The Pause that Refreshes

 

Gold has paused around the $2500 level.  Nothing goes straight up.  And we've hit a concensus: wait and see area.

Meaning: Do we have a soft landing?  Does inflation pause here and then dip back down into the Fed range - or does it ratchet back up?  Who wins the election and what does that mean for the economy?  Both wars appear to be out of mind and in permanent holding patterns with no solution in sight but with nothing materially worse in store.  Everything is on pause.

Or so it seems.

And gold like all risk assets performs in the short short run according to how "it seems."

And now, especially a world of social media where everything is relative, one truth is as good as another, and every possible truth can be found in any number of massive media echo chamber: How it seems is how it is.

But the difference between how things appear to be going and how they are going is a distinction that can leave you well off or destitute.

How things are going are thus: We are drowning in debt.  Both candidates are pledging massive amounts of addtional debt.  Inflation in real things can and must continue to spriral out of control.  The participants on both sides of both wars have pledged to continue their wars until one side attains a complete and total victory and the other side is wiped out.  There will be no compromises of any lasting value.  All commodities thus affected, especially oil and grain will over time become severely disrupted causing even \greater inflation, and ever greater global instability.

And our country is hopelessly divided by a hatred born out of the need to blame something more concrete than Negative Real Rates for our physical deprivations.  And the debased human opportunists who feed off this hatred.

That is happening.

Who cares how things seem right now?

(The markets - in the very short run)

In the long run everything is clearly pointing towards a higher gold price.

GOLD COLLECTOR COINS RULE #1

 

You may just want to buy bullion.  You may want to buy limited edition bullion for slightly more money.  There is nothing wrong with that.  In fact it's the smartest thing you can do unless you have some expertise.  The bullion price is very likely to double from here as long as the debt trajectory remains as it is.  And both presidential candidates are guaranteeing an orgy of debt.

However, if you do want to wade into collector coins.  Let me offer up one preeminent rule of thumb.

Buy something you really love,

Don't try to game the market and figure out the things most likely to rise from here.  

Don't jump in and momentum bid.  That works sometimes with stocks.  But with collector coins, because of the hammer fees you probably won't do that well.

Now, many people advise against collector coins altogether.  However if you go to Numisbids you'll see dozens and dozens of auctions full of collector coins going off every day, every week, every month.  So a lot of people are into it.  And some of them are pretty smart.

I can't tell you what to buy.  There's Ancients - Greek, Roman, Byzantine.  There's Medieval.  There's world by countries.  By Empires.  By issue types.  Coronation issues.  War commemoratives.  Historic Cities.  Historic Rulers.  It goes on and on.

But start with something you just think is amazing and would love to own.

It sounds simple but so many people try to outhink or game the market.

The thing is, if you find some coin or medal to be really beautiful, or historically important, you're probably not alone.  If you think something is amazing you'll probably find a community that also appreciates the same thing.  

Above is pictured the world's first gold coin.  When I first learned you could buy one of these 2500 year old objects on the open market, I was truely amazed.  I couldn't believe it.  And at the time they really weren't very expensive.  You could pick up a really nice one for maybe $4000.  Now it costs a lot more.  But really, compared to a painting by Basquiat that's all of 40 years old it's still incredibly cheap.

I also fell in love with this:

I bought a nice one on ebay for $2000.   I had to think long and hard.  I didn't really know what is was.  But what crasftmanship!  The portrait is amazing.  And it dates back to 1821.  There's some good history there.  Now a nice one is ten times as much.  Still, compared to a lot of things, not that much.

So buy what you love.

It's always best.

SOFT LANDING: DEVIL'S ADVOCATE EDITION

 

Everyone's hoping for a soft landing.  Of course.  Who doesn't want no consequences for massive deficit spending?  And it's possible.  The thing about consequences is you know they're coming, but you never know when.  They could be years off.

