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May 5, 2021

5.5.21 - Yellen Says "Rates Will Have To Rise"

Gold last traded at $1,784 an ounce. Silver at $26.49 an ounce.

NEWS SUMMARY: Precious metals held their recent gains Wednesday on bargain-hunting and a flat dollar. U.S. stocks churned near the flat line after major tech stocks gave back an early attempted rebound.

Gold tailwinds, Fed hot air and silver’s inevitable rise -Gold Switzerland

"In a 19-minute MAMChat, Matterhorn Asset Management principals Egon von Greyerz and Matthew Piepenburg address critical data points related to precious metal price conditions. Specifically, they discuss (and make sense of) ongoing shifts in inflation and yield data as well as the omnipresent topic of unsustainable debt levels fictionally managed by central bankers via monetary expansion and yield/rate repression.

As to inflation, dramatic increases in year-on-year money supply combined with record-high commodity prices and ongoing governmental guarantees of commercial bank lending are now undeniable tailwinds for the inflation camp - and hence gold as well.

As Matthew reminds, gold shines brightest when inflation outpaces bond yields in a negative real rate environment. Bond yields, however, have steadily increased in 2021 and thus Egon and Matthew discuss how yields will either be: i) artificially capped (to insure public debt repayment) or ii) rise beyond the control of the all-powerful central banks.

As to the all-powerful Fed, Matt touches upon the requisite double-speak of Jerome Powell’s latest promise to handle unsustainable U.S. debt growth in the 'distant future,' a promise which is simply and mathematically false based on current debt levels and currency debasement facts.

Gold and silver, of course, address currency debasement realities head on, and Egon closes the discussion with his thoughts on silver in particular and precious metals as a wealth preservation asset in general."

speculation Have We Reached Peak Speculation? -Calhoun/Alhambra Partners

"Last week I was contacted by two clients seeking information about cryptocurrencies. One was my godson, 12 years old and just getting started in investing...He first mentioned Dogecoin but I sent him a link to an explanation of its joke origins and he laughed and said well maybe not that one. Let that sink in for a second. Dogecoin was too much of a joke for my 12-year old godson to buy. What does that say about the adults buying it?

The second person who called me was an 88-year old lady, a dear friend who has been a client for nearly 30 years. She said one of her girlfriends was trading cryptos and making a lot of money...Her response when I explained bitcoin to her was, that's it? As I said, pretty savvy; you don’t get to be a successful 88-year-old investor without a healthy sense of skepticism.

Call me crazy but I think if the cryptocurrency mania has penetrated the 12-year-old and 88-year-old psyches, it may have just about spread as far as it can. I could certainly be wrong. I'll let you know if any 6-year-olds call me.

Speculation is rampant right now across a variety of markets. Forget for a moment why there is a lot of speculation; it doesn’t really matter...a joke cryptocurrency is up 5 times in less than a month and commodity charts have almost all gone vertical. Copper is up 12% in the last month and it’s lagging the field....

Stocks have been expensive for a very long time and it has been hard to stay invested or to get that way if you’ve been out. But until recently, stock valuations were high, not crazy, and there wasn’t this public fascination with investing and trading. It is the emergence of the speculative factor that has me concerned...the speculative frenzy gives me pause. And I think it should you too.

I do think it makes sense to start looking for the markers that generally signal the end of a bull run. For us, that means keeping a careful eye on credit spreads and other indicators that tend to act as early warning signs."

Stocks Extend Losses After Yellen Says "Rates Will Have To Rise" -Zero Hedge

"Treasury Secretary Janet Yellen is speaking at The Atlantic's 'Future Economy Summit' this morning - a speech she pre-recorded yesterday - and has sparked some chaos with her comments.

The highlight was this... 'It may be that interest rates will have to rise a little bit to make sure our economy doesn't overheat'

And this didn't help...'We've gone for way too long letting long-term problems fester in our economy.'

Is she talking about Fed-sponsored wealth-creation widening the inequality gap?

And the response - stocks puked as one would expect at the first signs of the punchbowl being taken away...

We wonder what Jay Powell will have to say about Janet stepping on his toes? Did she just start the process of thinking about thinking about thinking about normalization?"

Should Young Adults Stretch Financially to Buy a Home? -Wall Street Journal

"Mortgage rates are near-historic lows, which is luring many people - including first-time buyers - into the housing market...But the supply of homes is tight, and new construction can't keep up with demand - which means that buyers often have to fork over a staggering amount to close a deal....

