Einhorn Letter Q1 2021

Greenlight Capital/David Einhorn/1-15-2021

“[T]he Fed has indicated that it believes any abnormally high inflation will be transitory. We wonder, how will the Fed know? Do price increases come with a label that says “transitory”? Our sense is that no matter how hot inflation gets in the coming months, the Fed will continue with zero interest rates and large scale asset purchases. After all, the U.S. Treasury has a lot of debt to sell and it isn’t clear who, other than the Fed can absorb the supply.”

USAGOLD note: The current situation in a nutshell…… Einhorn is a long-time advocate of gold ownership. This is the same constroversial client letter that received considerable financial media attention for being critical of government regulators saying; “…[F]or the most part there is no cop on the beat. It’s as if there are no financial fraud prosecutors; companies and managements that are emboldened enough to engage in malfeasance have little to fear.”
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Goldman says copper is the new oil, raises price forecast to $11,000 per metric ton

CNBC/Pippa Stevens/4-14-2021

“Copper prices are expected to rise, as the transition to green energy accelerates and the supply of the metal tightens, says Goldman Sachs.”

USAGOLD note: When you consider that Goldman’s commodities’ index is up almost 22% since the beginning of the year, it gives cause to think that gold might be lagging and due for a rally. It is down almost 7% on the year. Goldman sees copper as a star performer forecasting it to rise from $8,900 per tonne currently to $11,000 per tonne over the next 12 months. Silver, by the way, has also been referred to as the “new oil” in recent days for its abundant use in green energy technologies.

The Goldman Sachs Commodity Index and Gold
(Per cent gain or loss year to date, 2021)

overlay line chart showing the GSCI and gold year to date

Chart courtesy of TradingView.com • • • Click to enlarge

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China’s digital currency is a threat to dollar dominence

Financial Times/Michael Hasentab/4-13-2021

graphic representation of digital gold yuan

“Markets have been gripped by cryptocurrency fever. The price of bitcoin has attained new highs while debate has raged over the emergence of cryptocurrency technology. But these may be a sideshow for a big developing trend — the rapid digitalisation of the renminbi.”

USAGOLD note 1:  What other central banks, China is getting ready to launch – and Hasentab, the chief investment officer at Templeton Global Macro sees both enormous benefits for the global monetary system and a possible undermining of the dollar’s dominance as the world’s top reserve asset. If what he says turns out to be the case, it would likely increase the appeal of owning gold as a hedge against dollar depreciation.

USAGOLD note 2: Though Hasentab does not mention gold, we would add that there is also the outside chance China might somehow deploy gold in its digital scheme to give its version of cryptocurrency greater credibility. It is, after all, the number one producer of gold and rumors persist that it owns significantly more gold than it is reporting. (The image above includes an artist’s rendering of a digital gold yuan token)

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Thinking about buying gold and silver?


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!


Looking to prepare your portfolio for whatever uncertainty lies ahead?
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ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

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Easiest money in history

Elliott Wave International/Murray Gunn

Repost from 4-13-2021

Chart showing the cycle of market emotions from optimism to euphoria to despondency to optimism againClick to enlarge

“This era of central bank-induced gushing liquidity, combined with a manic social mood, has created statistics that, when looked back on in the cold light of day, will be viewed as clearly insane. At this juncture, it is seen as entirely normal, indeed clever, to give your money to someone who will not tell you what they are going to do with it. The SPAC (Special Purpose Acquisition Company) mania is a prime candidate for the financial bubble history books.”

USAGOLD note: Well said…

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The Feds are implementing the greatest monetary experiment in U.S. history

Rogue Economics/Bill Bonner

Repost from 4-12-2021

graphic image of computer code abstract

“A thousand years ago, when money meant coins, China invented paper currency. Now the Chinese government is minting cash digitally, in a re-imagination of money that could shake a pillar of American power.” – Wall Street Journal, as quoted at link above

USAGOLD note: Bonner explores the consequences of the spend and print economics and its consequences – along with China’s introduction of a new form of “computer code” money that could become an international alternative to the dollar.

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Dylan Grice – ‘Central banks are going to overcook the economy’

TheMarketNZZ/Mark Dittli

Repost from 3-6-2021

cartoon of a hedge fund manager on the phone telling a client to buy gold

‘We have found there are plenty of managers running highly specialized, niche strategies which generate extremely attractive returns without being correlated to wider financial markets, or being subject to any of the risks we’ve just been talking about. Investors in traditional assets – public equity, private equity, venture, government bonds, corporate credit – are sitting on a time bomb. They have to keep their fingers crossed and hope that bomb doesn’t go off on their watch. If and when government bond yields rise, the traditional assets which have done so well will be smoked.’