However - if we were to play Devil's Advocate here are a few caveats:

1) The Yen carry trade. Everyone assumes Japan has backed off their idea of rate hikes after the world almost collapsed when they hiked 1/4 percent.  Everyone, that is, but Japan - who say they are going to keep hiking at least to between another 1-2 percent.  Imagine if they do what they feel is right for Japan and decide not to care if investors in the US lose money.  Wouldn't that be weird?  And scary for the market:

We don't know how many trillions upon trillions of dollars are still short the Yen so that they could be invested in US risk assets.  Imagine if they had to be all unwound at once?

2) The Pension Fund/ Private Equity time bomb.  Most State pension fund officers are political appointees with no finance background.  They've decided to trust the well meaning Private Equity folks like David "Howdy Doody" Rubinstein etc who have loaded them up with hundreds of billions of completely opaque asset bundles..  They can't tell them what's in them because then the competition would know and copy their strategy and it wouldn't be worth so much - but don't worry - the PE firms will let them know on a mark to model basis how much they're up every quarter!

Really, I'm not joking.  Imagine these had to be marked to market at some point.,,

3) AI.  Lot's of AI is being bought up.  So AI firms are making big profits  This should drive the new productivity miracle.  Here's the problem: There is, so far, no way to monitize AI.  Because AI is great at collating enormous amounts of information.  But it is lousy at making sense of it.  It can't tell the difference between something a Pulitzer Prize Winning historian wrote about World War II, and something some Moron Blogger wrote about World War II.  And it's liable to conflate all that random information into a meaningless word soup.  That's fine if you're using it for your blog.  If you're using it to produce information that's liable to get you sued if it is wrong - Like any major coroporation - it's worthless.  Ask any lawyer.

One day they'll work that out.  Right now it's way in the future.

4) Just imagine that anything in the market causes a small crash.  Nothing spectacular, but enough to scare investors out of overly leveraged positions.  Imgaine that the employment data starts to fall off a little more than even the last massive downward revisions indicate, because, after all, employment if the most lagging of indicators .  Imagine then that inverstors get the idea that the Fed is once again BEHIND THE CURVE.  Imgagine.  That might worry some people.

5) Imagine that either candidate gets elected and starts to carry out their stated agenda.

6) Imagine that either Ukraine or Gaza blows up to the point that the oil market gets disrupted and the price of oil shoots up?

Anyway, it's easy to play devil's advocate. Everything is probably A OK.

Still, a little gold might be a prudent hedge against all those far out scenarios.

GOLD AND THE ELECTION

 

The Fed has confirmed its widely anticipated pivot.  Still, big positive news for gold and all commodities priced in dollars.  

Some technical models call for gold to have one more big dive before it takes off to $3000 and beyond.  But technical models are just that: models.  They don't take into account facts on the ground like two hot wars that could  blow up at any time, a risk asset bubble that could blow at any time (think the yen carry trade), and and US election that could blow up in any number of ways.

So - the election.

We must take the candidates at their word and the their record at this point.  So there are three possible countcomes.  However, to me they appear to be all extremely positive for gold.

A) Republican candidate wins.  He has pledged Massive Tarrifs and trade wars and he has also pledged to take control of interest rates - which means take them back to zero.  His background is real estate.  Real Estate thrives on zero rates.  Unfortunately everything else but hard hard assets suffers tremendously from zero rates which destroys the dollar and creates massive inflation.

The tarrifs have an historical antecedent: the Smoot Hawley Tarrif act of 1930, which is largely credited with turning a recession into a depression. It also caused Global Trade to plunge by 52 percent.  Think of this as Smoot Hawely on steroids.  Smoot Hawley was enacted  just after a massive risk asset bubble popped.  Ours has not yet popped.  But it is a larger bubble, and if the employment revisions and the debt levels are any indication - it is not far from popping.  So I can't think of anything tarrifs would be good for besides GOLD.

B) the Democrat wins.  They will fight inflation with possible price controls - which have a historical antecedent: Nixon's economic stabilization act of 1970 which had a chilling effect on the economy causing affected businesses to pull back heavily on production.  The other ideas of the Democratic party all involve printing more money to help more people.  While this is not as disastrous as the current Republican ideas it still leads to the ever continuing destruction of the value of the US dollar.  In other words - the status quo.  Excellent for Gold.

