. Just as in the Weimar Republic or Venezuela today – despite the latter’s efforts to improve the situation by introducing official cryptocurrencies – money will become worthless.”

USAGOLD note: When citizen-investors lose faith in money, we will add, they often turn to gold. They did so in ancient Rome during the centuries-long debasement of the silver denarius, and they are doing it now to hedge the debasement of paper currencies.


Related please see
NEWS & VIEWS SPECIAL REPORT
March 2020

Hedging the decline and fall of a currency

The baseline case for gold hasn’t changed much in 1700 years

“We sometimes forget that inflation is a process rather than an event. One of the better-known examples of that axiom is the nearly two centuries-long debasement of Rome’s silver denarius – an inflationary episode Jack Whyte, a writer of historical fiction, skillfully addresses in his latest novel, The Burning Stone.” [MORE]

graphic image showing decline of the denarius over 200 y ears

Graphic illustration courtesy of VisualCapitalist.com • • • Click to enlarge

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Stock markets are now addicted to stimulus – and central banks have no exit plan, Guggenheim’s Scott Minerd says

Markets Insider/Shalini Nagarajan/10-19-2021

“Minerd said central banks are acting in a way they have never done before. ‘The role of the central bank was to provide marginal liquidity at the times of crisis, and then to withdraw it after the economy started to stabilize and come back,’ Minerd said. ‘Central banks are now running the markets.'”

USAGOLD  note: If one were to accept Minerd’s conclusions, and there is plenty of evidence that his assumptions are correct, the obvious questions are: Where does all of this lead us? Are we on a permanent high or heading blindfolded for the gangplank?

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Carl Icahn says the market over the long run will certainly ‘hit the wall’ because of money printing

CNBC/Yun Li/10-18-2021

cartoon image of stock market bear watching ticker“Longtime activist investor Carl Icahn said Monday that the U.S. markets could see major challenges over the long term in the face of excessive money supply and rising inflation.”

USAGOLD note: Not the prognosis Wall Street wants to hear from one of its most respected practitioners …… Icahn shied away from making a call on the timing.

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Inflation isn’t transitory – but what does that mean for markets?

MoneyWeek/John Stepek/10-14-2021

“As John Authers puts it on Bloomberg, ‘there’s no longer any sensible way to dismiss this inflation episode as merely transitory.’ Even if you get rid of ‘volatile’ stuff like energy, food, housing and used vehicles (yes, I imagine you too may be wondering by this point what’s left), inflation is still above 3%, which is its highest level in 28 years, says Authers.”

USAGOLD note: Stepek offers a comprehensive overview of the inflation situation and what it might portend that makes its way eventually to endorsing gold as a hedge. “[T]he reason that gold tends to do well in inflationary times,” he says, “is not because of inflation as such, it’s because when inflation goes up, ‘real’ interest rates (that is, interest rates adjusted for inflation) go down. Gold historically does well when real interest rates are falling.”

overlay line chart showing the real rate of return and the gold price 2017 to present
Chart courtesy of Merk Investments • • • Click to enlarge

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Resources are in corrective mode, what will it take for the gold price to move

Gold-Eagle/Adrian Day

Repost from 10-14-2021

graphic image of lines in the sand pointing higher“The big question on gold investors’ minds, for good reason, is why gold is not higher given the unprecedented money printing and rising inflation. The second question is when will it change? To some extent, gold has simply been in a long consolidation after the extraordinary move early last year, when gold jumped over 30% from its end-March low to early-August high. That kind of move – in four months – is extraordinary for an asset that is intended as a hedge and an insurance. Gold is not supposed to do that. Bitcoin…Tesla…perhaps, but not gold!”

USAGOLD note: As of yesterday, we finally got some movement in the gold price in response to the increasing inflation rate. There is a growing sense that inflation might be more persistent than previously believed. “The longer gold meanders in its current trading range,” says long-time market analyst Adrian Day, “the faster and stronger the eventual move will be.”

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The 5000-year view of rates and the economic consequences

Seeking Alpha/Lance Roberts

Repost from 10-14-2021

artist rendering of a man chasing a shooting star“BofA wants you to know that ‘Interest rates haven’t been this low in 5,000-years. ‘That’s right, 5000 years. ‘In the next 5,000 years, rates will rise, but no fear on Wall Street this happens anytime soon,’ said David Jones, director of global investment strategy at Bank of America. This should not come as a shock to anyone who has been watching, given that the Fed’s balance sheet is now an astonishing $8.5 trillion and that fiscal spending has caused the U.S. debt to balloon to over $28 trillion (For reference, the U.S. GDP is $22 trillion). All of this really means that the Fed and the U.S are in a tough spot. They need a lot of growth to dig out from mountains of debt, but they cannot afford for rates to move too high or debt service will become an issue. “

USAGOLD note: Some rather startling revelations in this article …… Roberts seems to believe that the Fed has no choice but to continue supporting the bond market. As a result, he is long bonds and will “continue to buy more whenever someone claims the ‘Great Bond Bull Market Is Dead.'” Is an aggressive, “all-in” approach a logical strategy, though, at a time when the real return on Treasuries is deeply in the negative? Already, we have considerable leakage of monetary inflation to price inflation which, in turn, is likely to push real yields even lower. So where does this all end and what will it mean for bond values along the way? Just askin’ ……

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Get rich with crypto, stay rich with gold

Atlas Pulse/Charlie Morris

Repost from 9-3-2021

graphic image of gold bar chart with line chart overlays

“I can’t help but think the next decade will belong to gold. After all, the S&P 500 trades at a lofty valuation by historic standards, while gold doesn’t. The main reason I have confidence that gold will win the 2020s is that this almighty asset bubble all around us will implode, and the crowded trades will disappoint the most. Gold is far from being crowded.”