For millennials who are looking for a home, this means a tough calculation. Many of them have limited funds and are carrying a lot of debt. So, is it worth stretching their resources to buy a more expensive house if they can lock in a lower mortgage rate for years to come? Or should they wait until housing prices cool down to more affordable levels - and risk having mortgage rates rise in the meantime?

According to Laurie Goodman, vice president for housing finance policy: 'If a young person interested in homeownership has the opportunity to buy a home in this low-interest-rate environment, they should do so. There is no guarantee that interest rates will stay this low for long, and the earlier homeowners start building equity, the better.'

According to Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School: 'In a recession, loss of jobs and housing-price declines can both make it impossible to pay back your mortgage and can wipe out your equity...Ultimately, the notion of stretching one’s means to take advantage of low interest rates or other affordable lending products will continue to be a gamble with potentially devastating impacts to the young home buyer and the overall economy.'"

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May 4, 2021

5.4.21 - Gold Price Jumps Over 1% on Weaker Dollar

Gold last traded at $1,779 an ounce. Silver at $26.49 an ounce.

NEWS SUMMARY: Precious metal prices eased Tuesday on profit-taking and a firmer dollar. U.S. stocks fell sharply following Treasury Secretary Yellen's comments that interest rates may have to rise to keep economy from overheating.

Gold jumps over 1% as weaker dollar, U.S. yields enhance allure -CNBC

"Gold prices jumped more than 1% on Monday, pulling along other precious metals with it, supported by a retreat in the dollar and U.S. Treasury yields....

'A combination of bond yields remaining tame, the dollar under pressure, the amount of fiscal and monetary stimulus that we have in this market ... all of those factors continue to drive gold and silver prices higher,' said David Meger, director of metals trading at High Ridge Futures.

'We are in this more inflationary environment and the fact that we’ve seen as much stimulus ... it’s understandable to expect commodity prices in that environment to do quite well.' The dollar index slipped 0.4%, making gold more affordable for holders of other currencies, while benchmark U.S.

10-year Treasury yields also retreated, reducing the opportunity cost of holding non-interest bearing gold. Gold also found support from data showing U.S. manufacturing activity grew at a slower pace in April....

Strong economic data can also push gold higher as it means inflation will go higher, said Michael Matousek, head trader at U.S. Global Investors.

'We need to see gold get above the $1,800 level and sustain it for a little bit, and then it could be off to the races for $2,000.'"

U.S. dollar The Feds' Daring Investments -Bonner/Rogue Economics

"There are times when long-term value mining seems like a waste of time.

Why go to all the trouble of working at the coalface of real investing when Dogecoin (a popular cryptocurrency that has zero value from an investment standpoint) is up more than 7,000% so far this year?

Why bother with all those company reports when you can just listen to Elon Musk… and get rich on Tesla?

And why worry about investing at all? The feds will do it for us.

Also in the news last week was the U.S. government, announcing the jumping-off point for the most daring 'investments' in the history of the world.

Yes, that’s what Joe Biden calls the 2020 COVID-19 relief programs and the 2021 follow-on infrastructure, family support, and climate change boondoggles… 'investments.'

It’s the biggest, most ambitious, grandest larceny ever attempted. Trillions of dollars will be taxed or inflated away from their rightful owners to be “invested” by the feds.

In fact, since March 2020, the total to be 'invested' by public officials is rising toward $10 trillion. The fib from the White House is that the rich will pay the costs....

Let us assume that the feds could identify 1,000 billionaires and squeeze each one for $10 million. That would only be $10 billion. Peanuts.

Suppose the IRS really cleaned them out, taking a billion from each one. Now, you’re beginning to talk real money – $1 trillion. Hmmm… still a $9 trillion hole....

When the government 'invests,' it’s a whole different thing.

What is the return on investment from giving more money to school administrators… to meals-at-school programs… to Amtrak… to people who are on leave from their work… to subsidize electric vehicles… to cities and states that have mismanaged their pension programs… to diversity training?

Nobody knows. But few investors - even those now buying NFTs - would want to find out with their own money.

And since you can’t calculate the rate of return, government 'investments' develop their own political support and continue misallocating capital resources almost permanently."

Soaring Lumber Prices Add Nearly $36,000 To The Price Of A New Home -NAHB/Zero Hedge

"Skyrocketing lumber prices that have tripled over the past 12 months have driven the price of an average new single-family home to rise by $35,872, according to new analysis by the National Association of Home Builders (NAHB), with the price spike threatening to hobble the momentum of the U.S. housing market, one of the bright stars of the recovery from the pandemic recession.

While homebuilder sentiment remains optimistic, as indicated by the NAHB Housing Market index, headwinds due to rising building costs have pulled the index down from recent highs.

