Investment Research Products

Powered by Kranzler Research

Articles

Gold, Silver And Mining Stocks: Patience Will Be Rewarded

Note: This commentary is from the November 25th issue of the Mining Stock Journal

Without question, investing in the precious metals sector has been a pain in the ass for nearly the entire 20 years I’ve been involved. The official intervention, which has become shamelessly blatant, is the primary reason. But also, speculative capital floods into the sector when a big move looks ready to occur. The sector quickly becomes technically overbought and sentiment soars, which makes it easier for the banks to beat the metals and miners back down.  What’s the motive for this?  To prevent a rising price of gold from signaling the degree to which Fed and Government policies have engendered untenable systemic problems. First and foremost is the problem of uncontrollable price inflation unleashed by flooding the monetary system with printed currency.

The precious metals sector ran up sharply from the end of September. Along with it, so did the open interest in Comex paper gold. When the latest price ambush operation began on November 19th, the open interest in Comex gold had shot up to 620k contracts. The RSI and MACD momentum indicators were in “overbought” territory. And the HGNSI (Hulbert Gold Newsletter Sentiment Index) soared in a brief period of time from a negative reading to 60’s. The HGNSI is a reliable contrarian indictor. When the HGNSI moves up into the 60’s, a sell-off of some sort predictably follows.

In the chart above I’ve drawn an uptrend line which hopefully will hold. The sharp sell-off was accompanied by a 60,000 contract plunge in Comex open interest. Per the recent COT reports, most of that open interest was created by the banks, who print Comex contracts like the Fed prints money and uses the newly created paper to fill hedge fund buy orders. The banks then operate to create the sharp sell-offs like the ones in the chart above to “harvest” profits on the short positions they established during the price run-up.

With a bona fide securities market operation, the broker has to find sellers from which to source securities that can be brokered into buyers – the broker can’t simply print new shares of stock or bond certificates the way Comex banks print new gold/silver contracts. That said, per history (the London Gold Pool, the run-up in gold in the 1970’s, run-up in gold from 2000-2011) we know the banks can only hope to slow down the price rise in gold and silver. Otherwise the prices of each would still be below $300 and $5, respectively, where they were when I started getting involved in the sector in 2001.

The charts for GDX and silver look similar to the gold chart. GDX is almost identical while silver is similar but not as “clean.” I don’t know what the specific catalyst reignite the move higher in the sector that began at the end of September, but GDX ran 20% in six weeks. If the SPX ran 20% in six weeks, the hosts on CNBC would be doing naked cartwheels on air. I do believe that patience will be rewarded and the next move up will be bigger than 20%.

A new subscriber asked me about any concerns I might have holding equities in mining stocks when we seem to be at very lofty stock market valuations (tech)? He said he sees the compelling reasons to own the metals directly, but is somewhat reluctant to own the miners if the markets were to significantly correct.

I’ve addressed this issue in the past but it’s worth mentioning again given that the stock market is even more overvalued now than the last time I shared my thoughts on the subject. For sure, in a big sell-off scenario like March 2020 or 2008, the mining stocks might be proverbial babies tossed out with the bath water. But they’ll recover quickly because gold and silver will be soaring as capital floods into flight-to-safety assets. In 2008 the HUI index doubled between early Nov and year-end despite a continued sell-off in the stock market. Lately on big down days in the stock market, the miners typically have been flat to green.

Stocks are always risky. The ultimate safety is having possession of physical gold and silver. “Possession” is the key. But if you also want a shot a wealth enhancement, the mining stocks are historically cheap vs the rest of the stock market. I always recommend keeping plenty of cash on hand to take advantage times when the mining stocks sell-off in correlation with a general market downturn.

Is A Silver Supply Deficit Inevitable?

