HARD ASSET UPDATE: NEW DEVELOPMENTS:

As more and more investors turn towards hard assets new investment opportunities and tools are being developed.  Herein are a few that have caught my attention - though these are NOT reccomendations - just observations of things indicative of a growing trend.

1)  Chroma: Ancient Sculpture in Color: The Metropolitan Museum of Art has an amazing display of ancient Greek and Roman statues redesigned to display the original colors.  These are not for sale obviously, but they do bring antiquity to life and should provoke a new interest in ancient art.  It's extremely well done.

1) Masterworks.com: Where the average investor can buy a "share" of a "masterwork of art." Their own advertising describes them thusly: With over 215 employees based in New York City, Masterworks is the first and leading firm for buying and trading shares in multi-million dollar, blue-chip artworks. Build a diversified portfolio of iconic works of art curated by our industry-leading research and acquisition teams.

Interesting.  To me it's not really a hard asset since you don't physically own the asset, but still it shows interest.

2) Numisindex: an index of commonly collected lower end coins that tracks prices over time.  From their own advertising: the numismatic coin market index (numindex) is group of 30 coins, which circulated across europe. all 30 coins within numindex have been precisely selected by european numismatists to ensure them being relevant, affordable and pro tfitable. numindex shows price development of the mentioned set starting from 2018 till today. it enables a comparison of all coin prices from the index and to track the performance of the collection over time. general rules used for calculating numindex and details of each coin (including visuals) are available under coins.

The coins they've selected are what I would call semi-bullion.  They have a bullion value and collector value at the lower end of the collecting universve because they are so readily available.  But this also makes the very trackable.  Certainly it could have a use.

3) https://www.thenumisplace.com/  Numis Place is a new High End Coin Mall (which I have joined as Gold-stater.com),  From their own advertising: We are committed to promoting and supporting the highest standards in numismatics, providing a secure market place and the cultivation of friendships among dealers and collectors.  With this is mind, we have invited a selection of dealers to join The NumisPlace: an outstanding inventory of coins put together by some of the world's most prestigious coin dealers and accessible to all numismatic enthusiasts. Through joining The NumisClub, members will have access to important privileges such as early bird access to newly published coins on The NumisPlace and invitations to our members-only parties organized during major international coin shows.

It's a cool safe environment for purchasing real hard assets of value.

4) 

Bank of America Private Bank - Alternative Investments

: Every major investment firm now offers a similar "alternative investment" service to high net  worth clients: In the words of their own advertising: Real Estate & Tangible Assets: Active and passive investments in precious metals, commodities, real estate, infrastructure, agricultural land, timberland and natural resources.

Nothing really portable, more commodity based, but moving in the right direction.

5)  Walmart+  At the ame time, even Walmart is getting into Hard Assets: From their own advertising: 

Jewelry/

Collectible Coins & Bullion: 

Gifts they’ll treasure: Shop licensed collectibles.

They really do sell an amazing array of collectibles; mostly on the mass produced end of course but every now an then they slip in a real gem.

6) And of course the mass array of collectible shows and infomercials on TV right now.  Pawn Stars seems to be on 5 different channels 24/7 as do those shows hawking "rare - only 1 million minted" silver US coins.

GOLD: THE CASE FOR AND THE CASE AGAINST

 

Gold is a stability hedge.  So the case for gold includes everything that could seriously destabilze our economic system.  This would include:

REASONS TO OWN GOLD:

1)  If the liquidity crisis that is now affecting small to mid size banks across the nation, which is being addressed in a series of rolling bailouts, and several Fed programs which enable these banks to receive hundreds of billions of dollars in "loans" that provide liquidity, does not magically disappear over time. 

Rather 2) commercial real estate which comprises a large segment of small and mid sized banks portfolios morphs into a full blown crisis, taking down these banks and requiring the most massive bailout yet.

3) This crisis or any similar crisis forces the Fed to cut rates back towards zero fueling a new and more serious round of crushing inflation.

4)The current rise in interest rates causes not only a commercial real estate crisis (which is in progress) but also a crisis in residential real estate as risky loans to low income households have resulted in the debt burden and interest costs for homes to attain all time record levels.  And as households have to spend more  and more of their income to service these loans they have less and less to spend on anything else as they hurtle towards foreclosure.  The average debt to income in the US is 40 percent.