'The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials,' said NAHB Chairman Chuck Fowke in a statement.

At the onset of the health crisis, 'the mills stopped producing,' said Dustin Jalbert, senior economist and lumber industry specialist at Fastmarkets in Burlington, Massachusetts. 'As soon as they saw 20 million unemployed, they shut down production,' Jalbert added....

Lumber producers have struggled to catch up with the bustling homebuilding activity, with lumber prices jumping more than 300 percent year-on-year to record highs.

'The logging operation, the shipping of the logs to the mill, the shipping of the finished product, getting workers back on the job, it’s not like flipping a switch to bring those back online,' Jalbert said....

This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, NAHB said in a post. This translates into households paying $119 a month more to rent a new apartment, the association said, adding that its representatives on April 29 held a 'productive' virtual meeting with White House staff from the Domestic Policy Council, National Economic Council, and the Office of the Vice President.

'The discussion covered mill capacity issues, mill worker shortages, and how soaring lumber prices are exacerbating the housing affordability crisis and putting the American dream of homeownership out of reach of millions of households,' NAHB said in a statement."

LA County reports NO new COVID-19 deaths for the first time in 410 days -Daily Mail

"Los Angeles County reported no deaths from COVID-19 Sunday, a stunning turnaround for California's most populous district which has suffered 23,915 fatalities since the pandemic began.

It is the first time in 410 days that the county has not reported at least one COVID fatality.

But health officials warned that the landmark figure may be due to an undercount because of delays in reporting COVID figures on weekends, the The LA Times reports.

Health officials reported 313 new cases and 410 hospitalizations Sunday in the county, which, which comprises a large swathe of Los Angeles city's metropolitan area and has a population of more than 10 million people.

California now has the lowest COVID rate of any state in the country after suffering alternating waves of death and lockdown over the past 12 months.

Less than four months ago, the County experienced its deadliest day when a record 290 died on January 8, according to official figures."

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May 3, 2021

5.3.21 - More Gov Spending Won't Solve Inequality

Gold last traded at $1,793 an ounce. Silver at $26.92 an ounce.

NEWS SUMMARY: Precious metal prices rose sharply Monday on rising inflation and a falling dollar. U.S. stocks traded mostly higher as shares tied to the economic reopening continued to rise.

Bitcoin no match for gold -Barrick Gold CEO/Fox News

"Bitcoin and other cryptocurrencies are nothing more than bubbles and will never replace gold, according to Barrick Gold CEO Mark Bristow.

Digital currencies have experienced massive price gains during the pandemic, leading many investors to speculate they could supplant gold as a hedge against inflation.

'They look like bubbles, they act like bubbles, they smell like bubbles,' Bristow told FOX Business in reference to cryptocurrencies.

Speculators have driven prices to record highs this year and last as Congress has doled out billions of dollars through stimulus checks and as the Federal Reserve cut rates to near zero and pledged to buy an unlimited amount of assets to support the U.S. economy through the COVID-19-induced downturn, the sharpest of the post-World War II era....

The explosion in the price of cryptocurrencies and other assets caused Federal Reserve Chairman Jerome Powell to warn at his press conference on Wednesday that those markets were extended and that monetary policy was partially to blame.

For Bristow, his biggest problem with bitcoin is that the main reason people use the cryptocurrency is to 'circumvent U.S. regulations around dollar transactions.' He noted central banks and global economies have no reason to allow the use of unregulated cryptocurrencies....

Anyone investing in bitcoins 'better own a whole pot of gold to hedge the risk,' Bristow said."

bear market What Happens When Stocks Only Go Up -Wall Street Journal

"Bear markets haven't gone extinct. They've evolved into teddy bears.

That's what some investors seem to believe - and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days....

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren’t risky at all. After last spring's rebound, Dave Portnoy, a social-media celebrity, declared 'Stocks only go up' so often that it began to seem like a magic incantation.

And, for the past year, just about every stock has gone up.

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions. Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy....

None of that means, however, that grizzlies have forever been transformed into teddy bears.

'Sure, stocks only go up,' says Rob Arnott, founder and chairman of Research Affiliates, a firm in Newport Beach, Calif., whose investment strategies are used to manage about $160 billion world-wide. 'They only go up - until they go down!'

This isn't the first time people have thought that bear markets had been rendered extinct...The best way not to be overwhelmed by fear during a bear market is to retain a trace of it in bull markets, too."

The Price of the Stuff That Makes Everything Is Surging -Bloomberg/Yahoo Finance

"The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as the world economy roars back to life.