C) The Republicans lose and then repeats their behaviors from the last election and calls for civil war.  This can not be discounted.  In fact it seems likely.  Especially since if they lose the republican candidate is facing jail time.  Whatever the result of this you can bet heavily it will create a domestic panic into GOLD.

So - it's tough to see how Gold doesn't thrive in this environment.

DEVIL'S ADVOCATE;  What would be bad for gold?

A political candidate comes along and says: "We have been living far beyond our means on borrowed money - as a Government - as industry - as individuals.

"We must tighten out belts, stop borrowing, live within our means, and let spendthrifts go bankrupt. Rates will have to be set by the market so they will remain permanently above the real rate of inflation.  That's where they naturally belong in a real free market economy.  This will be very painful for the next 5 to 10 years: many banks will go under.  Many businesses will go under.  But it will leave our children a much better economy, after a period of sensible restructuring, hence a better world.   Isn't that worth it - for our children's sake."

HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA

Don't hold your breath.

Buy Gold.

 

Fed confronts up to a million US jobs vanishing in revision

Augusta Saraiva

Tue, Aug 20, 2024, 6:00 AM EDT4 min read

1.5k

In this article:

• ^GSPC-0.20%

(Bloomberg) — US job growth in the year through March was likely far less robust than initially estimated, which risks fueling concerns that the Federal Reserve is falling further behind the curve to lower interest rates.

Goldman Sachs Group Inc. and Wells Fargo & Co. economists expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated — about 50,000 a month.

While JPMorgan Chase & Co. forecasters see a decline of about 360,000, Goldman Sachs indicates it could be as large as a million.

A 500,000 revision would wipe out 1/4 of the year's reported employment.

A 1,000,000 revision wipes out a half of all reported job gains.

The figure will be reported tomorrow.

SO YOU WANT TO BUY SOME GOLD?

 

So, you've decided maybe to protect yourself with some gold.  You've overcome your internal objections:

A) It's already so expensive!  (Not compared to where it will be as the debt bomb expands.)

B) I don't know where to buy or how to store it.

Here's what you do:

1) Stacks Bowers has a weekly bullion auction.  You bid by .1 percent (1/10th of one perent) increments over the bullion price of gold (starting at .99 percent..) so you get your gold or silver  at the most competitive price. 

I get nothing From Stacks for this.  It's just the best deal on bullion.  

You buy some bullion and hide it anywhere,  It's very small in size.  Easily hidden.  Or put it in a safety deposit box in the bank.  

Unless you're super rich then you deal with someone like Mathew Pipenburg and you buy pounds of gold and store it in his vault.

DO NOT TRADE PAPER GOLD.  It's extremely volatile and you will be forced to sell at a loss on one of the planned Fed raids on the gold price. 

2) If you are a little more adventurous you can buy limited run gold in any number of Heritage weekly auctions.  All the european mints put out limited (1000 piece editions or less - down to editions of 20).  You bid on them at weekly auctions so again you get the most competitive price.

Some of these have taken off and doubled in the last couple of years.  French 5 franc piedfort gold Roty sower coins in editions of 200 are at least double bullion price.  Some in low mintage are triple bullion. Peruvian 100 soles and 50 soles in ms 65 66, 67 have doubled and tripled.  Certain British mint limited editions like the Three Grades or the VIctoria Gothic head gold one and two ounce coins have doubled and tripled.  And just recently the French Gold Angles of 100 francs from the turn of the 20th century have taken off in higher grade.

You need to learn about this market.  And the ones I've mentioned have already taken off.  But there are many to choose from.  Some from the Dutch mint have great images that resonate with early US coinage and those are still closer to bullion for example.  There are Modern Cuban and South American that I'm not so familiar with but they are becoming popular.  And of course there's the Chinese mint which has a plentiful and varied output.  Some are already popular.  More recent issues trade close to bullion and some are in very low mintage.

