GOLD: ANOTHER ALL TIME HIGH FOR THE ANTI MEME STOCK

 

Gold just made another all time closing high at $2625 spot.  This is still without much public participation.  How can we know?  Simple: check inflows into the ETF'S like GLD, which are anemic to non existant (The stock rises because of derivative exposure not people buying gold) - and check both availablity and the premium over spot on the big bullion sites like APMEX.  Everything is available in quantity and the premiums are historically tiny.

It's still the Central Banks that are gobbling up gold.  Because the central banks know that the dollar is being destroyed by Deficit Spending and Money Printing.  And they are preparing the ultimate de-dollarization play: the launching of a competing settlement currency.

So Gold is not a meme stock.  It is not Gamestop.  It is not Invidia which has real earnings and sales but it sells a product for which there is little real productive value at this point.  It is not Bitcoin which has no use  but soars or falls purely on investor sentiment.  It is not Apple which has wonderful products though each year it comes out with the exact same product with a few pointless bells and whistles and expect to sell it all over again to the same people who bought it last year.

No - gold is the anti-meme stock -  It is a reserve currency used by central banks to secure the liquidity of their central economy.  It is the currency of last resort.  When there are no more lenders, when the printing press (electronic though it may be) stops printing money that people want to use - the Central Authority still possesses a currency that anyone anywhere will accept in return for real goods.  Simply because they have done so for thousands and thousands of years.  It provides the ultimate fiancial stability.

Gold is the anti meme stock.  It has only use value.   

But then gold can have what Karl Marx would have called fetish value.  That is to say what we call Meme value or what used to be called vogue, trend, craze, rage, mania or fad value.  At times of stress in the system investors and traders do flock to gold.  It just hasn't happened here in the US yet.  Because here in the US we have been feasting for so long on the value that has accrued to us through the use of the world's reserve currency that we can not recognize this moment of stress that almost everyone else in the world can see.

Our government was nearly overthrown in violent revolution just a few years ago and we've totally whiteswashed the memory.  Two hot wars are raging in oil and grain producing areas that could metatstasize at any moment yet they have already moved out of the news cycle, as everything does after a few weeks of coverage.  Then it gets boring and old - to US viewers.  Becuase we're special.  Nothing touches US because we have the worlds reserve currency.

But as the world dedollarizes (while we sleep) eventually we wake up one day and realize the dollar is losing value at an alarming rate.  And it makes no difference who is in the whitehouse or who is at the Fed or what the next transformative technology is changing the world.  Because there are just too many dollars being printed and distributed to too many people for it to retain any real value over time.

And then things which are just annoyingly expensive now will be prohibitvely expensive.  LIke houses, and education and food.  We're close.  But we have no attention span.  Anyone who promises to fix the problem will be believed because we want to believe.  

But what is the solution to a debt based currency when we are drowning in debt and when any slowing of the debt produces a recession - that can only be cured by more debt?

When the average Amercian understands that this is the problem and not immigrants or blacks or jews or muslims or women with no children or strangers eating our pets then they will realize that there are only two solutions: Change the economic system which will require years of difficult adjustment or protect yourself with your personal reserve currency of last resort.

And then Americans will buy gold.  And the price will shoot ever higher.  But then the availability of REAL GOLD BULLION will disappear and the premium over spot will shoot up to 10,20, 50, 100 percent and more.  

Then Gold will become a meme stock.  Everything has its moment.

DIVERSIFICATION WITHIN THE GOLD UNIVERSE

 

Let's say you're one of the very few Investors who have bought into the Gold story. 

Though this is, at present, a story that is very much driven by Central Bank purchasing, and very few US investors have bought in - YET - let's say you're in.  But you're not sure exactly what to do to maximize the value of your position.

It's like any other investment.  You need to diversify within the Gold Universe.

How?  You prepare for the various scenarios in which gold will be needed.

These scenatios include:

A. Inflation.  This is guarnateed by the central bank driven, deficit spending driven, global economy.  Real inflation (as calculated by the metrics the government used back in the 1980's before that fancey hedonic adjustments) has been at between 15 and 22 percent for the last four decades.  Anyone alive spending money who is not a billionaire is sure to have noticed.

B. World War which ruputures supply chains, ratchets up inflation, and increases the chance of real terror inducing disruptions.  There are two significant hot wars going on where Russia. China, and US all have vital interests in the outcomes.  And it is certain China will  move on Taiwan before long.  So 3 vital hot spots that couls easilty metastasize.

C.  A strong man Autocrat seizes control of the US govenment, and takes control of the Fed which will cause a flight from the dollar, especially in the quadrillion dollar derivatives markets.  And when everyone tries to sell at once - financial markets head into crisis.  Again, the only thing keeping the world in the dollar is confidence in the Fed.  It takes a lot of heat from a lot of places.   But no one doubts that they're trying to keep the value of the dollar steady.  If an autocrat takes over the Fed, that confidence will die, and so will the dollar and this will cause havoc in the financial markets

So how to prepare?