From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. It’s also lit the fuse on the massive reflation trade that’s gripped markets this year and pushed up inflation expectations. With the U.S. economy pumped up on fiscal stimulus, and Europe’s economy starting to reopen as its vaccination rollout gets into gear, there’s little reason to expect a change in direction.

JPMorgan Chase & Co. said this week it sees a continued rally in commodities and that the 'reflation and reopening trade will continue.' On top of that, the Federal Reserve and other central banks seem calm about inflation, meaning economies could be left to run hot, which will rev up demand even more.

'The most important drivers supporting commodity prices are the global economic recovery and acceleration in the reopening phase,' said Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects commodities as a whole to rise about 10% in the next year.....

Of course, rising commodities don't immediately show up on grocery shelves and cafe menus. They make up just a part of the costs for retailers, which often absorb the initial increase to keep customers coming back. But there's a limit to that margin hit, and high prices could ultimately feed through to consumers."

What the US Can Learn From Denmark About Inequality and Social Mobility -ProMarket

"Progressive advocates in the US often point to Denmark as a model welfare state with low levels of income inequality and high levels of social mobility in income across generations. Denmark has many generous social policies in place that progressives currently seek to emulate: There are well-funded social security, disability, and unemployment programs, and inequality in disposable income is much lower than in the US.

The Danish policies now advocated for adoption in the US include free college tuition, universal access to high-quality health care, equal per-pupil expenditures across all neighborhoods, universal high-quality pre- K, and generous childcare and maternity leave policy.

Advocates should note, however, that despite generous social policies and equality in access for all citizens, substantial inequality of child outcomes remains across social and economic classes in Denmark. Family influence on many child outcomes in Denmark is comparable in magnitude to those in the US.....

Common forces are at work in both countries that are not easily mitigated by welfare state policies. One overarching conclusion from our study is that formal equality in access does not guarantee equality of opportunity....

Generous provision of social services does not eliminate inequality in many important life outcomes across generations. The origins of inequality and social mobility lie elsewhere.

Families shape child outcomes. And families operate through multiple channels. They do so both through direct parental interactions with children in stimulating child learning, personality, and behaviors through choice of neighborhoods and thereby the quality of institutions and peers; and through guidance on important lifetime decisions.....

One of the most striking policy differences between Denmark and the US is in the educational system, where Denmark has tuition-free education from pre-K to PhD and gives generous education support.

Yet, contrary to conventional wisdom, the differences in the Danish welfare state and that of the US are not reflected in intergenerational educational mobility. Despite the more generous Danish policies, the association between children's and their parents' education is roughly the same in the two countries....

Strengthening families needs to be front and center in policies promoting social mobility across generations. Since equal Danish provision of services does not eliminate inequality in many important life outcomes, an uncritical adoption of Danish policy initiatives is not an effective way to ensure equality of opportunity. Universal programs benefit advantaged families."

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Apr 30, 2021

4.30.21 - Mints Running Out of Physical Gold/Silver

Gold last traded at $1,769 an ounce. Silver at $25.89 an ounce.

NEWS SUMMARY: Precious metal prices steadied Friday as upbeat economic data boosted the dollar. U.S. stocks retreated despite a flurry of upbeat earnings led by tech giant Amazon.

Mints are running out of gold; not enough physical silver to cover paper -former U.S. Mint Director/Kitco

"A global shortage of physical gold and silver products has created a premium on coins and bars, and this premium is causing a disconnect between the spot price and the 'true' price that retail investors need to pay, said Ed Moy, former director of the U.S. Mint.

Moy, who was the director of the U.S. Mint between 2006 and 2011, cites the inability of the mints around the world to keep up with physical coin and bar demand as a reason for this shortage.

'Not only the U.S. Mint, but other Mints around the world, Australia's Perth Mint, the Mexican Mint, have all run out of gold, they can't keep it in spot and there's so many shortages retailers are having problems accessing that gold,' Moy told Michelle Makori, Kitco's editor-in-chief.

Premiums on these physical gold and silver products can run as high as 20% in some places, Moy said....One of the main reasons for why the spot prices have not caught up to gold and silver's premium-adjusted price is that the overall markets are flooded with bullion derivatives, Moy said, but it's only a matter of time before the short contracts keeping the price down expire.

'What's artificially depressing the price of gold now is that there's a lot of institutional investors that don't hold gold. What they hold is they buy gold derivatives, like futures...and a lot of them are betting that the economy's going to recover and that everything's going to be fine and gold's going to go down,' he said. 'As those short contracts come up, what you're seeing is a popping in price.'"

melt up The Stock Market Melt Up Will End in 2021 -Sjuggerud/American Consequences

"The Melt Down is coming, my friend… Unfortunately, it will arrive this year.