Silver is both a monetary metal and store of wealth – as such older than gold in fact – and a metal that is critical to a multitude of industrial applications. Silver is not only historically cheap relative to gold, but it is headed into a major supply deficit. For most of civilized human history, the gold silver ratio has been below 16. The ratio of ounces silver and gold pulled out of the ground currently is around 9. During the Roman Empire the ratio was 8 to 1. From the late 1600’s to 1900, the gold/silver ratio averaged just over 16. Currently the GSR is 75. The only conclusion to draw from this is that silver is one of the most undervalued hard assets in the world right now.

Kinesis Money invited me onto their podcast to discuss the impact of retail silver buying on the market; the future of gold and silver premiums and industry predictions of a severe silver supply deficit in years to come:

***************************

The Mining Stock Journal is a bi-weekly newsletter that presents high rate of return investment ideas in junior exploration mining stocks as well as trading opportunities in large cap producing mining stocks. Currently my portfolio of recommendations includes multiple silver junior exploration ideas, some of which will be home runs (I recommended Silvercrest Metals at 16 cents in January 2016 and Discovery Silver at 30 cents in in August 2019. I’m currently working on what could be a home run opportunity in a junior looking to advance a silver-copper project that could be a company-maker. You can learn more about this newsletter here:   Mining Stock Journal

Note:  I do not take compensation in any form from the companies I present and recommend. I invest directly in many of them in my personal stock account and indirectly through a bullion and mining stock fund that I manage and in which I’m invested.  I put my money where my mouth is.

The FOMC Statement Is Bullish For Gold And Silver

While the Fed announced the start of its long-threatened taper program, the actual policy statement says “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals” (FOMC Policy Statement).  In the press conference following the meeting, Jay Powell confirmed that tapering could be limited to just November and December.  This is why the Nasdaq shot up 149 points shortly after the release of the policy statement. It’s also why gold and silver spiked up sharply after enduring the customary paper gold price take-down on the Comex in the hours leading up to the release of the policy statement.

The economy is growing weaker by the day. Any kind of “growth” in the recent stream of economic reports is attributable to price inflation rather than “unit” growth. As an example, the factory orders report for September earlier this week showed a 0.2% increase over August in the total value of factory orders – $515.8 million in September vs $514.6 million in August. But using the monthly inflation rate of 0.2% in September from August per the CPI report, the real “unit” growth in factory orders was zero. Applying a real inflation rate would produce a decline in the value of factory orders in September from August.

[Today’s employment report was boosted considerably the 363,000 jobs attributed by the highly questionable, if not entirely non-credible, Birth/Death model. Real hourly earnings declined nearly 1% YoY]

The Fed is primarily concerned with keeping the banking system propped up and, secondarily, keeping the stock market from crashing. It’s a good bet that continued signs of economic weakness will give the Fed “cover” to halt its taper schedule after December. The FOMC next meets on December 14-15th. After that at the end of January so maybe the taper goes on for three months. Once the Fed stops the taper, or reverses and starts printing more money, the gold, silver and the mining stocks will do a moonshot.

Rob Kientz of Gold Silver Pros hosted me and Silver Tiger (SLVTV, SLVR.V) CEO, Glenn Jessome, to discuss the factors that lead us to believe silver will eventually hit triple-digits, which implies a gold price in the $5k-10k range:

*************************************

Many of the junior exploration/development companies I cover, recommend and invest in have the potential to 5-10 baggers from their current down-trodden level. You can learn more about my newsletter here:  Mining Stock Journal information.  I do not take compensation of any type from mining companies and I have been doing my own research in the sector for over 20 years.

The Set-Up For Precious Metals Is Historic

The fundamentals supporting a monster move in gold and silver have never been stronger. This includes extraordinarily negative real interest rates, Government debt outstanding that seems to be increasing at an increasing rate, the continued devaluation of fiat currencies from Central Bank money printing and escalating geopolitical risks. These are just the primary fundamental factors.

