HOW TO BE RICH; HARD ASSET UPDATE

 

It'a no secret that the rich are buying up hard assets.  But the levels to which they must now bid to gain their coveted treasures are eye opening.  Some recent purchases:

The legendary Ruby Slippers from The Wizard of Oz: Sold on Dec 7, 2024 for: $32,500,000.00

Citizen Kane (RKO, 1941), "Charles Foster Kane's" Practical Riding "Rosebud" Sled: Sold on Jul 16, 2025 for: $14,750,000.00

Action Comics #1 Kansas City Pedigree (DC, 1938) 

Sold on Apr 4, 2024 for: $6,000,000.00

2007-08 Upper Deck Exquisite Collection Dual Logoman Autographs Michael Jordan & Kobe Bryant  Sold on Aug 23, 2025 for: $12,932,000.00

Dmitry Muratov 2021 Nobel Peace Prize Medal...Sold on Jun 20, 2022 for: $103,500,000.00 

(now you know why politicians covet this prizE)

FD-26 Grateful Dead 1966 "Skeleton & Roses" First-Printing Avalon Ballroom Concert Poster Sold on Jul 12, 2025 for: $106,250.00

DECLARATION OF INDEPENDENCE]. Sold on Jul 8, 2023 for: $2,895,000.00

GOLD NEWS:

In the last weeks the US hit India with massive 50 percent tarrifs.  In response, the Reserve Bank of India (RBI) has reduced its holdings of U.S. Treasury bills while increasing its gold reserves. This strategic move is part of a broader global trend of central banks diversifying their foreign exchange reserves away from dollar-denominated assets

"Looks like we've lost India and Russia to deepest, darkest, China. May they have a long and prosperous future together!"  Truth social, Sept 6 2025

Is this policy or biproduct?

Who cares?

It means goods in the US are more expensive, margins for US corporations are 

depressed, growth slows.  And, as Jim Grant says in the Interest Rate Obverver: 

Jim Grant: A Multi-Decade Bond Bear Market Lies Ahead

You know who loves these economic conditions?  

GOLD!

WHO OWNS GOLD PART II

 

There are currently about 22 trillion dollars of gold above ground.  This number includes all the gold ever mined in the world.

15-16 Trillion of that dollar amount is in the vaults of Global Central Banks.  That's 2/3 of all available gold that is being hoarded by the governments of the world, and that ratio is growing rapidly.

If you go back about 25 years that value of all the gold in the world was closer to 2 trillion dollars and, of that, governments owned closer to 1/3, and many, such as the Bank of England, were selling gold into this abyss.  Gold was deemed a "Barbarous Relic" or a "Pet Rock" and financialization, (which is not possible when conrstrained by gold-money)  was being lionized as the savior of the global economy and an ineluctable future that would go on forever.  "Deficits don't matter, Ronald Reagan proved that" said Vice President Dick Cheney. While Art Laffer "proved" by drawing a squiggle on a cocktail napkin that the more you cut rich people's taxes the more tax receipts you would get.  In other words, the more debt you accumulate, the less debt you have.  Seriously.  Many politicians still argue that today.  

Today, the world is drowning in debt.   In fact, 8 of every 10 financial transactions in the world involve some form of Debt Refinancing.  (Stat courtesy of the brilliant Michael Howell.)

In the US, the current regime is running debt at a trillion dollars per quarter and they are financing that at the very short end of the yeild curve which is tantamount to Debt Monetization (Again, see Michael Howell for a explanation.)

In the face of this, Real Wealth is determined by Gold Ownership as it is the only asset used by World Governments as the ultimate settlement currency for commodity transactions.  (The dollar is a transactional currency but the dollars are then converted to gold - as per Nassim Taleb)

So who owns all this gold?

China and Russia currently hold about 20 percent of the world's reserve gold (officially), and they own about 25 percent of the world's mining capacity.  But most analysts put this number much higher because their gold mining sector is government run and most of that production goes straight into their Central Bank vaults.

But add in Ghana, Indonesia, Kazakstan, Uzbekistan and Indoneia (shithole countries as far as the US is concerned) which are all under China's sphere of influence, and you reach about 40 percent of the world's gold mining capacity.

The US has about 5 percent of the world's gold mining capacity.  Our one-time ally, but current enemy, Canada, has another 6 percent.

So that doesn't leave as much gold for the US consumer.  Not that the US consumer cares.  