5) As every western economy is in exactly the same situation every central is being forced to print more and more money for bailout (or technically non-bailout) facilities for their banks causing debt to rise to levels that are impossible to service, we are hurtling towards a sovereign debt crisis.  It ma not happen tomorrow.  But it will happen.

6) The extreme financial repression that occurs from the bailouts shoveling more and more money to the richest percentile, while the politicians seek to balance the books on the backs of the poor by cancelling food stamps, and making medical care unavailble, etc etc thus fueling a populist rage that results in violence.

7) The rise of nationalisitic strong men throughout the west who seek to placate populist rage with trade wars, sanctions, hot wars, and the scapegoating or minorities continues to disrupt supply chains and make goods that are already expensive, unaffordable thus fueling a virlulent inflation - and disruptimg industry that doesn't comply with political strictures.

THE CASE AGAINT GOLD:

All of these problems magically disappear.  Or maybe they're just not nearly as destabilizing as they appear to be.  

COUNTER-PARTY RISK

 

One thing you never hear much about is counter-party risk.  In a society where major Fraud suits are being conducted daily against the largest corporations and the most prominent politicians you'd think counter-party risk would be on the tips of every investing tongue.

But it's not.  Yet.

Every paper and electronic transaction involves counter-party risk.

Yet just turn on the TV or the Internet and you are bombarded with ideas that will supposedly safegaurd your portfolio from risk.  Annuities.  Index-linked annuities.  Crypto.  Diversification.   Hedged portfolios.  Structured products.   AAA bonds. Options.

All of these and everything else besides US Government Treasuries involve massive counterparty risk.  OKay, FDIC protects you up to $250,000.   And Treasuries are safe.  Because the US has a printing press.  But if they have to run those presses overtime to pay off debts the dollars they print to repay your losses are worth less and less.  That is a real risk.

But what about those other safe investments?

Annuities are backed by Insurance companies.  Back in 2008 the world's biggest and safest insurance company AIG was the first to go bust.

Crypto must be traded on exchanges.  Once you use the exchange your are at the mercy of the exchange.  If it just steals your crypto - tough luck.

Every structured product has a counterparty, usually an insurance company.  

Every AAA bond has been rated by a ratings company that can be bought and have made catastrophic ratings errors in the past.

And as for options: 90 percent of them expire worthless - but remember - there are 4 quadrillion dollars worth of derivative contracts floating around the world economy - a fact that Warren Buffet calls the "Rel weapons of mass destruction" and they are all subject to massive counterparty risk.

The world of paper and electronic investments is riddled with counterparty risk.

Any corporation, trading house, platform, bank, insurance company etc can go broke and then the paper/electronic chit you hold is worthless.

How do you mitigate that?

Hard Assets.

Hard Assets exist in your possession in real time in the real world.  It's still there when the electricity goes out.  It's still there when your country's currency crashes.  There is no counterparty.  If you're worried it might burn up if your house burns down, put it in a vault.   When you want to sell it you arrange a deal with a buyer and when you receive your payment - however you want it - you turn over the real asset.  

The only risk is market risk as all assets rise and fall.  BUT

A) there is no Counter-party risk.

B) in an era of unlimited central bank printing of electronic/paper money real things priced in that money tend to rise over time.

So as we go forward and the stories of Counter-party Fraud mount and mount think about the one thing that protects you from a society that has a very blase attitude towards fraud:

HARD ASSETS

I'm not big on technical analysis but....

 

I'm not big on technical analysis but if it works anywhere it is within the context of long term cycles.  I've followed many techinical trading "systems' and talk about BS  designed to take the money of the gullible.  If any of them worked you can bet their founders would be billionaires rather than trading letter schillls.

However if you look at the 30 year chart from about 1995 to 2023 you can see we have just started to break out of a massive cup and handle formation - which is traditionally the most bullish formation in technical analysis. What it means is that over many cycles, with their own mini cycle lows, we've had a long term run up and then a massive 12 year consolidation in a cup pattern which appears to have broken out to the upside.

Personally, this is interesting to me only as a confirmation.   Because the END GAME TRAP that the world's central banks are caught in INFLATION OR LIQUIDITY CRISIS means that gold must rise as the system has become super unstable - with no apparant solution.

But the technical charting of this gives a picture that can be intuitively unerstood in this case.   So take it for what it's worth.

HOW DID WE GET HERE? AND HOW DO WE GET OUT?