Gold and silver are at their cheapest levels relative to other commodities since 2009. Institutional investment allocation to the precious metals sector is at a historical low at well less than 1%. In 1979 institutions had 5% in the sector. Imagine the effect on prices if big funds were to allocate just 2% to the precious metals sector. (Note: the chart below was sent to me by a subscriber – I do not know the source but it’s an awesome chart – if anyone knows where it came from, please leave a comment so I can give proper attribution):

Away from the obvious macro economic fundamentals that should lead to a big move in the precious metals sector, India is in the midst of its peak buying season. Daily ex-duty import premium price data point to the heavy importation of gold right now. This is after import data for September show that India imported 71 tonnes directly from Swiss refiners. This was 60% of Swiss exports for the month. China was a distant 2nd on the list at 18.1 tonnes.

Speaking of China, Hong Kong reported that its exports to China jumped 61% in September from August to 34.7 tonnes. Keep in mind that the export data is reported by Hong Kong. China does not report any gold it imports through Beijing. This is intentional. Based on Shanghai Gold Exchange activity during September and October, China is importing considerably more gold than what is “visible” based on Swiss and Hong Kong export data.

A subscriber inquired about a recommended allocation to junior exploration stocks and the best way to build a position in illiquid stocks. Almost all of the companies I recommend and invest in are pretty liquid. I occasionally will use limit orders. But most of the “five letter” OTC stocks I cover also are listed on the TSX Venture or TSX, which makes them more liquid. I almost never have had problems getting “screwed” when I use market orders.

The other thing to keep in mind is that, with many of these plays, they are going to be 5-10 baggers – or more – or perhaps not work out at all. The point here is that we’re not going to be five cents “smart” on these stocks. Don’t worry about paying a few cents above the stated offer price. It won’t make a difference over the course of time.

Your percentage allocation is a function of the degree to which you are willing to take risks. By “risks” I mean risk losing 50-75% of your investment for the upside potential of 500-1000%. The best way to do it is pick out 5-10 of my ideas that you like and build positions in them that represent maybe 15-20% of your overall exposure to mining stocks. That would be what I consider to be a conservative allocation. An aggressive allocation would 50% of your mining stock exposure.

Finally, don’t put on full allocation positions in the stocks you choose all at once. I recommend always leaving cash on hand to take advantage of pullbacks/corrections in the sector. Even though the juniors I play tend to be relatively liquid, they will still move up and down in much larger percentages than the mid-cap/large-cap producers.

********************************************

The commentary above is from my latest issue of the Mining Stock Journal. Many of the junior exploration/development companies I cover, recommend and invest in have the potential to 5-10 baggers from their current down-trodden level. You can learn more about my newsletter here:  Mining Stock Journal information.  I do not take compensation of any type from mining companies and I have been doing my own research in the sector for over 20 years.

Hash-Tag US_BananaRepublic

“When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.”  – Francisco d’Aconia “Money Speech” from “Atlas Shrugged”

The surest sign that a country has become a Banana Republic is the extreme redistribution of wealth. The wealth skew between the upper 1% and the rest started to accelerate in 2008, when the Fed began to slowly hyperinflate the money supply.  Mayer Rothschild famously proclaimed “give me control of a country’s money supply and I care not who makes the rules.”  That is the proclamation not only of someone who understands and knows how to apply monetary theory but of a misanthropic dictator characteristic of the attributes of a Banana Republic.

The United States has become the biggest Banana Republic in history. Blatant, unabashed corruption and an unimaginable degree of wealth redistribution effected by those who have control of the money supply. Moreover, those who were elected or appointed to protect the public from the greed and corruption of corporate America, specifically and especially the Too Big Too Fail Banks and the Military Industrial Complex, have been well paid off to look the other way. That is the definition of a Banana Republic. And this commentary is not addressing the highly problematic, yet covered up, dealings of the current “President” and his son.