Before you get bent out of shape with me for urging caution at the precise moment when things seem like they’re getting really good, please keep this in mind… I have been bullish – and right – on the stock market for nearly all of the last 12 years.

I am proud of that. But it's also why it pains me to tell you that the last 12 years of (mostly) good times for investors will likely end this year....

Markets peak when there is nobody left to buy. That is all you need to know.

Unfortunately, we’re getting close to that point right now. And that is exactly what makes this year different than previous years.

When music stars like Snoop Dogg and Gene Simmons (of the band KISS) are talking up cryptocurrency Dogecoin on their Twitter accounts, you know speculating is starting to get out of control....

If you are 55 years old and you handle the Melt Down the wrong way, you might lose half of the money you have invested. That might cause you to work an additional 10 years before retirement… all because of a few bad decisions made in 2021. So… don’t be that guy.

'As the market goes down, will people rotate out of speculative stocks into less speculative ones?' one of my colleagues asked me recently.

'No, they won't,' I replied. These market newcomers will ultimately give up after big losses. They will throw in the towel. They will pull what little money they have left out of the markets – and vow to never return.

At least, that’s the way it went in the 1999 to 2000 Nasdaq Melt Up… which ended in an 80% fall in the Nasdaq between the March 2000 peak and the bottom in 2003.... But you still have to act – and sell – when the time comes.

Your goal from here should be to participate in all of the upside potential that is left in the Melt Up… and then get out with most of your gains when the Melt Down arrives. It’s easier said than done."

The Golden Age of Fraud is Upon Us -Carlson/A Wealth of Common Sense

"Thodex is a cryptocurrency trading platform in Turkey. Last week it was reported the 27-year-old founder of the exchange took a flight to Albania. He took with him $2 billion from more than 30k clients.

Last month the company brought in hoards of new clients by offering free dogecoin to anyone that signed up. Whoops....

If Charles Ponzi were alive today, I have no doubt that he would be able to raise capital from investors, probably in the form of a SPAC. Many investors would laud him for being a genius as he bilked investors out of millions of dollars.

When I was researching the history of financial scams for 'Don't Fall For It' the one thing that jumped out above all else is how similar financial frauds are across time and place. They typically involve new technologies, people with extraordinary sales skills and the insatiable human desire for get-rich quick schemes.

Despite the fact that people have been getting duped by hucksters and charlatans for centuries, there was one period that kept coming up over and over again in my research - the 1920s.

It was the golden age of financial fraud. The Roaring 20s had everything a con-artist looking to dupe people out of their money could ask for - innovation, new financial products, a booming economy, rising markets, new and exciting technologies, loose lending standards, new communication tools and people getting rich all over the place....

During bull markets and economic boom times people witness others becoming very wealthy. So they let their guard down, take more risk than they reasonably should and trust people they shouldn't while chasing easy riches.

And the people most susceptible to financial fraud tend to be the more highly educated investors who have already made a ton of money....Be careful out there."

Biden Is Using the Pandemic as an Excuse for Permanent Expansions of Government Power -Suderman/Reason

"President Joe Biden isn't letting a crisis go to waste.

His administration is using the pandemic as an excuse to push a list of preexisting Democratic policy priorities, few of which have much to do with COVID-19, and some of which were initially pitched as temporary measures.

But in last night's address to a joint Congress, Biden made clear that he wants to extend some these policies, turning COVID-era emergency measures into permanent expansions of federal power, using the virus as an excuse. For Biden, the pandemic has become a catchall justification for a wide array of big-government programs that he and the Democratic Party already wanted to pursue.

Take, for example, Biden's push to expand subsidies for health insurance purchased via the Affordable Care Act, the health law commonly known as Obamacare....

Biden's subsidy expansion was structured in a way that would expand subsidy availability to families with quite high incomes. The expanded subsidy is tied to local premiums, and so it varies geographically. In some parts of the country, however, it could make tens of thousands of dollars in annual subsidies available to households earning $350,000 a year....

Biden is using this playbook to extend and expand other programs as well. His $1.9 trillion American Rescue Plan also included a one-year expansion of the child tax credit. Much of it is refundable, and the plan allows for it to be paid monthly, meaning that it is essentially a regular check cut to parents by the government. As a New York Times report put it recently: 'Though framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children.' ....

And somehow it's all justified by the pandemic. His speech last night started with the words, 'Tonight, I come to talk about crisis.' As he took office in January, he said, he had 'inherited a nation in crisis.' The speech, and its laundry list of pricey new programs and policies, was thus framed as an extended response to that crisis.