A.  Physical gold.  You need some.  And you need it where you can get your hands on it quickly.  A nearby bank vault.  A hole the ground in your back yard.  Somewhere safe, nearby, accesible.

This will be most important for scenearios B and C.  Any breakdown in social order and you need physical gold.  And any breakdown in the financial order and physical might be your only savior.

B. Electronic gold: GLD is the biggest and  most liquid tracking stock.  This is not gold.  They own some gold along with a heavy dose of derivatives.  So in scenario A you can make money of this vehicle and it is far more liquid than physical gold.  I use it.  It's great.  In a true A/B crisis though I'd sell it in a heartbeat.  Because the derivative market can seize up in  a heart beat.

C. Collector Gold.  This market is real.  You can't really rely on experts though, except to explain things to you as you learn about it.  You have to know what you're doing.  But it's well worth learning because the market is big, real, liquid.  The trick is you have to buy and sell through dealers and auction houses.  So you have to pay retail or pay the hammer fees at auction.  Don't let this daunt you.  As the price of the dollar is destroyed through Fed/Treasury printing schemes and through a government drowning in debt that has totally given up on fiscal responsibility the value of collector coins like all hard assets keeps rising.

The trick here is to always remember its a DEMAND DRIVEN market.  Something can be rare and interesting but if nobody cares, the value won't rise.  You have to monitor the market and see what's in demand.   Then you have to get to know and understand areas that interest you and areas in which you have some familiarity through study or heritage or aesthetic appreciation.  Take the time. Learn.  It's worth it.

D, Other types of precious metal etc: Silver, Platinum, Diamonds: all of thse can work.  The problem they are all at the mercy of investor demand.  Gold is the only thing used by Central Banks as a reserve currency.  That is a very major underpinning of the market.  And for this reason, in a real crisis - only Gold is as good as Gold.

Gold is the real de-dollarization play – Nassim Taleb

 

De-dollarization has become a trending topic amid the rising strength of the BRICS bloc and surging U.S. debt. But according to one analyst, while many are focused on competing currencies or digital assets, the real de-dollarization play is gold. 

 

“People are not seeing the real ‘de-dollarization’ in progress,” essayist and mathematical statistician Nassim Taleb said in an X post. “It is not [about] trade settlements. Transactions are labeled in USD, as an anchor currency, but central banks (particularly BRICS) have been storing, that is, putting their reserves, in Gold.”

 

“Gold is up ~30% y-o-y,” Taleb highlighted. 

 

Luke Gromen, founder and president of Forest for the Trees, responded with the following chart, noting that “It's quietly been underway for 10 years; got much louder post-2022 sanctioning of Russian FX reserves.”

 

 

As Gromen mentioned, chatter about de-dollarization has been on the rise for the past several years. The decision to freeze Russian assets after the country invaded Ukraine served as a wake-up call for those who held large portions of their reserves in U.S. Treasuries.

 

Geopolitical and financial analyst Angelo Giuliano posted the same chart as Gromen, saying, “De-dollarization is happening.”

 

“Instead of buying US debt, countries are buying GOLD,” he added. “The US dollar Ponzi scheme is collapsing...the US exorbitant privilege to print endless amount of paper toilet currency is over. Gold hit an all-time high today [Sept. 12]. +30% yearly performance. Only the beginning.”

 

X user The Parabolic responded to Taleb’s post by noting that “The emerging monetary order can be summed up using Jevons' 3 key functions of money: store of value, unit of account, and medium of exchange.” 

 

“It is a historically odd and an aberration to have USDs/USTs serve all three roles,” they said. “Between 1922 (Genoa Conference) and 1971 (Nixon shock), the Anglo powers removed physical gold as the international store of value. They replaced gold with  government promises (banknotes, bonds, etc.), and the resulting debt-based system is extremely unstable, requiring ongoing quick fixes to not blow up.”

 

Taleb “shows that while the USD instruments can function as a medium of exchange and unit of account, their role as a store of value is being questioned by some of the world's largest economies,” The Parabolic said. “BRICs et al wanna take us Back to the Future.”

 

And touching on Taleb’s point that transactions are labeled in USD, author Richard Turrin noted that the “dollar's high percentage in trade settlements is increasingly meaningless,” as “1) Gold holdings show reserve storage, and 2) Migration of trade to alternate currencies isn't captured on SWIFT statistics.”

 

“The US will tout the USD's high percentage use in trade all the way to the bottom,” Turrin said. 