I bring this up because Wall Street On Parade has presented more evidence that the U.S. has devolved into a corrupt, self-dealing Banana Republic: “The Fed Is Subsidizing the Money Market Funds Operated by Larry Fink’s BlackRock as BlackRock Manages a Big Part of Jerome Powell’s Wealth:”

Last year, during the financial crisis, Fed Chairman Jerome Powell held five confidential phone calls with BlackRock’s Chairman and CEO Larry Fink. The first call on March 19 lasted 30 minutes; there were two calls in April, one on April 3 and one on April 9, both lasting 15 minutes. A phone call between Powell and Fink on May 13 lasted 30 minutes; and one on November 20 lasted 10 minutes.

That’s a total of 100 minutes that the Chairman of the central bank of the United States spent on the phone with the man who heads the company that is also managing a large portion of Powell’s wealth through its iShares Exchange Traded Funds. The dates and times of the phone calls come from Powell’s publicly-released daily calendars.

Powell’s phone calls with Fink continued this year. On February 5, Powell held a 30-minute phone call with Fink. On March 1 of this year, there was a bizarre hour-long virtual meeting between Fink and the Board of Governors of the Federal Reserve and Fed staff. (Powell’s daily calendars are only currently available through August of this year.)

There is the growing impression that Fink is functioning in a consultant capacity to the Federal Reserve while his company, BlackRock, also manages a significant part of Powell’s wealth. See this report: BlackRock Authored the Bailout Plan Before There Was a Crisis – Now It’s Been Hired by three Central Banks to Implement the Plan

But wait, there’s more:

The Fed also gave BlackRock three no-bid contracts in 2020 to manage the Fed’s corporate bond buying programs. Under those contracts, BlackRock was allowed to buy up its own Exchange Traded Funds.

Now we are learning from Crane Repo Data, that a big chunk of the Fed’s overly-generous Reverse Repo operations have landed in BlackRock money market funds. Crane Repo Data reports that as of September 30, BlackRock Liquid FedFund money market held $84 billion of the Fed’s Reverse Repos while its BlackRock Liquid T-Fund held $65 billion.

This is now the United States.  A bastion of corruption and elitist self-dealing that signals a  hyperbolic wealth-grab ahead of an epic collapse. You can read the rest of the Martens’ report here:  LINK

Robinhood Markets: Robbing From Retail And Giving To Citadel

“Robinhood is the poster boy for the craziest, most unregulated stock market era since 1929. That one ended in tears. This one will also.” – WallStreetOnParade.com

HOOD operates a commission-free trading app that became popular in March 2020 with Millennials and Gen-Z’ers who fancy themselves as day-trading geniuses. The Company went public in July 2021 at $38/share. Aside from the fact that HOOD is symbolic of the biggest stock bubble in history, the corporate suite is riddled with fraud and corruption.

As it turns out, the trading service is not exactly free. The bulk of HOOD’s revenues comes from routing its order flow to third-party trading firms rather than the stock exchanges. This increases the execution cost, unknowingly, for HOOD’s retail, stool-pigeon accounts. In Q2 HOOD routed 34% of its order flow Citadel (hedge fund and brokerage) and 21% to Susquehanna (options order flow).

As a former Wall Street junk bond traderl, I can guarantee that Citadel and Susquehanna “front run” the order flow by taking positions, with buy orders for instance, in the stock/options being routed to each firm before executing the HOOD orders. The HOOD orders drive up the price of stocks/call options like AMC and GME. Citadel or Susquehanna then unload their front-running position for a profit that exceeds what was paid for the order flow. The mechanics of this may be akin to “scaling fish” for profits but aggregated over $10’s of billions of orders it’s huge, free money for Citadel and Susquehanna. It’s also easy to hide and hard for regulators to prove (if they bothered trying).  But this is one of the ways in which Wall Street skims money from investors.

HOOD is not the only brokerage that does this but HOOD has built its business model on order flow payments, as 80% of HOOD’s revenues is derived from order flow revenues. It was announced this past week (late September) by the SEC Chairman that banning payments for order flow was “on the table.” If this occurs, HOOD’s stock price will get destroyed.