USAGOLD note: Though Charlie Morris’ thought processes are held in high regard, we continue to counsel caution when it comes to cryptocurrencies. Many harbor a lingering suspicion that crypto has as much chance of rapid decline as rapid advance. In the end, though, we all need to find our own way on the matter. As for the second half of Morris’ mantra (as expressed in the title), there is a great deal of merit and historical support for preserving one’s gains, wherever they might occur, through conversion to gold. For those who have made significant profits in the crypto arena, perhaps preserving some of those gains is an option worth considering. After all, the crypto space has tracked the S&P more closely than it has gold. Morris’ latest is well worth the time spent no matter where you come down on the crypto controversy.

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Swiss stock up on gold – OpEd

Eurasia Review/Claudio Grass

Repost from 9-3-2021

photo of pile of Swiss 20 franc gold coins

“Over the last couple of months, it has become clear from conversations with friends and partners from the gold industry that there is a marked increase in retail demand for physical gold from Swiss investors. The most interesting thing about this development is that the bulk of new orders is coming from smaller accounts, showing that it’s ordinary savers and citizens that are driving this trend, rather than professionals, speculators or larger investors.”

USAGOLD note: The United States is experiencing a similar surge in demand from private investors who tend to gravitate towards coin and bullion acquisitions. The big institutions and funds favor gold ETF acquisitions for ease of holding and liquidating very large positions. “It is essential,” says Grass, “to think for oneself and to plan for the future, regardless of what the majority may think at the time or what any centralized authority might promise.”

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Beyond Bretton Woods: When it comes to money, we need a common discipline

The New York Sun/Jacques de Laorsiere

Repost from 10-13-2021

photo of Jackques La Rosierre, former IMF managing director, president of the bank of France“So the world at large welcomed the collapse of Bretton Woods as a ‘liberation.’ In reality, though, the world was not free. It became more and more dependent on financial markets which are now the financiers and decision makers of our system.”

USAGOLD note: Important and surprising insights on the history of the current monetary system and where we stand now from the former managing director of the International Monetary Fund and president of the Bank of France ……

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Silver to the stratosphere

Singapore Bullion Market Association/Emil Kalinowsky/Fall 2021

graphic representation of an angry silver bull“I’m ‘crazy’ about silver’s bullish outlook for the rest of this decade, and I explain why in this article (i.e., green energy, inflation). I could have styled this article in a matter-of-fact way, but I’ve been reading too much science fiction while pining for international travel to resume once again. And so I wondered, What would it be like sitting next to someone? And what if they wouldn’t stop talking? On an interstellar trip? What would I say? Hopefully the content is educational and entertaining. See you at the spaceport.”

USAGOLD note: An entertaining review of silver’s longer-term fundamentals for those looking to check that box on their investment To-Do List.

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2022 is shaping up to be a bad year for the stock market as investors grapple with these 3 ‘shocks,’ BofA says

MarketsInsider/Matthew Fox/10-17-2021

graphic image of a seated bear gazing quietly back at the viewer“‘Bear case is pandemic ending and so is $30 trillion of emergency policy stimulus,’ BofA said, referencing the liquidity provided by global central banks since the pandemic began.”

USAGOLD note: We’re pivoting from pro-growth to anti-inflation, says BofA and that will send shocks rippling through financial markets in the coming year. More at the link ……

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El-Erian says investors should prepare for bigger market swings

Bloomberg/Tony Czuczka/10-17-2021

cartoon showing a boat riding the rising tide“If I were an investor, I would recognize that I’m riding a huge liquidity wave thanks to the Fed, but I would remember that waves tend to break at some point, so I would be very attentive.” – Mohammed El-Erian, Queens College Cambridge

USAGOLD note: Quite a few heavyweight investors and analysts have weighed in of late on the danger of a cresting wave in the stock market. El-Erian is one of the more vocal in the group. He warns that inflation is likely to remain elevated for at least another year.

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Contagion

Credit Bubble Bulletin/Doug Noland

Repost from 10-12-2021

“Beijing waited much too long to begin reining in its Bubble. Pandemic stimulus stoked already perilous excess. Now Chinese officials face a terrible predicament and onerous decisions. At this point, large liquidity injections could further stoke inflationary pressures, while risking a disorderly decline in the Renminbi. The Fed waited much too long to begin reducing historic monetary stimulus. Pandemic stimulus stoked already perilous excess. Federal Reserve officials could soon face quite a predicament and difficult decisions.”

graphic image of a red dominoe starting a chain reaction“Was the jobs report good enough for a November taper? That just doesn’t seem the crucial question today. What does the world look like a month from now? Has China’s unfolding crisis by then enveloped the ‘Core’? How powerful are de-risking/deleveraging dynamics in November, globally and in U.S. markets? My thoughts harken back to the March 2020 dislocation in bond (and equities) ETFs. Since then, Fed pandemic measures have spurred additional gargantuan bond fund inflows (at historically low bond yields), while simultaneously unleashing powerful inflationary dynamics. Quite a combustible mix. Clearly, the Fed is not about to ‘slam on the brakes.’ Might the bond market?”

USAGOLD note:  In this lengthy piece, Noland chronicles the unfolding debt crisis starting with China and Evergrande and working his way in careful detail to the contagion, as he now labels it, beginning to “wash up on our shores.” Noland conveys a sense that things could spin out of control, launching a crisis that could once again catch the bulk of investors by surprise. Secretary of State Blinken directed comments to China last week that serve as a wake-up call for western financial markets as well. He said that China should act “responsibly and deal with the challenges” imposed by the ongoing meltdown in its real estate and credit markets. What the country does economically, he said, “is going to have profound ramifications, profound effects, on literally the entire world because all of our economies are so intertwined.” In short, Blinken, too, is raising the specter of a contagion.

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