USAGOLD note: Grice, a former investment strategist at Societe Generale, is one of those analysts to whom the global market cognoscenti pay a great deal of attention. This interview with that mind is a must-read. There are three approaches to the difficulties Grice communicates. One is to find a money manager, like Grice, who has a deeper understanding of what lies ahead and hope he pulls the right levers. Another is to develop that same deeper sense of what lies ahead, structure one’s investments accordingly and hope that you have pulled the right levers.  The last, and the most sensible in our view, is to diversify one’s portfolio completely and include gold and silver in the mix as the ultimate, unassailable store of value. It leaves much less to chance.

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The Fourth Turning: The end of things and a beginning

The Hill/Bernie Quigley

Repost from 10-3-2020

graphic image showing sun moon cycle - icon

“Now might be a good time to review The Fourth Turning: What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny by historians William Strauss and Neil Howe. The authors’ thesis is that all historical periods are ‘post-war periods’ and every 80 years or so a human cycle of four generations concludes itself in catastrophe and rebirth.”

USAGOLD note:  I came across this review of The Fourth Turning posted at The Hill while researching another topic and thought it worth posting a link. It lists five possible crisis triggers in the book, one being that “the Centers for Disease Control and Prevention announce the spread of a new communicable virus.” The prescience of the authors – in both the big picture and the details – is uncanny. It’s an old article but worth revisiting in light of what has gone on in the American economy since it was published in late 1996. We are in the grip of the Fourth Turning now and will continue to be, according to Neil Howe, until 2028, when a new era will dawn.

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Fast food struggles to hire as demand soars

Reuters/Hilary Russ

Repost from 4-12-2021

stein cartoon image of foot about to meet banana peel an unintended consequence“‘The most recent stimulus check and unemployment benefits have been a catalyst for people to stay at home’ instead of looking for work, he said.”

USAGOLD note: Such is the downside of government income maintenance programs – one of the great unintended consequences of the Biden rescue package. Already, as this article points out, employers are paying signing bonuses and wages are beginning to rise. Powell might get the inflation he wants so desperately through the back door – a rapidly rising cost of labor.

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Short and Sweet

For gold . . .
‘It is not a question of if, but when’

The lesson is one as old as the gold market itself: The best time to buy is when the market is quiet – a strategy that requires both discipline and conviction. As an old friend and client used to say (he passed away years ago): “It is not a question of if, but when.” He accumulated a large hoard of the metal in the 1990s and early 2000s between $300 and $600 per ounce and lived to see his prediction come true. His estate though was the ultimate beneficiary of his wisdom. He was not one to sell gold once he had acquired it. We chatted regularly on the phone back then and I told him that I had used the story just told in one of my newsletters.  He was in his late 80s at the time. “Tell them,” he said resolutely, “that I bought my first ounce of gold at $35.”

photo of pile of $20 St. Gaudens gold pieces

The possession of gold has ruined fewer men than the lack of it.”
– Thomas Bailey Aldrich –


Are you looking to solidify your hard-earned wealth for the long run?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ORDER GOLD & SILVER ONLINE 24-7

 

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Melt up? More money poured into stocks in past five months than last 12 years

Reuters/Thyagaraju Adinarayan and Sujata Rao

Repost from 4-9-2021

graphic image of the White House with piles of greenbacks in front of it

“’Goldilocks and melt-up are popular terms this week and we think that can be seen through market valuation,’ said Emmanuel Cau, head of European equity strategy at Barclays. ‘We remain optimistic but there’s less upside left in our view.’”

USAGOLD note: All for the love of stocks or the result of overly ambitious money creation?

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Precious metals continue rapid ascent. Gold up 2.25% on week; silver – 3.8%.

(USAGOLD –  4/16/2021) – Precious metals continued their rapid ascent this morning influenced principally by inflation and real rate concerns. Short covering off gold’s late-March double bottom might also be playing a role in the current rally. Gold is up $18.50 at $1784 in today’s early going and up 2.25% on the week. Silver is up 39¢ on the day at $26.30 and up 3.8% on the week. Yields have turned marginally higher following a sharp mid-week decline and the dollar is down. Financial analyst Dan Amoss believes real yields are destined to sink deeply into the negative – a trend that will push gold to new record highs.

“If we see several months of 3% to 4% CPI, and the 30-Year Treasury yield stays near 2%,” he says in an article published at the Daily Reckoning website, “then real yields will be in lower territory than they have been since the late 1970s. When the red line in the chart rises, the blue line tends to do the same, which means higher year-over-year gains for gold. What might this look like by late 2021? Real yields are likely to fall below -1% in the months ahead. That could coincide with gold rising to the $2,300 range by July (a 30% gain from the $1,800 level of July 2020). This isn’t an explicit forecast; it’s meant to illustrate what sort of explosive rally in gold is possible in this macro environment of wild deficits and money printing.”