I get nothing for this from Heritage.  

But the great thing about Stacks and Heritage is they both have excellent customer service and are fully insured against mishaps - like mail deliveries that don't arrive for example.  

Also, check out the bi weekly CNG auctions for US mint gold at good prices.  They got a big consingment of US gold but it won't last for ever.

I get nothing from CNG by the way.  But again, a good honest company.

So get started.  The gold bull is only just beginning.  It will run until the major first world countries sort out their massive debt problem.  That's got to take at least 3-5 years.  Optomistically.

And if they can't sort them out without World War III then you will really need the protection.  

STILL WAITING - FOR ANYONE IN THE US TO NOTICE....

 

Gold just closed over $2500.

No unusual geopolitifal event transpired.  (for these turbulent times.)

No unusual economic print.  No unusual interntational economic event (like last week's Japan carry trade fiasco.)

No sudden bunkruptcy (other than the normal parade of  bankruptcy belying this fantastic economy)

Just the normal boring old story of the world drowning in so much debt while no politician is even willing to broach that boring old story.

Meanwhile... Gold broke $2500 in a new closing high and still nobody in the US is noticing.  Still no stock broker at any major brokerage is reccomending a gold exposure.

Still the average portfolio contains a 1/2 percent exposure to gold whereas the long term average is 2 percent and in times of turmoil often reaches 5 percent.   

That's pathetic head in the sand behavior.

And still both candidates, Republican and Democrat are proposing bold new economic plans that promise to boldly increase the debt!

Republican: Tarrifs, Trade war and take rates back to Zero!  (hyperinflation)

Democrat: Price controls, and a general increase in benefits. (stagflation)

Two bold approaches to massive new debt burdens.  (Anyone who thinks either approach is anything but massively inflationary please pull your head out of the sand.)

But there is a good reason:

A) because there is no easy solution.  Every bank in the country including the Fed is bankrupt on mark to market accouting.  The Federal government is in permanent trillion dollar a quarter budget deficit.  And interest rates can not be brought down much lower without restoking the virulent inflation that is now a part of every day life for every American.  And every European.  And every South American   And every Russian, Chinese, Indian etc.  

The only way out is to inflate your way out of debt.

B) because any other real solution would involve massive short term pain, which is political suicide.

But you can not run an economy on a permanent deficit spending regiem without eventually causing virulent inflation - or a virulent debasing of the currency.  Two ways of saying the same thing.

And eventually has become NOW.

Why gold has chosen this exact moment to register an economic consiousness that the debt is out of control is a mystery.

But it has.  

Not to say it's straight up from here right now.

But over time.... it's straight up from here.

GOLD - STILL WAITING... But.....

 

The world may be deglobaizing - in other words operating with less cooperation and more animosity and friction - but it is more interconnected every day,

Troop movements on the Ukraine Russia border, Rockets launched over the Israeli - Syrian border, cause massive volatility in oil and gold markets.

An interest rate hike in Japan causes an unwinding of the yen carry trade and global markets fall thousands of points in minutes.

Retail sales comes in a touch stronger than anticipated in the US and global stocks soar.

The Chinese housing market has a bad print and copper and lumber prices tank,

And a day or two of relative calm can cause global markets to spike upward in manic relief untethered from any objective reality.

There are is only once constant in all this:

Debt is now the fuel for all financial liquidity.  And Liquidity drives all the global markets.

That's a tremendously complex thought if you want to break it down and really understand the myriad components of debt: debt creatd by the global central banks, Debt created by the global Treasury departments, Debt created by the Shadow Banking system of Private Equity, Private Lending, Hedge Funds and DeFi shadow banks.  Bundles of debt tranches sold into all the pension funds.  Debt derivatives sold over the counter.

This debt is measured in the quadrillions of dollars.  Or not really measured at all anymore.

And no politician is even talking about it.  Because nobody wants to hear about it.

It's boring.

Try talking to somebody about the debt problem and watch their eyes glaze over.