It's not. In part that's because so many of his proposals are either poorly targeted (large checks for households with stable six-figure incomes) or totally irrelevant to any actual problems stemming from the pandemic (bailouts for union pension funds)....

Biden's presidency is barely three months old, but it's already fallen into a predictable pattern: Point to the pandemic. Declare that it's an emergency, and that something must be done. Then insist on an expensive, expansive policy overhaul that Democrats have pushed for years - first, in some cases, as a temporary measure, and then, inevitably, for much longer. It's deceptive and dangerous. And if he keeps this up, he may leave a new crisis in his wake."

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Apr 29, 2021

4.29.21 - Gold Price Going 'Well North of $2,000 This Year'

Gold last traded at $1,772 an ounce. Silver at $26.09 an ounce.

NEWS SUMMARY: Precious metal prices eased back Thursday on rising interest rates and upbeat GDP data. U.S. stocks rose, led by strong first quarter earnings reports from tech giants Apple and Facebook.

'We are sitting on economic cliff': Gold price will be 'well north of $2,000 this year'-Kitco

"Investors could see a big move higher in gold soon, according to ex-JP Morgan managing director and now CEO of Trovio, Jon Deane, who sees prices trading well north of $2,000 an ounce this year.

Inflation is already here, and the world is sitting on an economic cliff, which makes assets like gold, silver, and bitcoin very popular with investors, Deane told Kitco News.

'We are already seeing inflation. If you look around the world, you see real estate prices, building supplies, and services skyrocket,' he said. 'What we created since the early 1990s is an entire financial infrastructure that is relying on debt, and we have accelerated that dramatically in our response to managing the COVID-19 crisis. In that regard, we will continue to increase the money supply globally, and we will continue to have a quite aggressive fiscal policy. We are sitting on an economic cliff'....

'We'll go well north of $2,000 this year. Realistically, $2,200 is probable. It may have some headwinds as we go through $2,000 again. Gold is in a much better position than where it was a few months ago," Deane said."

jenga Changing America, One Good Intention At a Time -Bonner/Rogue Economics

"The Biden administration’s 'net zero' climate change project itself is unlikely to affect the world's climate, Biden's proposals will almost surely take a few weeks off our economy's growing season.

You’ll recall that when the money goes funny, everything goes funny. First, things get weird. Then, they get nasty. But that is all still ahead - the consumer price inflation… the financial controls… the depression… the crack-downs… and the crack-ups.

We are still in the delightful, delusional, weird stage. Ordinary people, for example, are beginning to hallucinate that old-fashioned working and saving is a mugs’ game. They can make as much money in one hour trading Dogecoin as they can in a whole month stocking shelves… So why not?

Dogecoin rocketed upward after Elon Musk signaled via Twitter that it might be important. Now, the coin - which began as a joke in 2013 - has a market cap of nearly $36 billion....

Some even think the feds should control the world’s temperature. Why not? The sky’s the limit!

Others want to turn the entire U.S. into a 'safe space,' where people are not allowed to voice any opinion that others might find offensive…

Good intentions? Maybe. Power unchecked by real, limited money? Surely....Most people will be pleased to hear about higher taxes on the rich. They think wealthy people are getting away with something.

Perhaps they are. But it has nothing to do with loopholes and not paying their fair share.Instead, they are on the receiving end of a $30 trillion wealth shift - thanks to the Federal Reserve....Where did all that extra wealth come from?

The Fed prints money. It buys Treasury bonds. The rich own bonds. Bond prices go up....Most likely, none of the goals will be reached. Temperatures will go whither they want… productive jobs will be destroyed so that the resources can be redeployed… the new jobs will be time wasters… and the rich will get richer."

"They're Guessing" - Gundlach Rejects The Fed's "Inflation Is Transitory" Narrative -Zero Hedge

Don't believe your lying eyes, will be the message from The Fed's Jay Powell as he hypnotizes investors to believe that 'inflation is transitory' and they have 'the tools' to manage it. 'Bond King' Jeff Gundlach is not buying that line and told BNN Bloomberg in an interview this morning.

'...more importantly, I'm not sure why they think they know it's transitory... how do they know that?'

'...there's plenty of money-printing that's been going on, and we've seen commodity prices going up massively... home prices in the US are inflating very substantially... so there's a lot of inflation that's already baked in to input prices.'...

The Fed is 'trying to paint the picture' of control, but Gundlach tries to make clear: 'they're guessing.'

So, what does that mean for markets?

While some fear 'we ain't seen nothing yet' in terms of yields rising (and multiple contraction), Gundlach notes that 'it really depends on just how much manipulation the authorities are willing to do.'