In June 2020, HOOD was fined $57 million by FINRA and ordered to pay $13 million in restitution to clients affected by app outages and misleading communications in March 2020. It was the largest FINRA penalty in the history of the organization.

In December 2020, the SEC brought charges against HOOD for repeated misstatements that failed to disclose the firm’s receipt of payments from trading firms for routing orders to them and with failing to satisfy its duty to seek the best reasonable available terms to execute customer orders. HOOD settled the charges by paying a $65 million fine.

The day before this, the Massachusetts securities regulatory agency brought an enforcement action against HOOD for several regulatory violations, including aggressive tactics to attract new, often inexperienced investors and breach of the fiduciary conduct.

And there’s more. This past week (late September) it was revealed that the SEC was looking into whether or not HOOD President/COO, James Swartout, violated securities laws by selling out his position in AMC shares just ahead of HOOD placing a restriction on the trading of AMC.

Where’s there’s the “smoke” of fraud and corruption, there’s usually a “fire”. In HOOD’s case, it’s pretty obvious and there’s multiple wildfires burning. But this is just one aspect that makes HOOD a great short. HOOD’s share price is extraordinarily overvalued based on fundamental metrics and it looks like its business activity may be starting to slide.

For the first six months of 2021, after adding back a $2 billion non-cash charge for the change in the fair value of convertible notes and warrants liability (I normally would include non-cash charges but this particular charge is not a function of HOOD’s operating business) HOOD’s operating income was just $123 million. Giving the Company the benefit of annualizing that number – and there’s good reason to believe it will decline – HOOD’s operating income could be $246 million. After the provision for income taxes ($49.2 million in the 1H 2021, or $98.4 million for the full-year), HOOD might generate net income of $148 million.

On this basis, based on Friday’s closing stock price (October 1st), HOOD’s market cap is $36.6 billion. It’s thus valued at a P/E of 247x and 16x revenues (assuming revenues in 2H 2021 are equal to the 1H). It’s beyond comprehension that anyone would pay those kind of multiples for a cock-roach infested motel like HOOD. But, such is the nature of extreme stock bubbles.

Away from the potential regulatory and legal issues that HOOD faces and likely will face, there’s plenty of reason to believe that its operating business activity will begin to deteriorate. Keep in mind that HOOD is 100% retail-based. Its business activity soared when the stock market crashed during the peak of the virus crisis as Millennials and Gen-Z’ers flocked to HOOD’s app with dreams of getting rich by day-trading meme and tech stocks from their parent’s couch. And HOOD also added the ability to trade cryptos, which also is heavily retail-based.

According to Apptopia data, the number of new Robinhood app downloads in Q3 (a proxy for account openings) is down -78% from 2Q21. This compares with a drop of around 50% for Bitcoin, Coinbase and other crypto apps that rode the retail trading trend. In addition, Q3 daily active users (a proxy for activity levels) have declined -40% from 2Q21. This compares with a 23% decline for crypo peers and 30% for Schwab.

As stock bubbles start to pop (see 1999/2000 and 2007/2008) retail stock speculators start to lose interest in the market or try to buy the dip until they destroy their account. Most ultimately get wiped out.

When HOOD reported its Q2 numbers on August 18th, it warned that it expected lower trading activity and lower revenue in Q3 as well as “considerably fewer funded accounts” compared to Q2. The Company also has warned twice of a slowdown in crypto trading revenue.

HOOD IPO’d on July 29th so there’s only a little over two months of trading data. The chart above (through 10/1/21) is an hourly chart that goes back to the IPO date. Technically, it looks like continued market turbulence could knock the stock down to $30 this quarter. If the stock market suffers and “accident” this month, HOOD will go below $30. And there’s the constant threat of regulatory torpedoes being launched at the share price.