 

OUR ECONOMY and GOLD IN 2 CHARTS

 

THIS CHART SHOWS A PROPORTIONAL REPRESENTATION OF THE FINANCIAL SECTORS OF THE ECONOMY

This chart puts some dollar values on the various financial sectors.

There is no collateral for almost all the Credit based Derivatives that make up the vast dollar amounts involved in our Financial Economy.  (2-4 Quadrillion dollars in derivatives alon)

The entire multi Quadrillion dollar derivatives sector of our economy is comprised of UNSECURED DEBT where the counterparty risk is spread across all sectors of the economy,

However, much of financialized sectors below that also includes unsescured debt like ETFs, REITS, Tracking stocks, etc that purport to own commodities or stocks or real estate  but only own derivatvies that represent this ownership through leveraged derivate instruments.  And then there is the universe of strucutured products that supposedly base their performance of undrlying stocks or commodities but again are comprised of derivatives.

Then, even with Government Bonds, these are IOU's that will not default because we can print money to pay them off, but they are backed by nothing but "Good Faith."  

In fact, the entire pyramid above the tiny gold triangle at the bottom can be said to represent a global economy that no longer has any capitalist component (investment in capital through savings) - it is rather a Creditocracy - or Creditism - where economic growth is gained through credit creation that enables consumption.

But this is a highly inflationary system by nature.  And it is form of a Ponzi Scheme dependent on the unlimited growth of credit to unable the unlimited growth of discretionary spending.

The trouble comes in turbulent times - when inflation gets out of hand, and spending becomes more and more punitive and then every wants to cash in, and when they do they find out their claims are worthless because the tiny bits of collateral underlying all the derivativres have been sold again and again to vast numbers of other claimants (Rehypothecation) and you own nothing but worthless derivatives based on nothing of real underlying value.

Every government understands this. I'm  not saying anything new or inspired.

That's why all governements are furiously buying gold.  (Except the USA where we're clinging to strength of the printed dollar.)

And if you're at the very top of the US CREDITOCRACY this is still a good deal for you.  There are plenty of suckers willing to by your worthless derivative crap and make you richer and richer and richer while everyone around you goes broke.  (Yes, you, Blackstone, and Carlyle and KKR etc - Good job!)

But if you want protections against this and you don't work for one of the firms above you need to go right to the bottom of the pyramid and buy the only asset that has no counterparty risk and no rehypothication risk and no collateralization risk: GOLD.

GOLD AND THE DOLLAR AS RESERVE CURRENCIES

 

The US dollar became the world's reserve currency after WWII because of what is now called American Exceptionalism. This meant that thr US has/had the world's pre-eminent military along with the world's deepest and most sophisticated financial markets.  So the dollar was the natural choice for reserve currency status - and the dollar was convertible into Gold.  Therefore, Gold was the ultimate reserve currency.

In 1972 when US president Nixon closed the gold window - in other words declined to honor requests (in this case by France) to  exchange  dollars for Gold, the dollar became unhinged from its Gold anchor - which ushered in the Age of Financialization which quickly turned into the Age of Unlimited Debt.  The Age of Unlimited Debt also turned into the Age of Unlimited Wealth Transfer from the working classes and middle management classes that had to qualify stringently for debt to the Financial Classes that could obtain debt on vastly favorable terms.

And those who could obtain enough debt on favorable terms soon discovered they would never be forced to honor - or repay - that debt.  This created a class of Billionaire Debt Barons.

However, through this unprecedented Global Debt Orgy the US has managed to retain Reserve Currency status because our financial system is the one which has been able to originate and control  most of this debt globally through the EuroDollar (debt) market.

Now US Exceptionalism is predicated on the use of the US Dollar as reserve currency.  This is our biggest asset because we are the only nation that can simply print dollars to repay dollar denominated debt.

This game could probably go on for a very long time until massive defaults overwhelmed the system.

UNFORTUNATELY a genereation of exceedingly stupid politicians have done the one thing guaranteed to bring about the demise of the US dollar as reserve currency:

THEY/WE Have WEAPONIZED the dollar.  SANCTIONS AND TARRIFS are the two things you have to avoid if you want to keep the privilege of the reserve currency.

WHY? Because sanctions and tarrifs incentivize other countries to DEDOLLARIZE.  That means stop buying our debt.  And stop settling international deals, especially commodity deals, in dollars.  (among other things.)  And not just the sanctioned and tarrifed countries.  Every country looks at the US and thinks "We could be next.  Better dedollarize."

And through this age of American Exeptionalism every country including the US has kept a huge store of Gold in its central banks as an Reserve Currency of Last Resort.  So the first step in dedollarizing is making sure you have enough gold.