The billionaire fund manager notes that yields are 'still very low... well below the current inflation rate... so we have negative yields everywhere on the yield curve.'....

His forecast is that 'The Fed will allow the market forces to take yields to higher levels [10Y 2.25%] before stepping in.'

The Bond King also note that the US stock market is very overvalued by virtually every important metric, and especially so versus foreign markets such as Asia and even Europe."

Thanks to the Fed, the High-Risk, Small-Time Borrower Is Becoming a Thing of the Past -Mises Institute

"Banks and accounting trickery go together. Last year, as I remember back to my banking days, financial institutions followed the advice once proffered by one of our board members, 'If we’re going to the dump, let's take a full load.'

When the pandemic struck, banks dumped plenty in their loan-loss provisions, $60 billion, expecting the worst. The cavalry arrived led by Jerome Powell’s Fed liquidity flood, Steven Mnuchin’s Paycheck Protection Program (PPP) loans, Congress’s Coronavirus Aid, Relief, and Economic Security (CARES) Act, and moratoriums on foreclosures and evictions. Instead of an Austrian business cycle cleansing, the cracks were papered over, including bailing out money market funds, allowing us to watch the pandemic comfortably on TV.

Here we are a year later and banks are rocking their earnings by adding back the money that had been put away for the predicted rainy covid day. Appearing on Real Vision's Daily Briefing with Jack Farley, bank analyst extraordinaire and Ludwig von Mises fan Chris Whalen said the future of banks could be dim or worse. Mentioning bank darling JPMorgan, Whalen pointed out, '[Y]ou take the reserve release out, their revenues are down year-over-year. Their earnings would have been down year-over-year, and nobody on Wall Street really gets past the first paragraph in the press release, so they don't bother with this stuff.'....

While consumer numbers look good, the lurking problem is commercial real estate. While hiding in plain sight the heavy hand of the government is 'letting the banks let these borrowers go [in] the hope that they come back.' Hope is not a good strategy, but 'the bank doesn't want the building. The bank doesn't want the shopping mall. They're giving these people time. But I think it's a mistake, because especially in big cities, we're going to have to restructure this real estate.'....

In the banking big picture, the Fed’s monetary manipulations are sending the business toward oblivion. 'As the banks have grown, their earnings return on earning assets, which is probably the most important thing you look at with any bank that has been falling. It's fallen 20 basis points in the last three years. We're down to about 70 basis points,' Whalen said. 'I keep telling people if the Fed doesn't change their policy, by the end of this year, the banks are going to be in trouble.'

Banks aren’t in the risk business anymore. As Whalen told Real Vision, 'banks are running away from consumers, the consumer is toxic. The only time a bank wants to face a consumer is if it's an affluent consumer, a bigger mortgage, high FICO score, low LTV [loan-to-value], cut a loan, no risk.' Other than credit card lending, there is no margin in the lending business anymore....

The Fed and Treasury are scary, banks are slowly failing, and crypto is a fraud. Other than that, it’s the end of the world and I feel fine."

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Apr 28, 2021

4.28.21 - Visualizing the Economic Case for Gold

Gold last traded at $1,775 an ounce. Silver at $26.08 an ounce

NEWS SUMMARY: Precious metal prices steadied Wednesday as investors awaited the latest Fedspeak. U.S. stocks fell back as investors digested major technology earnings and geared up for the latest Federal Reserve policy announcement.

World's Most Cashless Place Takes Next Step Toward Digital Money -Bloomberg

"The central bank of Norway, where old-fashioned cash is now used less than anywhere else in the world, says it's time to take the next step in exploring the introduction of a digital currency.

Norges Bank Governor Oystein Olsen, who in the past has seemed less enthusiastic about central bank digital currencies than his peers, says the case for looking into their feasibility now 'has been strengthened.' The bank plans to spend the next two years building its knowledge of the area, and doing 'experimental testing of technical solutions' to make sure it understands the 'purpose and consequences' of introducing a CBDC, he said in a report published on Thursday.

The bank has already spent four years on preliminary research, but has remained on the fence on the subject as others move ahead. Central banks globally are racing to respond to widespread cashlessness by developing their own digital currencies, spurred by the embrace of cryptocurrencies such as Bitcoin, as well as private initiatives including Diem, which is backed by Facebook Inc.

Only 3-4% of transactions in Norway are conducted with bank notes and coins, according to Norges Bank, which estimates that’s the lowest level of cash usage in the world. The rate is 9% in neighboring Sweden, which is among the most advanced nations when it comes to developing a CBDC, according to the McKinsey Global Payments Report.