Of the 875 million shares outstanding, insiders have dumped 464 million. In addition, 98.7 million shares connected to a convertible note owned by insiders will be dumped once the S-1 registration becomes effective. Finally, another 567.9 million shares will become available to sell by insiders as lock-up restrictions expire. Oh, and let’s not overlook the fact that ARKK owns 5.5 million shares and has been adding more shares recently.  ARKK’s endorsement of HOOD alone makes it a fabulous short without knowing the long list of fundamental negatives.

Robinhood to me seems like a no-brainer short. If the stock market falls into a bear market, HOOD will go below $10 and probably below $5. For now, the shares are hard to borrow. I have a big position in December $30 puts. I may also throw on some May 2022 $35’s. Shorting the longer-dated OTM calls is like taking candy from a baby. Once the above-mentioned lock-up expires, the stock will take another leg down and shorting OTM calls will pay off handsomely. 

HOOD will report Q3 numbers in mid-November (it reported Q2 numbers on August 18th). I think there’s a good chance it will miss estimates.  I’m guessing it will report Q3 either the Wednesday or Thursday before the November 19th option series expires. I may buy a small amount of November $40’s or $38’s.

***********************************

The post above is from the October 3rd issue of my Short Seller’s Journal, a weekly subscription newsletter that employs fundamental analysis to identify high probability short sale ideas.  Each issue features analysis of the the past week’s stock market action and economic plus, of course, current short ideas and a weekly update on TSLA. Recent shorts include PENN (at $100 and $120), LEN ($98 and $109) and MU (weekly since it was in the $80s). I also put my money where my mouth is on many of my short ideas. You can learn more here: Short Seller’s Journal

Gold And Silver Are Set To Take Off – The Mining Stocks Are Highly Undervalued

A massive financial system crisis is building.  Evergrande is a small part of the cause but it may have been the “black swan” trigger. The move into the dollar is likely a reflexive flight to safety by professional investors globally and foreign banks. While it’s easy to define Evergrand’s on-balance-sheet debt, there’s no way to know what lurks off-balance-sheet in the form of OTC derivatives and contingent liabilities. Not just for EG but also for the big banks that make wrath of God money underwriting and selling credit default swaps etc.

As evidence that the Fed/Central Banks knew that a financial hurricane was brewing, recall that the Fed quietly announced the establishment of a $500 billion repo facility at the FOMC meeting in July. Why do this when currently the Fed has been keeping over $1 trillion of liquidity circulating in the banking system in a sort of “suspended animation” via the Reverse Repo mechanism?

Gold (and silver) is likely being pummeled by the paper gold price management team in order to disconnect the warning signal of an impending crisis that would be transmitted to the markets if gold continued to move higher in correlation with the USD (remove the canary from the coal mine before it dies).

At some point the demand for the wealth preservation/inflation-shield attributes of physical gold and silver will overwhelm the ability of the banks to cap the price. And the mining stocks are historically undervalued relative to the S&P 500 and to the price of gold. I would argue that the mining stocks represent a generational value investment opportunity.

Bill Powers of Mining Stock Education invited me back on to his podcast to discuss the above issues as well as present a some stock ideas I find particularly compelling:

*****************************

The mining stocks are once again historically cheap.  At some point this year I will be raising the subscription price, though existing subscribers will be grandfathered at the current monthly rate.   If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

If Energy Prices Go Parabolic, Gold and Silver Will Go Parabolic x 3

Commodities are historically cheap to the S&P 500. This is after the monster move over the last 18 months ignited by the Fed more than doubling its balance sheet over the next same time period. Funny thing about looking at a chart of commodities. That rally largely has not included gold and silver. But that is likely going to change:

The chart above shows gold vs the M2 measure of money supply from 2016 to present (the 4 1/2-year bear market in the sector ended late December 2015). The chart suggests that at some point the gold price will correct “up” to the M2 line. Even if the Fed were to start tapering its monthly money printing, the money supply will not decline unless the Fed engages in “quantitative tightening” (permanent reverse repos to remove  money from the system).

