Tag Archives: tariffs

Trump’s Dilemma And Refuting The Gold/Yuan Peg Theory

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, ,

The following is an excerpt from my December 6th issue of the Mining Stock Journal:

Trumps Dilemma – The dollar index has been rising since Trump began his war on trade. But right now it’s at the same 97 index level as when Trump was elected. Recall that Trump’s administration pushed down starting in 2017 to stimulate exports and attempt to cut the trade deficit.  The dollar  fell from 97 to 88.  Gold ran from  $1125 to as high as $1360 – a key technical breakout level – by late April 2018.  Something had to be done to keep gold from moving higher…Trump started his Trade War in March, which  pushed the dollar higher.  Gold began tank.   Ironically, the trade deficit one again began to balloon.

If Trump wants to “win” the trade war, he needs to push the dollar a lot lower. This in turn will send the price of gold soaring. This means that the western Central Banks/BIS will have to live with a rising price gold, something I’m not sure they’re prepared to do. This could set up an interesting behind-the-scenes clash between Trump and the western banking elitists.

I’ve labeled this, “Trump’s Dilemma.” As anyone who has ever taken a basic college level economics course knows, the Law of Economics imposes trade-offs on the decision-making process (remember the “guns and butter” example?). The dilemma here is either a rising trade deficit for the foreseeable future or a much higher price of gold.

The other problem with pushing the dollar lower to stimulate exports – or at least attempt to stimulate exports – is the funding of Treasury debt. If foreign investors, who fund a large percentage of Treasury issuance, expect the dollar to decline it will significantly reduce the foreign funds that finance Trump’s spending deficit. That deficit – on-budget + off-budget – will likely end up somewhere between $1.5 – $2 trillion this year…

Refuting the yuan/gold peg theory – When the theory about the Chinese pegging gold to the yuan based on the chart correlation was floated, how come nobody bothered to check the other major currencies vs. the dollar and vs. gold? The dollar has traded higher as if on steroids since late-April. Gold was trading at $1360 in late April. Between now and then it has traded as low as $1170. The yuan began falling vs. dollar in late April. But so did the Swiss franc and yen. The euro began falling vs. the dollar in February.

The charts of the Swissy, euro and yen vs the yuan over the last 12 months are all largely flat over that time period. More to the point, the chart of gold vs all four of those currencies (yuan, Swissy, euro and yen) over the last 12 months looks very similar:

As the chart above shows, the price of gold in all four currencies – yen, yuan, euro, Swissy – has been correlated. The argument could be made that gold is “pegged” to any four of those currencies. The yen, euro, Swissy make up a large portion of the dollar index. Gold is thus not pegged to the yuan so much as it is trading inversely to the dollar,  which is expected.

The Trade War Shuffle And The Fukushima Stock Market

Financial Markets, Gold, Housing Market, Market Manipulation, Precious Metals, U.S. Economy, , , , ,

The market is already fading quickly  from the turbo-boost it was given by the announcement that China and Trump reached a “truce” on Trump’s Trade War – whatever “truce” means.   Last week the stock market opened red or deeply red on several days, only to be saved by a combination of the repetitious good cop/bad bad cop routine between Trump and Kudlow with regard to the potential for a trade war settlement with China and what has been dubbed the introduction of the “Powell Put,” in reference to the speech on monetary policy given by Fed Chair, Jerome Powell, at the Economic Club of New York on Wednesday.

It’s become obvious to many that Trump predicates the “success” of his Presidency on the fate of the stock market. This despite the fact that he referred to the stock market as a “big fat ugly bubble” when he was campaigning.  The Dow was at 17,000 then. If it was a big fat ugly bubble back then, what is it now with the Dow at 25,700? If you ask me, it’s the stock market equivalent of Fukushima just before the nuclear facility’s melt-down.

Last week and today are a continuation of a violent short-squeeze, short-covering move as well as momentum chasing and a temporary infusion of optimism. I believe the market misinterpreted Powell’s speech. While he said the Fed would raise rates to “just below a neutral rate level,” he never specified the actual level of Fed Funds that the Fed would consider to be neutral (neither inflationary or too tight).

I believe the trade negotiations with China have an ice cube’s chance in hell of succeeding. The ability to artificially stimulate economic activity with a flood of debt has lost traction. The global economy, including and especially the U.S. economy (note: the DJ Home Construction index quickly went red after an opening gap up), is contracting. Trump and China will never reach an agreement on how to share the shrinking global economic pie.

While Trump might be able to temporarily bounce the stock market with misguided tweets reflecting trade war optimism, even he can’t successfully fight the Laws of Economics. His other war, the war on the Fed, will be his Waterloo. The Fed has no choice but to continue feigning a serious rate-hike policy. Otherwise the dollar will fall quickly and foreigners will balk at buying new Treasury issuance.

For now, Trump seems to think he can cut taxes and hike Government spending without limitation. But wait and see what happens to the long-end of the Treasury curve as it tries to absorb the next trillion in new Treasury issuance if the dollar falls off a cliff.  Currently, the U.S. Treasury is on a trajectory to issue somewhere between $1.7 trillion and $2 trillion in new bonds this year.

Despite the big move higher in the major stock indices, the underlying technicals of the stock market further deteriorated. For instance, every day last week many more stocks hit new 52-week lows than hit new 52-week highs on the NYSE. As an example, on Wednesday when the Dow jumped 618 points, there were 15 news 52-week lows vs just 1 new 52-week high. The Smart Money Flow index continues to head south, quickly.