 THE FACE OF INTELLECTUAL DEBATE IN THE US A GENERATION AGO: 

BUCKLEY V VIDAL

TWO ACCLAIMED AUTHORS AND INTELLECTUAL VIRTUOSI MAKING COGENT AND COMPELLING POINTS ON EITHER SIDE OF THE ISSUES

THE FACE OF INTELLECTUAL DEBATE IN OUR CURRENT ERA:

TWO ANGRY OLD MEN (AN ENTITLED TRUST FUND BABY AND A CAREER POLITICIAN) SHOUTING INSULTS AT EACH OTHER AND LYING THROUGH THEIR TEETH ABOUT ANYTHING THAT POPS INTO THEIR HEADS

It would be funny, right, except the problems these two have to solve include:

A) An unprecedented debt and liquidity probelm (like either of these guys understands the mechanics of liquidty) in the face of

B) An unsolvable Debt problem (when one of these guys brags about how much debt he's defaulted on and the other thinks you can spend your way out of a debt problem)

C) and a Generational Inflation problem resulting from de-Globalization trend that is intensifying at a rapid rate.

ADD TO THAT:

D) A Generationl Energy crisis wherein the west is trying to contain a virulent climate problem while still running its entire industry on fossil fuels.  And Meanwhile, Opec, once a protectorate of the US has now become a protectorate of China.

E) A hot war in an area of the world that controls a huge amount of the worlds' Grain and Oil and Gas.

F) Generational Domestic Gun violence crisis wherein kids don't want to go to school because they're afraid to die - at a time when school test scores are already at a muligenerational low.

F)  A Domestic Crisis wherein folks in either party no longer compete in the realm of ideas but simply loathe one another and wish them dead.  And calls for breaking up the union are a regular event from members of congress.

G) The rise of CHina.  Which could easily be treated as a dangerous but rational competitor.  But instead is being treated the way we treat anyting we don't take the time to analyze and understand anymore: As an object of violent hatred.

What's an investor to do?

Buy Gold.

Buy Hard Assets.

WHAT MAKES GOLD RISE?

 

There are those who believe that gold is simple.  It is an inflation hedge.  It runs inverse to the dollar.  Just figure out the Real Interest Rate (nominal minus inflation) and gold is a guage of how negative that is.

But all of these things are symptons.

Gold is a stability hedge. 

Inflationa is destabalizing.  A falling dollar is destabilizing to dollar denominated assets.  Negative Real rates destabilize an economy.

But is it the instability that gold measures.  Some stability factors are obvious:

As the dollar weakens as a result of a weakening economy - or as a result of other countries moving away from using the dollar to settle large international commodity trades - like oil - gold must rise in dollar terms. 

As the US government piles up debt and must issue more and more dollar denominated debt to fund itself, and corporation must issue more and more dollar denominated debt to fund themselves and consumers go into debt to fund themselves more and more dollars chase fewer goods.  This is highly unstable and inflationary.  Gold rises.

Also as the economy weakens yet the Fed is unable to support the risk markets because of inflation this is very destabilizing and it takes away gold main competitor.  Thus  gold rises.

These are the obvious driver of gold and right now these drivers alone are very destabilizing to the economy and hence very supportive of higher hold prices.

But we live in a uniquely unstable period.  Politically we have politicians at the highest level devoted to destabilizing the judicial system.  This is tremendously deleterious to the dollar which depends on having the world's most stable judicial system in which to settle dollar denominated contracts.  Creating doubt in that system casuses more long term instability than almost anything else.

Internationally we have entered a period of De-GLobalization, Eastern Bloc BRICS + are seen less and less a healthy competion to the Western economies and more and more as Enemies.  It is impossible to stress how destabilizing that is for the global economy and how inflationary that will prove to be in the long run.

And finally gold more than anything measures confidence in the global Central Banks.  As these Central Banks begin to lose their abitlity to support the risk markets without causing massive inflation the rising price of gold is a measure of public loss of confidence in them.

So if you see the intstability you should buy gold.  If you don't see it, or you just think it's a lot of overblown hype - there's no need.

CENTRAL BANKS CONTINUE TO STOCKPILE GOLD - ESPECIALLY BRICS +

 

Central bank gold buying update: 2023 sees the strongest start to a year in more than a decade

The gold market continued to receive support from central banks as countries kept adding gold to their reserves in February, marking the strongest start to the year since at least 2010, according to the latest data released by the World Gold Council (WGC).

