The First World Follows Japan into Hard Investments

 

If  you follow the brilliant Youtube WEALTHION series you may have noticed more than one anyalyst has remarked on how Japan's extroardinary forray into unconventional financial innovation has been at first mocked, then accepted, then followed by other Western Economies.  They were first to go to ZERO rates.  Absurd! cried other Western Economies.  Soon Everyone was at Zero rates.  Then Negative Rates.  Then Quantitative Easing.  Everyone has followed every step of the way.

Now Japan has adopted yeild curve control.  Something that certainly can't work without destroying the currency, right?  Well yesterday Great Britain entered the yeild   curve control club with a policy of buying unlimited amounts of long dated gilts.  Can the ECB be far behind?  I doubt it.

And in the end the US will be there too.  It is inevitable.  It's that or let rates rise above the real inflation rate and try to service the massive debt at 10 percent or higher.

What does that mean for you investments?

Well, if we look at Japan as the model for the financialization, let's also look at Japan's investment model.

For many years now Japan's wealthy investing class has been scouring the world for High End Hard Asset Collectibles.  They invest in evetrything from high end fine art to Original French Dadaist first edition books to Chinese porcelains to Ancient Gold coins and to Gold Historical Medallions.

Americans have been slow to enter this field of investment because Stocks and Bonds have been hammered into the general consciousness.  But the value of all paper assets is now finally collapsing under the deluge of Credit/debt where Global Debt to GDP is now about 400 percent, not including another  10,000 percent in Debt Derivatives. 

The collapse will not occur all at once.  There will be counter rallies - some be violent and lengthy.  But the collapse is inevitable because the Disenflationary Globalization Movement that worked to keep inflation under control for the last 40 years has reversed into a vicious DEGLOBALIZATION which is now working to magnify the inflationary impulse of unchecked money printing.  

So what can you do?  I say follow the economy that has been leading the way all along.  Invest in Hard Assets.  They will keep you safe.

Major Hedge Funds like Black Rock and Blackstone have already developed Alternative Investment funds to exploit these areas.  But Hard Asset investing (It used to be called Collectibles - but that sounds so childish!) is really in its infancy.  

How to start?  Find something in which you have some expertise and then start collecting .  Hot areas now include Sports Cards and memorabilia, Entertainment Memorabilia, Coins, Stamps, Medallions, Cars, Waches, Wines, Historical Documents, Jewlery, Sneakers (!) First Edtion Books.

Real Things.  Not imaginary paper - or electronic tokens.

If you're thinking crypto or E-tokens or NFTs - I know it sounds cool.  It sounds like the future.  It's not.  Don't get fooled by words like decentralized.  Everything electronic is subject to government control and ultimate government confiscation.  If you don't think the government is lurking in every corner of the dark web, you're a fool.

You can't hide your cryptos in a hole in your backyard.

The future is back to the REAL.   

HARD ASSETS VS COMMODITIES PART 2: INVESTMENT GOLD

 Sold on Sep 25, 2022 at Heritage Auctions for:

$3,840.00

Fungible 1 ounce gold pieces are selling at about 12 percent over spot.  A good premium.  High Grade Collector gold bullion is selling at about 200 percent over spot.  This coin is not a short print for the series.  It is a nice grade but not extraordinary.  This is just the state of the Hard Asset market.   Educate yourself.

Republic gold 100 Soles 1963 MS65 NGC, Lima mint, KM231.

Metal: Gold
Weight: 46.8071g
AGW: 1.3543oz
Melt Value: $2,227.82
Gold Spot: $1,645/oz (09-25-2022 7:33PM CT)

THE DIFFERENCE BETWEEN COMMODITIES AND HARD ASSETS

 

During periods of inflation both commodities and hard assets are supposed to serve as portfolio hedges.

But at the moment only one of the two are working.

That would be Hard Assets.

Why?

Quite simply because commodities are priced in dollars.  Gold is traded internationally in US dollars.  Oil is too.  So are many base metals and so are many agricultural commodities.

So right at this moment when the dollar is on an unholy tear against every other currency on earth, commodities priced in dollars are getting slammed.

Hard Assets are priced in whatever currency is in effect in the country to which you sell them.  Hard Assets in this sense are free from the constraints of the global currency system.

This is precisely one of the attributes that make hard assets so valuable during periods of sustained financial instability.  Their value is intrinsic and not tied to the value of any particular currency or financial system.

Therefor an ounce of bullion gold has lost about 20 percent of its value during the recent downturn.  However an ounce of gold with some collector value - for example short print British mint favorites, short print China mint favorites, short print Paris mint favorites, low mintage 100 soles gold coins. High grade french 100 franc angels etc etc have not lost any value..  Some are still edging up in value.