Right now.

Right now the US consumer is obssessed with the 500 trillion dollars of financialized instruments Stock, Debt, Private Equity that comprises most of the US portfolio.  Some analysts argue that the curent inflow into gold ETF's show a renewed intereste by the US consumer, but that inflow is very much the result of Sovereign Wealth funds moving into gold (See the recent Saudi purchaes) and not the US consumer.

Our major competitors, China/Russia and their sphere of influence, are actively encouraging their consumer base to stock up on gold.  Just as the Central banks of those countries are stocking up on gold.

That's wher we stand.

If you're one of the very few US consumers who see the value of gold or hard assets in general, you can look forward to some of that 500 trillion flowing into a space with current 7 trillion dollar capacity (gold) or 15 trillion dollar capacity (precious metals and collectibles) over the next decade or two.

GOLD PRICE: THE NEXT TEN YEARS

 

As gold makes an all time closing high today, Two fairly unassaible points about gold valuation:

First, a thought from the brilliant Cem Karsan:

There are currently 500 trillion dollars of correlated assets in the traditional 60/40 portfolio: stocks, bonds, real estate, private equity.

There are currently 15 trillion dollars in non correlated assets: precious metals, art, energy, collectibles etc,

Given that the correlated assets are now trading far above all valuation metrics at all time highs, we can expect a decade or two of near zero real (inflation adjusted) returns, just as were exprienced many times historically  (1900-1920/ 1930-1949/ 1962-1983) after similar runs ups, 

What happens when some of that 500 trillion dollars goes looking for returns and discovers the non-correlated areas?

In the last three years this flow has caused the non-correlated assets to increase from a total pool of 5 trillion to 15 trillion, so some of this flow has begun.

But how far will it go as it becomes obvious that the correlated assets are no longer providing a real return?  And the non-correlated assets are already providing a healthy return.

Rick Rule puts this another way, but similar, when he points out that historically the US investor has 2-5 percent of their portfolio in gold.  Now that figure stands at half of 1 perecent.  What happens when that returns to the mean?

How high can gold go?

In "normal" times you could easily calculate gold in terms of the purchasing power of the US dollar.  Or in terms of total us debt.  Many people use these valuation.  And they are useful.  For  example the chart above shows a strong correlation of Gold to US debt.  The second chart show gold price moving inversely to the puchasing power of the US dollar. 

By both metrics there is no reason to think gold is overvalued.  US debt is accumulating at an alarming rate with no sign of moderation even being contemplated, and the purchasing power of the dollar is dropping dramtically while the current Regime has a stated goal of forcing the value of the dollar ever lower.

But Nassim Taleb has shown in his book "The Black Swan" that events we regard as abnormal hit the markets with  alarming frequency.  They can be any sort of event that was not expected and  not built into the models regarding "normal" valuations.

Right now, the gold market is being buffeted with a number Black Swans that are all extremely bullish for gold, and which are, by definition, unaccounted for by the normal methods of gold valuation.

GOLD BLACK SWANS:

1. Tarrifs: Tarrifs on this scale have not been experienced in the global economy since the Great Depression.  Tarrifs slow growth and foster inflation.  They are stagflationary.  However, this is only part of the Tarrif effect on Gold.  Tarrifs are also a weaponization of the US Dollar and as such they provide enormous incentive for Global Central Banks to sell dollars and buy Gold - which they are all doing at a record pace.  This tail wind for gold is not likely to moderate any time soon. 

Tarrifs are also simply the tip of the iceberg in a deglobalization push that is upending 50 years of economic precedent, and the resultant uprooting of supply chains, economic and military alliances, and global trade relationships is necesserily an enormous drag on global growth and highly inflationary.

But if the Global Trade war results in Global Hot wars ( as it did after the Great Depression)  that would make gold the most  crucial asset for every portfolio. 

2. Loss of Independence of the Fed.  The Regime take over of the Fed is in progress.  The last time a Central Government controlled the central bank in a Western economy was when the German State took control of the Reichsbank.  This was a prelude to World War II.  Ir was also a prelude to  the theft of 600 million dollars (in 1931 dollars) of  gold from European central banks.  What this signals for the US, in the short term, is the lowering of rates  down to 1 percent, and the resultant inflation, and loss of confidence in the US dollar and US debt.   This is terrific for gold.  