'A possible introduction of digital central bank money will still be some way off,' Olsen said. The timeline published on Thursday 'reflects that Norges Bank has so far not seen an immediate need for the introduction of such money,' he said.

Olsen also said that any decision on introducing a CBDC will require political involvement and potential changes to Norwegian legislation."

A Golden Future: Visualizing the Economic Case for Gold -Visual Capitalist

"Throughout history, people have revered gold as a sign of wealth and a store of value. Today, gold is not only a precious metal but also a precious investment.

In fact, in 2020, 47% of global gold demand - the largest share - came from investors....Gold can protect investors’ wealth during tough times while preserving capital for the long run. Investors add gold to their portfolios because it offers many investment benefits....

long term value

Effective diversification - In a typical portfolio of stocks and bonds, gold’s historically low correlation with major asset classes and negative correlation with the U.S. dollar can reduce risk through diversification.

Hedge against inflation - Gold is priced in U.S. dollars. Therefore, as the purchasing power of the dollar falls due to inflation, gold becomes more expensive to buy, acting as a hedge against the eroding value of the dollar.

Long-term returns - Gold has always maintained its value in the long run. Between 2001 and 2020, gold’s annual return averaged 11.2%, outperforming other key asset classes including U.S. equities, bonds, and treasuries....

With rapidly rising money supply and near-zero interest rates in response to the COVID-19 recession, the world is entering an era of quantitative easing, and possibly, higher inflation....Gold does not rust - it will always hold its value, as a precious metal and a precious investment."

The Fed in the Sand as Inflation Threatens -Wall Street Journal

"Expectations are high that an economic boom is coming. Vaccines are allowing people to get back to normal life. Unprecedented monetary and fiscal policies are designed to stimulate aggregate demand. The Federal Reserve has joined the robust-growth camp, raising its forecast of 2021’s real gross domestic product growth to 6.5%....

If everybody agrees the boom is coming, why does the Fed remain so sanguine that inflation will stay close to its 2% longer-run target? The central bank's outlook rests on the experience of the decade following the 2007-09 recession...But things are different today, raising the risks that the Fed may be caught flat-footed by higher inflation.

If the Fed is too slow to reverse its emergency monetary responses to the pandemic, it risks adversely jarring financial markets and the economy....Conditions in the real economy are also vastly different. Housing is booming. The inventory of homes for sale is close to historic lows, and contractors can’t build quickly enough. Double-digit home-price increases are lifting expectations and fueling more demand. This is driving consumption of household durables, and spending on all goods are surging....

The Fed’s angst about the risks of falling inflationary expectations seems out of place, and its optimistic assessment of inflation is unbalanced. The Fed should be more realistic about current risks and prepare markets for a timely unwinding of its asset purchases and an eventual rise in interest rates."

The Spectrum of Optimism and Pessimism -Collaborative Fund

"At one end you have the pure optimist. He thinks everything is great, will always be great, and sees all negativity as a character flaw. Part is rooted in ego: he’s so confident in himself that he can’t fathom anything going wrong.

Then there are extremely optimistic people who accept that bad things occasionally happen to other people....Next are the optimists who are capable of being skeptical of other peoples' optimism....

Next are people who are pessimistic with their words but optimistic with their actions. They’re attracted to pessimism because it’s intellectually seductive and gets people’s attention. But their investment portfolios are clearly set up for a world where things get better. Many pundits fall into this category.

In the middle we have what I call reasonable optimists: those who acknowledge that history is a constant chain of problems and disappointments and setbacks, but who remain optimistic because they know setbacks don’t prevent eventual progress. They sound like hypocrites and flip-floppers, but often they’re just looking further ahead than other people.

Then come the probabilists. They know progress is likely but couch everything as a matter of playing the odds. 'I am not an optimist,' Hans Rosling once said. 'I'm a very serious possibilist.'

Now we get into closet pessimists: Those who view historical progress as a one-off fluke, but think low growth or stagnation is more likely in the future...Further down come the skeptics. They don’t disagree that progress is possible, even likely. But they have such a high bar for proving it that only hindsight observations are convincing....

A level down are those who quietly hope for decline, usually to benefit their investments....Soon you get into some real gloom: people who think evidence of past progress is misleading, incomplete, or manipulated to paint a rosy picture.

Then come the cynics, who view anyone promoting progress as being secretly motivated by power and fueled by corruption.

And at last come the pure pessimists. He thinks everything is terrible, will always be terrible, and sees all positivity as a character flaw. Part is rooted in ego: he has so little confidence in himself that he can’t fathom anything going right. He’s the polar opposite of the pure optimist, and just as detached from reality."

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