Chart of the Day

Gold
(50-year, in percent)

line chart showing percentage rise in the price of gold 1971 to present

Dow Jones Industrial Average
(50-year, in percent)

line chart showing the percentage in the DJIA from 1971 to present

Charts courtesy of TradingEconomics.com • • • Click to enlarge

Chart note: As we approach the fiftieth anniversary of the fiat money system’s introduction on August 15, 1971, we thought it would be interesting to take a snapshot of gold and stocks’ performances over the period. Many will be surprised to learn that gold has outperformed stocks since 1971 – up 4821% to stocks 3490%. (All data of 12/14/2020)

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Platinum price to rise as green hydrogen emerges as a new demand segment

MiningWeekly/Simon Liedtke/4-14-2021

“The rarity of platinum, combined with a decline in supply and overwhelming demand, is a formula for a build-up of a ‘perfect storm’, says independent precious metals consultant Dr. David Davis, who says that this will lead to significant upward pressure on the price of platinum, to which investors have already begun to react.”

USAGOLD note:  Some are buying platinum for the green aspect of its profile. There is another component to platinum’s story that is equally intriguing. For a very long time – and up until 2011 – platinum cost more per ounce than gold and at times significantly more than gold (See chart below). Now gold sells for considerably more per ounce than platinum. If you have an interest in adding platinum to your holdings, please contact the Trading Desk for product availability and pricing. (1-800-869-5115, Ext 100)

Gold and platinum prices
(1998 to present)

overlay chart showing the prices of gold and platinum 1998 to present

Chart courtesy of TradingView.com • • • Click to enlarge

 

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Annual threat assessment of the U.S. intelligence community

Office of the Director of National Intelligence/4-9-2021

seal for the office of the director of national intelligence usa“The COVID-19 pandemic has disrupted life worldwide, with far-reaching effects that extend well beyond global health to the economic, political, and security spheres. We expect COVID-19 to remain a threat to populations worldwide until vaccines and therapeutics are widely distributed. The economic and political implications of the pandemic will ripple through the world for years.…The economic fallout from the pandemic is likely to create or worsen instability in at least a few—and perhaps many—countries, as people grow more desperate in the face of interlocking pressures that include sustained economic downturns, job losses, and disrupted supply chains. Some hard-hit developing countries are experiencing financial and humanitarian crises, increasing the risk of surges in migration, collapsed governments, or internal conflict.”

USAGOLD note: An ominous assessment of the economic and political future, this study also reviews the threats from China, Russia, Iran, and North Korea. In the whirl surrounding economics and the financial markets, we sometimes push aside the geopolitical situation. As we have reported here occasionally, though, rivalries have sharpened over the past year and could become even more contentious as the net economic effect of the pandemic takes its toll.

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Notable Quotable

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”

John Maynard Keynes
1946

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Gold rush underway as Koreans seek safety, and a bargain

Korea JoongAng Daily/Yeom Ji-Hyeon and Chea Sarah/4-15-2021

Photo of gold KimThanh from Viet Nam“Gold is glittering again as economic fear mounts and Koreans rush toward safe assets. Volume on the Korea Gold Exchange through April 9 is already half of 2020’s full-year trading, with 10,780 kilograms (23,800 pounds) changing hands.”

USAGOLD note: South Korean demand is representative of the “buy the dip mentality” at work throughout Asia, as the west to east gold pipeline resumes deliveries……

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Central bank and consumer buying in India and China arrest gold’s slide

Financial Times/Henry Sanderson/4-14-2021

“‘There’s been a sea change in sentiment in Asia,’ Rhona O’Connell, an analyst at brokerage StoneX in London, said. That could provide a floor for gold prices if central bank gold demand also remains strong, she said.’

USAGOLD note:  This article offers further confirmation of ramped up physical gold demand from central banks, China and India – as reported here over the past two weeks. The demand in Asia is the result of released pent-up pressure as those regions come out of pandemic-induced gridlock. In our view, central bank demand has been restrained by an unpublicized lack of immediate physical availability for large-size purchases.

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How to choose a gold firm
It may be the most important choice you make as a gold owner

photo shows choosing a king on the chessboard

It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands before the damage is detected.

Here you will find some brief but useful guidelines
to help
you choose the right gold and silver company.


To end right, start right.
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com
ONLINE ORDER DESK-24/7

Reliably serving physical gold and silver investors since 1973

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Morgan Stanley dumped $5 billion in Archegos’ stocks the night before massive fire sale hit rivals

CNBC/Hugh Son

Repost from 4-6-2021

“The night before the Archegos Capital story burst into public view late last month, the fund’s biggest prime broker quietly unloaded some of its risky positions to hedge funds, people with knowledge of the trades told CNBC.”

USAGOLD note:  We are going to take the judicious route and not make a direct comment on this article. Instead, we encourage you to read it, and form your own conclusions.

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Hungary tripled gold reserves as central banks turn to buyers again

Bloomberg/Eddie Spence

Repost from 4-8-2021

Image of gold stacked in storage at the New York Federal Reserve

“Hungary tripled its gold reserves in one of the biggest purchases by a central bank in decades — the latest sign of governments turning to the precious metal as a safeguard of value.”

USAGOLD note: Hungary is one nation-state among many implementing gold acquisition programs. At this juncture, one would think that competition will be intense for any gold offering of size.

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