But the knock on effects of the world's largest economy switching suddenly from a capitalist system to a centrally planned economy controlled by one man are undertermined, but potentially cataclysmicly good for gold.  

If this were all, it would still be reason to throw out past valuations and ratchet up all expecatations of Gold's future performance.  But a number of other Black Swans could easily occur in the near future.  Among them would be a credit crisis (reference Michael Howell and Ray Dalio and David Stockman)  a crisis from reversion to the mean in financial assets (reference Jermeny Grantham, Lacy Hunt, Charly Munger among many others) a crisis from the vicious swing in passive investing (Mike Green), a nascent housing crisis (Melody Wright, Gerald Caliente) or the Hot War that occurs in every fourth turning (Neil Howe.) 

So high can gold go?

How long can this US and Global instability persist?

GOLD AND STAGFGLATION NATION

 

If you hold Gold there is nothing better than Stagflation.  This is when the economy slows to a grind and inflation rages.  This erodes the puchasing power of the currency and turbo charges the alternate stable currency: gold.

But really, all inflation hedges such are hard assets and top grade financial assets do great under stagflation.

This is by design.

Stagflation is not an unfortunate biproduct of bad policy.  It is the policy.

Staggering debt is the unfortunate biproduct of bad policy.  

This policy started in the 1980s under Reagan and Greenspan who realized that in an economy with no debt and no inflation (thanks to Paul Volker) you can smoothe out any problem with debt.  

After 50 years, that debt is now in the hundreds of trillions if you include unfunded liabilities.  And inflation, as measured by the diminishing purchasing power of the US dollar, is so far out of control that 60 percent of Americans live pay check to pay check, and can hardly pay their monthly bills, and they have nothing left over for any type of emergency.  

That is life on the edge.

Meanwhile, the current political regime is funding their current spending spree with 1 trillion dollars of new debt every quarter.

That is life in the fast lane.

So the only policy option to deal with this ever increasing, massive debt, is Stagflation - which requires ever more debt and ever lower rates which inflates the debt away while also inflating that value of hard assets and quality financial assets - and simultaneously bankrupting the vast middle class.

The only other policy option is Deflation which requires the retiring of debt, forcing the debtors to go bankrupt when they can't pay what they owe, (nobody is to big to fail) massively cutting spending, removing liquidity from the system,  and in the process, eradicating the value of all financial assets.  But preserving the integrity of the currency and the purchasing power of the middle class.

Guess which choice the regime has chosen?

The regime is clear: they want rates at 1 percent and will get that.  And they want no debt ceiling and have gotten that.  And they will spend however much they want without constraint and they are doing that to the tune of 1 trillions dollars of new debt per quarter.

Stagflation.

And, the regime has also decided to fire or prosecute anybody who stands in the way of Stagflation, and fire or prosecute anybody who reports economic numbers that suggest there is slow growth or high inflation. 

So the policy is not only to encourage stagflation, but also to deny that it exists.

I cant comment on what this means for the economy.

But is is awesome for gold. 

GOLD THE FED AND CHINA

 

Gold opened uip $25 dollars this morning - not a huge devlopement, but surprising since Gold was on schedule, according to most analysts, for a mid cycle low a few hundred dollars lower.

Of course this low could still be reached.

But a couple of new trends seem to be driving this counter trend rally:

1) The political regeim is threatening hawkish Fed voting Governors with Justice Department persecution if they don't immediately resign.  Fed Governer Lisa Cook now must decide if fighting inflation is worth a trip to a Somalian dungeon.  This developement contradicts those who point out that even if the regeim replaces Powell with a loyalist, rates can only be lowered by a consensus vote.  It seems the regeim has an answer for that objection.  They will get rates where they want them.  And that is back to ZERO.

2) Just as significant, and equally damaging to the dollar in the long run, is a news flash signalling that China is agreeing with Kenya to refinance their dollar denominated debt in Yuan..  Bid deal, right?  Kenya is just a shithole country, as far as America is concerned.  But, it seems China considers Kenya to be a terrific source of Rare Earth, and Gold mining wealth.  This developement gives teeth to the de-dollarization trend that many critics have dismissed as a fantasy.

At the same time China is is taking advantage of the US Regeim's puzzling tarrif attack on India to effect a raprochement of trade and economic developement with their long time rival.  This too poses a grave long term challenge for the dollar.

So which of these developements are driving gold's counterrally this morning?

Who cares?

Over time this is all terrific news for gold.