Global gold reserves increased by 52 tonnes in February, rising for the 11th month in a row, the WGC said Tuesday. In January, central banks bought 74 tonnes of gold. And that follows record levels of last year, with 1,136 tonnes purchased.

Year-to-date, central banks' net purchases stand at 125 tonnes. "This is the strongest start to a year back to at least 2010 – when central banks became net buyers on an annual basis," said WGC's senior analyst Krishan Gopaul.

The biggest purchaser in February was the People's Bank of China, with 25 tonnes bought. This was the fourth monthly increase for China, during which the PBOC added 102 tonnes of gold.

The Turkish central bank bought gold for the 15th month in February, adding 22 tonnes to its reserves. Turkey was the largest gold buyer last year.

Also, the Central Bank of Uzbekistan added eight tonnes, Singapore bought seven, and the Reserve Bank of India added three.

The February data excludes newly revealed Russia numbers, the WGC added. Russia disclosed that it bought one million ounces (31 tonnes) of gold between February 2022 and March 2023.

"Based on the new information, gold reserves now account for 24% of Russia's international reserves," said Gopaul.

GOLD: THEY DON"T RING A BELL WHEN THE FED PIVOTS

 

Everyone knows that when the Fed "pivots" the gold price and all finacial assets should skyrocket.  The reason is that with so much debt in the system and so much embeded inflation, tight money is bound to cause liquidity crisis and a pivot will come as a result of crisis and not achieved obectives.

This will result in the return to highly inflationary loose money.

But the markets keep churning in a fairly directionless way as traders look for clues.

The problem with so many investors is precisely that they are "traders" and not investors.

This is especially true for gold.

If you are a trader you are looking at all sorts of micro economic signals that show where the Fed might be headed.  CPI, Housing Starts, Consumer confidence, PCE, MI, M6, credit spreads, blah blah blah.

Or  worse you're reading technical indicators.  That is a true fool's game.

And you're scouring the Fed minutes for clues.  Following minute changes in the dot plots.  Listening to the speeches of regional Fed heads for hints of dissent.

That's great.  Everyone needs a hobby.  And the stuff can be fun.  At least I find it fun. To a point.

But the only way to make money in gold is to have a broad macro understanding of the overall direction of the quantity and flow of Debt and Money (which are two sides of the same coin) Nationally and Internationally.

The rest is noise.  If you don't understand what that means, find out.  It's not that hard.

Basically it has to do with whether central banks are tightening or loosening overall, and who is receiving the funds and what they are doing with them.

To this end everyone is looking for a Fed "pivot" right now.  That means they are looking to see when the Fed moves from tightening to loosening monetary policy.

But nobody will ring a bell.  

The truth is this: The minute the Fed and the Treasury agreed to bailout SVB - the "Pivot" happened.  Because Trillions were injected into the financial system.  And trillions more were pledged.  And they will be provided as needed.  And they will be needed

It doesn't matter if we get a few more quarter point hikes.  It doesn't matter how tough the Fed talks.  It doesn't matter what happens with the "dot plot."  It doesn't matter what the month to month Employment readings say.  Or the CPI readings.  

All those things can affecty the markets on any given day.

But all that really matters is that rates, having hit about 5 percent, were as much as on over-indebted economy could stand and it began to break.  Rates can go no higher without massive bailouts that will dwarf the scale of the 10 trillion dollar covid bailout, or the 3 trillion dollar housing bust bailout, or the Trillion dollar S and L bailout.

In other words we can not control inflation in the long run with as much debt as we have amassed in the system, wihtout breaking the system.

Get your head around that - or go broke.

That's all you need to know about the overall direction of gold.

If inflation soars gold will protect you.  If we break the system gold will protect you.

If you try to trade it, you'll lose your position as there are huge traders out there who can push the paper price 100 dollars in a few minutes on any given day.  The real bullion price rarely reacts to these paper raids.  But if you are trading GLD or Gold Stocks, or gold futures you will lose your position.

For the average gold investor you buy as much real gold as you can stomach and sit on it.

Or you buy gold coins and medals if you understand that market.  They will benefit greatly from the appreciation of the bullion market.

Or you buy any intrinsically valuable Hard Asset you undetrstand.  It will appreciate in the same way for the same reasons.

If you can't afford gold you buy silver.  It acts the same way in this situation.

And silver has been catching a bid - even on days when gold is down.  That shows people are intuitively grasping all this.

If you agree with the macro premise, you only need vison patience and conviction - and a little disposable income.