Because the numismatic value puts them into the category of Hard Asset: an asset that has artistic/historical/rarity value. Or what Marx called Fetish Value.

And as the financial stability continues as it will the value of Hard Assets will continue to rise.  

At some point the Fed will pivot, the dollar will drop shaply and dollar denominated commodities will shoot back up.

At some point China/Russia will introduce a commodity backed currency that will throw the entire global currency system into the chaos of a new phase.  Who knows how commodities will respond.

But Hard Assets will continue to rise.

The international financial system has never been in such a precarious situation.  Debt combined with DEGLOBALIZATION which makes inflation a major problem into the foreseeable future - combined with an incipient East West Global War - has created an instability unlike any seen in the modern age.

Those who don't understand the problems that accompany deglobalization will make the terrible mistake of assuming inflation is transitory/   It is not.  Yet central bank tightening will not be tolerated for long by a system drowning in debt.

Hard Assets will protect you.  It's hard to think of another asset class that might also protect you in this situation

COIN SCHOLARSHIP: SCHOLARLY INTERPRETATIONS ARE WIDE OPEN

 

There are three kinds of history.  A) what really happened; Nobody knows beyond the most basic facts, and even those are often in contention.  B) What the victors said happened in contemporaryt texts.  C) What certain historians try to reconstruct according to their interpratations of older texts and archeological discovery.

Where does coin history come in?  Coins are archeological artifacts.  At best they will have pictures of rulers and dates on them.  In this case we know who issued the coin, where they ruled and when.  

Of course many coins, especially archaic coins, have no writing and only pictures of mythological creatures.  It they are found in situ archeologists can date them and place them according to objects tht do have writing or images of rulers or other objects that are carbon dateable, that are found with them in situ.

If not, it's all guesswork.  Some guesswork is better than other.  Die studies is a form of guesswork that has some merit.  Mettalurgical analysis provides clues to eductated guesses. as certain metals are found in certain combinations in certain places.  And symbols provide clues for educated guesswork.

But take the beautiful Hekte (sixth stater) above.  Coin history dates this to 454-427 BCE to the island of Lesbos.  That is all guesswork.  Could this coin be dated to 480 BCE or 520 BCE or 550 BCE?  Of course it could.  It could possibly be dated to 600 BCE.  That would push back older coinage with no images and crude punches closer to 700 BCE where the archeological community places it, and that creates lacunae in numismatic chronology that numismatists find uncomforatble.  But those are not historically compelling reasons for dating a coin.

What about the images?  Coin History has decided that the obverse is a satyr and the reverse are rams butting heads.  It says so right on the holder.

Why?  The image could be a satyr.  But then why is it adorned with a Diadem?  An uncomforatble anomoly.  Wouldn't that make it an image of a king?  And what king had Donkey Ears?  King Midas springs to mind - and who better to depict on a Gold Coin than the Mythological King that fell in love with gold and was punished witht the Golden Touch?

And what of the rerverse,  Could these be Rams butting Heads?  Sure.  But why?  Why pair that image with Midas who has no connection to rams.  However this image is also the way the Golden Fleece that the Argonauts sought has been depicted throughout history.  Would that not be an much more compelling image: Gold as the object of Human Desire to pair with the King who prized gold above all else?

I think so.  But that's just my interpretation.

What's yours?  

One of the things that makes coin collecting/investing so much fun is that interpretation, dating, and historical analysis is so wide open.  So discovering the past becomes a live and engaging intellectual pursuit rather than a rote recitiation of "facts."

As the Fed raises the Fed Fund rate interest payments go hyperbolic

 

Unsustainable is a word that describes so much of the current economic environment.  The Fed raising rates into a slowdown for example.  They can do it for so long but as they do several obviously unsustainable things happen at once.

For one the interest payments on the ballooning federal debt (which soared an astonishing 25 percent during Trump's 4 years) become obviously unsustainable.  Receipts are declining as payments are rapidly rising.

For another thing US households are in the exact same boat.  Declining income as adjusted for inflation with soaring debts that are ever more expensive to service.

And corporations are in the same boat.

To make matters much worse, these are cumulative numbers.  The trouble comes when you strip out the healthiest One percent.  The vast majority of households, and corporations are in poor shape.  The wealth - and market share of the one percenters make the numbers seem far better than they really are.

Just because Walmart is still doing well.  And Blackrock is doing well, and Chase Bank is doing okay doesn't mean that when JC Penny and Archegos and Washington Federal go under the ripples won't be felt across the economy.  

As the Fed keeps tightening into weakness eventually someone big and unexpected will go under.   

Or the Fed will realize its course is unsustainable and there will be a pivot that sends inflation spiraling back up.

I'm afraid those are the the two outcomes.

And when we get to either one, you'll want to own hard assets.