Author Archives: Opinion
“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:
“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
“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
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.
“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
“You will not hear about this in the mainstream financial press: there’s a gold rush happening at the moment, and it’s getting bigger. It makes a strong case for much higher gold prices. Understand that gold prices move based on demand and supply. If demand is increasing, price tends to move higher.”
USAGOLD note: We referenced this newsletter in yesterday’s DMR and repost it now for those who may have missed it.
Repost from 11-4-2020
“We want you on board the gold train as it pulls out of the station. It’s also important to understand why you’re on board. Gold is — and always has been — the world’s favorite safe haven. That is, during times of uncertainty, insecurity, economic or political upset, war, devaluations and more, gold has always come out as #1. And this impressive track record goes back more than 5,000 years.”
USAGOLD note: This overview from the Aden Sisters – the widely followed chart analysts – is an excellent primer for those new to the gold market, i.e., why it has always made portfolio sense and why it makes sense now and for the future – “the best investment in the world today.”
Repost from 8-16-2020
“They move around prices in the short run, but long-term they will not affect where gold & silver are heading (decidedly higher). And when they drive prices too low, that provides opportunity. When they’re instrumental in pushing gold to overbought – that’s an opportunity tooCan be frustrating to see gold (& silver) rally all night, only to be bashed down $20+ as soon as NY futures trading opens. These levered traders/computers push price around on correlations (today it’s rising bond yields). But remember, it cuts both ways. They also push prices up.”
USAGOLD note: What goes around, comes around ……
Repost from 1-15-2021
“‘Know what you are investing in’ is a steadfast, uncontroversial investing adage. Unfortunately, when it comes to bitcoin, this advice is being dangerously overlooked by both novice and seasoned investors. In this article, I seek to set the record straight on what bitcoin was and has become, and what I believe is the biggest risk associated with bitcoin today.”
USAGOLD note: Revelations from someone who has been involved with bitcoin from its early years – what it really is and where its true value really lies. “It is not a vehicle for investment,” says Pickard, “not a store of value, and not an inflation hedge. BTC is not a capital asset: it does not generate cash flows derived from economic returns on capital. Its extreme volatility invalidates claims of a reliable store of value and calls into question any inflation-hedging properties.”
Repost from 1-15-2021
“Should precious metals investors diversify into other market sectors, like stocks, bonds, and real estate …Holding a mix of (seemingly) non-correlated assets (ETFs or stocks) in real estate, energy, fixed income, and general commodities may be helpful, but it’s best to build any portfolio in baby steps.”
USAGOLD note: Thomson offers a tongue in cheek assessment of modern portfolio design…
Graphic illustration courtesy of VisualCapitalist.com
“Specifically we see ongoing US dollar weakness, deeper negative real rates in the treasury markets and a significant rise in unproductive debt as the Democrats open the spigots with fiscal stimulus as supporting factors. With the economy still contracting in Q1, we expect a bounce in H2 as the vaccine frees up the economy. With the recovery comes demand-pull as well as cost-push inflation further fuelled by the higher velocity of money, leading to expectations of much higher inflation, notwithstanding the weak labour markets.”
USAGOLD note: Ross Norman has finished high or won the annual LBMA price forecasting contest (including last year’s) that one is forced to pay attention. He sees $2025 as the average price, $1810 as the low, and $2285 as the high. Norman says physical demand for silver coins and bars will show “impressive gains,” reflecting ‘strong demand for safe havens in these troubled times.” He sees $36 as the high for gold’s traveling companion.
“However, there was a fundamental difference between what happened during the financial crisis and what is happening now. The money created by the Fed during the last financial crisis found its way into excess reserves in the banking system. Little of it was lent out to the private sector.”
USAGOLD note: The thing that interested me about Siegel’s heads-up on inflation is identifying the bond market as its chief victim. He also explains why inflation did not develop during the money printing binge to address the 2008 crisis and why it could develop now. Siegel says this time around money printed, as the chart below shows, is finding its way into the money supply. Last year’s surge in the money supply “was the largest in 150 years.”
Sources: St. Louis Federal Reserve [FRED], Board of Governors of the Federal Reserve System
Cartoon courtesy of MichaelPRamirez.com
“Biden is going to attempt to chart an economic policy that’s visibly to the left of Bill Clinton and Barack Obama. If he succeeds, it’s going to show up not only in taxes and spending, but also in regulation.”
USAGOLD note: And, there is little doubt, it will show up in the value of the already stressed dollar. The Ramirez cartoon brings to mind the old joke: “That light at the end of the tunnel?…… It’s a train.”
Repost from 1-15-2021
“Over the past 12 years saving gold and/or silver has been an 8x – yes, 8 times! – more effective strategy to grow one’s wealth than banking money and I believe it will continue to be so for the foreseeable future for 4 reasons.”
USAGOLD note: Lorimer Wilson, the editor of munKNEE, goes on to post some interesting statistics including gold providing an annual return of 13.4% since 2013, and silver 12.7%. He concludes that “a disciplined cost-averaging program remains a sound strategy to provide for an uncertain future.”
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Repost from 11-30-2020
“In this way, the government doesn’t actually have to pay anyone back; they just keep refinancing and kicking the can down the road farther out into the future. And the Treasury Department is praying that bondholders will continue this practice forever. Unfortunately that’s probably not going to happen. For starters, foreign governments like China and Japan (which are among of the biggest owners of US government debt) have already started reducing their holdings.”
USAGOLD note: I referenced this Simon Black article in a recent Daily Market Report and repost it now for those who may have missed it. In essence, the Secretary of the Treasury has become in recent history the government’s chief bond salesman whose job it is to place the trillions in US sovereign debt with global buyers. That which isn’t sold either domestically or internationally is sold to the Federal Reserve as part of its quantitative easing program.
Sources: St. Louis Federal Reserve [FRED], U.S. Bureau of Economic Analysis
Repost from 1-14-2021
“Few predicted—and most were unprepared for—the enormous challenges that have kicked off this decade: pandemic, economic collapse, social unrest, and political divisions around the world. Yet it’s the job of a Wall Street executive to factor in all the unknowns.”
USAGOLD note: This article does not mention gold directly, but indirectly the concerns presented by Goldman’s R. Martin Chavez, Bridgewater’s Eileen Murray, and Two Sigma’s David Siegel are something all of us – gold owners or not – should contemplate. Contemporary worries from three intellectual heavyweights ……
Repost from 1-14-2021