To be sure, the current effort by the banks and western Central Banks to cap the gold price is one of the most aggressive I’ve witnessed in 20 years. They are in a fight to maintain their last shred of credibility with the markets in a bid to keep the current fiat currency monetary system intact. It’s a battle they will eventually lose.

Wall Street Silver hosted myself along with David Morgan (silver-investor.com) and Andrew Pollard, CEO of Blackrock Silver ($BKRRF, $BRC.V) to discuss the the energy and precious metals markets:

***********************************

The mining stocks are once again historically cheap.  Find out why I have Blackrock Silver as one of my top junior exploration plays.  At some point this year I will be raising the subscription price, though existing subscribers will be grandfathered at the current monthly rate.   If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

Will Price Inflation Prick The Stock Bubble?

“There was a complete rout of net favorable views of buying conditions: household durables fell to the lowest level since 1980, vehicles fell to the lowest level since 1974, and homes to the lowest level since 1982. These record drops were all due to complaints about high prices: homes had the highest negative ratings of home prices ever recorded, vehicles had the most negative price references since 1974 (in response to the first oil embargo), and durables had the worst price rating since 1980.” – Richard Curtain, director of the U of Michigan Consumer Sentiment Survey


The graphic above does a great job of conveying the non-transitory nature of price inflation – price inflation resulting from the substantial and continuous devaluation of the dollar from the Fed’s money printing and the Government’s debt issuance. The graphs show prices paid and received for manufacturing companies in DC, Virginia, North/South Carolina, Maryland and Virginia. The price inflation at the production level will show up at the retail level over the next 3-6 months. This in turn will cause a further slowdown in consumer spending.

The graphic above shows consumer perception of the buying conditions for large household durables from the UMich consumer sentiment survey released Friday. The view is that the conditions are the worst since 1980. The reason is price inflation. Average household incomes are not even coming close to keeping up with price inflation. This is especially true for retired households dependent on Social Security. This is going to reverberate through the entire economy and cause a severe economic contraction – a contraction that will be masked in the headline numbers by price inflation.

When adjusted for inflation and annualized, the cost of food is higher than nearly anytime in the past six decades, according to United Nations Food and Agriculture Organization data. Alastair Smith, senior teaching fellow in global sustainable development at Warwick University in the United Kingdom, recently noted: “Food is more expensive today than it has been for the vast majority of modern recorded history.” In the U.S. instead of raising prices many food processors are making packages smaller.

“Price Inflation” is a product of currency devaluation from money printing in excess of systemic wealth output. By the time end user prices are rising, the currency devaluation has already taken place. The Fed is printing money and devaluing the currency on a weekly basis, the currency devaluation “nuclear bomb” was dropped in March 2020 when the Fed printed $3 trillion to bail out the banks and to continue funding Government spending without causing a big spike-up in interest rates. As long as the Fed continues to print more money, inflation is unequivocally non-transitory.  In fact, the price inflation we’re seeing now is in the early stages of a much larger escalation.

This is not going to end well. Eventually price inflation is going to sink the economy as households are forced for budgetary considerations to stop spending money anything other than absolute essentials. And the ESG movement is going to send price of energy to Pluto and beyond.

At some point, as was experienced in a similar set-up with the German stock market in November 1923, the money printing and resultant price inflation will undermine the stock market. As legendary investor, Jeremy Grantham, recently commented: “I believe this event will be recorded as one of the great bubbles of financial history,” Grantham wrote, “right along with the South Sea bubble, 1929, and 2000.”

**************************

Most of the above commentary is from the September 19th issue of the Short Seller’s Journal. Recently subscribers who played the recommendations have made small fortunes on ideas like Toll Brothers (TOL), Microstrategy (MSTR) and Penn Gaming (PENN), among others. The learn more about this newsletter, follow this link: SHORT SELLER’S JOURNAL