Now countries that have sufferered the weaponization of the US dollar  have banded together in what is known as the BRICS+ nations (which comprise about 3/5 of the world's first and second world economies) and are aggressively DEDOLLARIZING and buying vast amounts of GOLD in preparation for the launch of their own settlement currency and their own transfer systems.

What this means is as they move away from the dollar the US if forced to finance its own debt.  In other words Buy its own debt with its own Central Bank.

This is the ultimate cause of Massive Inflation.  It means the we have to print dollars to finance our debt.

But we print dollars by creating NEW DEBT.  That how it works. The more we have to finance our debt by printing - the more debt we have - and the more debt we need to finance and the more debt we have.  Repeat until financial collapse.

We have shot ourselves in the head and we are continuing to shoot ourselves in the head.

Meanwhile if you want to protect yourself from this institutionalized suicide you might want to do what the central banks of the world are doing.  

Convert some of your dollars into GOLD

Gold and the Debates

 

Republican squared off against Democrat last night and battled over who could run up the deficit the highest.

The Republican claimed he would spend untold billions moving 20 million people (who exactly he didn't specify) first to "Camps" and then out of the country.  Obviously this will require an entirely new agency, appropriations of land and massive constructions of Camps that can house 20 million people as they await deportation - which will cost a fortune in itself.  This was a mastersrtoke of Deficit  Spending! No number was attached but pick a number in the hundreds of billions and then mutlitiply it be ten if this program ever gets off the ground.

Combine that with a Massive Tarrif program that will cost the US consumer Trillions that will come out of discretionary spending and reduce global trade by about 50 percent if the Smoot Hawley Tarrifs are any guide and then you will get a massive reduction of tax income, to add to the promised massive redutions of corporate tax income - so, in all, and impressive master stroke of Deficit Spending!

On the Democrat side we heard about Grants for anyone starting a small business.  No number attached again, but imagine that it will be managed with the same efficiency that the Covid Relief spending was managed by Republicans and Democrats alike, and you can bet that any number they can come up with will be quickly depleted by anyone who can fill out a form properly, and then have to be renewed every quarter or so.  So, that should be quite a number to pile up on the Deficit Spending side.  And then middle class  tax breaks and child support in the form of Grants or Checks of printed money mailed out again to anyone good at filling out forms.  So they still need to work on some massive Deficit Spending proposal to match the Tarrifs, but it's a good start!

So, in all, I'd say Gold won the debate by any standard!

Go GOLD!

GOLD AND THE 8 YEAR CYCLE: SHIFTING SEASONS

 

A big deal is being made in technical circles about the 8 year cycle in gold - and rightfully so.

It really matters as to where you are in the larger, long term cycle - in order to have confidence in the only strategy that makes sense - Buy and Hold - unless you can trade with the kind of size that Goldman Sachs or JP Morgan traders can have to push the markets around in your favor.

But here's something to think about:

Cycles dominate all Forms of Nature (human psychology, which informs Market pschology, which moves Market Prices must be considered within the Form of Nature).

But all the Forms of Nature appeat to be shiftling.

Take political pscychology: The Far Right has shifted so far to the right it's where the far far left used to be 40 years ago: Socialstic Totalitarianism.

And the far left has shifted to where the Far Far right used to be 80 years ago: Social Darwinism.

And even the Seasonal Cycles have shifted dramatically.  

Here in New York City, where I live, the winters used to be brutal.  Weeks on end with 3 feet of snow piled up, and sub zero temperatures with biting winds forced everyone indoors.  Summers used to be brutal with weeks on end of relentless 97 degree heat, and 100 percent humidity.

Now, for the last decade, at least, winters are progressively mild.  Summers are progressively mild.  The magnificent Falls we used to have are now confined to a few short weeks.  And Spring barely exists.  One day the trees are bare.  A week later everything is in bloom.  And every season starts a few weeks earlier than it used to start.

It's weird.  The seasons have totally shifted.  And it rains all the time.  It's like we've become the Pacific Northwest.

How?  Why?  I have no idea.

But if the Seasonal Cycles are shifting - why not other Cycles?

What if the 8 year gold cycle is now a 71/2 year cycle - or a 7 year cycle?  If you look at a chart it certainly appears that the gold cycles - and other cycles - are shifting both in duration and in the violence of the spikes - just like the weather.

Now, if that's the case, (and obviously this is entirely observational = not mathematical or scientific in any way) - but if this is the case, we are already well into gold A upwave of year 1 - and anyone waiting for a huge wave 3 downward correction to get in to this bull market is going to be sorely disappointed.

Just a thought.  Perhaps wishful thinking because I'm comitted.  I think even if we get a draw down it's termporary and you just tough it out because higher prices are ahead.

But a practical thought too.  Because when you wait for that perfect In point - you tend to miss the entire move.  Especially if your precious cycles have shifted.