Trump talks about Trade Wars and taking control of the fed so he can control rates.  That's a sure fire recipe for creating massive new amounts of debt.

Harris talks about stopping corporate price gouging.  That will bring prices down at the fringes.  But it does nothing to adress the debt problem.

Name any politician world wide who even dares mention debt?

The problem is so big it's become invisible.  It's like a malignant blood cancer that can't be seen, and sometimes appears to be in remission,  but it is lethal all the same.

But everyone who understands this problem is buying gold.  China, Russia, Saudi Arabia, India, The Global Billionaire class.  

Only some of that is reflected in the offical gold price.

But when the debt does become visible trhough a bank collapse, or sovereign bond sale that goes awry, or a currency trade that has to be unwound by millions of traders all at once, or a spike in inflation or a war that has to be funded with massive printing etc etc etc

Then the gold price leaps up by a hundred dollars in a day.  

And suddenly everyone wants in on the trade.

We're obviously not quite  there. 

But the greater the debt....

Nearer we get to the end game.

AUGUST 1: WHAT DRIVES GOLD FROM HERE?

 

Gold is firmly esconced in new high territory around $2400.  Anyone waiting for one great drop to get into this raging bull could wait a very long time.  A quick dip is always possible of course, but a much more salient question is what could drive gold higher from here?

The Fed is done raising.  Not because inflation has been beaten but because everyone realizes that with hundreds of trillions of dollars of debt in our system rates can't go any higher without provoking a crisis.

So Fed cutting is not likely to drive gold much higher.  That's been baked in for a while.

And that's what Americans are used to looking at as the great indicator.

So: What is likely to drive gold much higher?

The unexpected.

Here's a list of things that are happening as I write that nobody in the US is paying any attention to - so if they intensify to the point where Americans start to notice gold will soar:

1) Russia hosts the Brics in October.  The Brics now include many of the middle east oil producing countries, the South American oil producing countries, and many of the African mining economies.  IF anything that represents an intensification of the DeDollarization process  - that is the entire point of the BRICS movement - intensifies at this meeting - or APPEARS to intensify at this meeting - fears of dollar depreciation could make gold soar.

2) Escalation of the middle east war that comprisises much of the oil producing world.  Iran backed by China and Russia is fighting Isreal - backed by the US and Europe - through Hezbollah and Hamas - and DIRECTLY.  The US media talks about possible escaltions.  It is escalating.  The qestion is when we notice.  Probably not until after our election.  But we could be forced to notice at any time.  Then fears of WW III will make gold soar. 

Also - for those who think that the US can be energy independent then it won't matter - that's stupid.  A) we have plenty of oil - but all the cheap oil has been drilled.  The remaining oil wll be eincreasingly expensive to drill.  In other words, Highly Inflationary.  B) No matter how oil independent we are, war in the Midlle East means the closing of shipping lanes through which most of the worlds goods are transported.  This will be highly inflationary.  C) War is highly inflationary.

3) Breakdown in norms of civility in the US.  This has reached a point far beyond anything I could ever have imagined, and I remember the Viet Nam era.  We're way beyond that in terms of  corrosive civil discouse.  As this worsens violence will follow and gold will soar.

4) Finally whenever the Debt problem -which is insolvable - except through Default which will cause endless depression or massive inflation - whenever this comes to the fore of US consciousness through cor;porate defaults, bank failures, mass layoffs. yield curve control, currency dislocations - all the things that regularly occur through the accumulation of massive debt - gold will soar.

If you don't think any of the above is likely - well you're in the club of mainstream american consciousness.  So you don't need gold anyway.  Everything is fine.

If, like me, you think everything above is occuring to some extent and it's just a question of when  it will intensify to the point where everyone will have to notice then the question of when gold soars is simply a question of when everyone will notice.

I'd say soon for some or all of it.

So how high is Soar?

Well, right now the US investor has allocated Half of one percent of their portfolio to gold.  The long term average is 2 percent.  At times of stress this has gone to 5 perecent.

You do the math.