For now it looks like the Dow is going to do another “turtle head” above its 50 dma (see the chart above) like the one in early November. The Dow was up as much as 442 points right after the open today, as amateur traders pumped up on the adrenaline of false hopes couldn’t buy stocks fast enough. As I write this, the Dow is up just 140 points. I suspect the smart money will once again come in the last hour and unload more shares onto poor day-traders doing their best impression of Oliver Twist groveling for porridge.

Silver, Trump’s Trade War, Mining Stocks And The Fed’s Gold

Financial Markets, Gold, Precious Metals, U.S. Economy, , , ,

If you have gold, you have money – If you don’t have gold, you have a problem – Alisdair Macleod

With the massive net short position in both gold and silver Comex paper precious metals, offset by the historic net long position of the “commercials” (banks, mining companies, users, hedgers), numerous rumors are swirling around the precious metals market. For certain, the availability of physical gold bars in London that can be delivered to the large eastern hemisphere buyers who demand delivery is growing tight.  Apparently the retail silver coin/bar market is starting to feel supply strains.

Miles Franklin’s Chris Marcus invited me onto this podcast to discuss the precious metals markets, mining stocks, Trump’s Trade War and the status of the gold held in custody by the Fed on behalf of the American public:

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:  Short Seller’s Journal information and more about the Mining Stock Journal here:  Mining Stock Journal information.

Navin R. Johnson Goes To The White House

Financial Markets, Gold, Housing Market, Market Manipulation, Precious Metals, U.S. Economy, , , ,

(Note: with apologies to Carl Reiner and Steve Martin, who directed and co-wrote “The Jerk,” respectively)

Just when you thought Trump’s “leadership” could not get any more insane, he adds a third ring to the circus going on at 1600 Pennsylvania by hiring “economist,” Larry Kudlow to be the head of his economic advisors.

For those of you not familiar with financial market history beyond the last 10 years, which includes the majority of money managers and other sundry financial “professionals,” Kudlow was the chief economist at Bear Stearns from 1987 to 1994.  His tenure at Bear ended infamously when it was revealed that he had developed a nasty cocaine and alcohol addiction at some point in his career.

Prior to Bear, Kudlow began his post-college career as a Democratic political operative.  He parlayed his political connections to get a job as a junior staff “economist” at the Fed.  I use quotations marks around the term “economist” in reference to Kudlow because he does not have a degree beyond undergrad  from the University of Rochester, where he majored in history.

At some point Kudlow, likely for political expedience given the political “winds” of the country in the early 1980’s, became a Republican. He wheeled his political connections into a job in Reagan’s OMB (David Stockman was the Director).  From there, he moved on to Bear Stearns.  The rest is history.

I thought  it would be interesting to peer into the mind of an untrained economist to examine the thought process.  Clearly Kudlow excelled at wheeling and dealing his political connections.  But is he qualified to be the president’s chief economic advisor, especially at a time when the U.S. is systemically collapsing?

In November 2007, Trump’s new Chief Economic Advisor, Larry “Señor Snort” Kudlow wrote an article about the economy titled, “Three More Years of Goldilocks” for which he should receive the Darwin Award (credit goes to @RudyHavenstein for posting the article).  Let’s examine some excerpts – keep in mind Kudlow wrote this about 5 months before Bear Stearns collapsed, triggering a financial crisis that anyone with more than two brain cells could see coming:

“I think the election-year economy will be stronger than the Fed’s estimate — closer to 3 percent. Too much is being made of both the sub-prime credit problem and the housing downturn.” IRD note: Many of us predicted and made big bets on the outcome of “too much being made of the sub-prime credit problem;” a caveman could see what was coming.

“What’s more, the entire market in sub-prime debt is just 1.4 percent of the global equity market.” – IRD note: Maybe 1.4% of a global stock bubble – but that’s like saying a small nuclear bomb in the hands of a madman is just 1.4% of the total stockpile of nuclear weapons. Notice that Kudlow overlooks the $10’s of trillions of OTC derivatives connected to the sub-prime debt, something that was obvious to many.

In issuing a forecast for 2008, Kudlow goes on to say:  “Both consumer spending and business capital investment are advancing…Right now, stocks are in a classic declining-profits correction. This downward trend has so far reduced the Dow by roughly 8 percent. As a rough guess, a 10 percent correction ought to spell the end to the Dow’s slump. And Fed rate cuts should be a big booster for stocks.” IRD note – Where on earth was he getting his data on consumer spending? By November 2007, households that weren’t living in fear of foreclosure were living in fear of losing their job. Between October 2007 and March 2009, the S&P 500 collapsed 58%.

Kudlow’s assertions back in 2007 were a joke.  What happened to Kudlow’s “Goldilocks economy?”  This is the person who is now Trump’s lead economic advisor.   Now Kudlow once again is asserting that, “the profit picture is good. It’s looking real good, and growth is not inflationary just let it rip for heaven’s sakes. The market is going to take care of itself.”

Based on his track record of issuing bullish forecasts right before a collapse,  I’d suggest that the economy and financial system is closer to taking care of itself by  “ripping” off a cliff without a parachute than it is to producing real growth. Retail sales have tanked three months in a row, the housing market appears to be headed south, auto sales plummeting, restaurant sales have dropped 19 out of the last 20 months. Where is this growth you seeing, Larry? Please do tell…

Mr. President, If We Don’t Have Gold, We Don’t Have a Country

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , , , , ,

The consequences of Gold Truth, such as it is but has not yet been revealed, are beyond sobering. If the Gold Truth is that USG, Inc. does not possess and own the gold it has promised the world that it owns and possesses, every last shred of monetary, fiscal, financial, economic and moral authority that USG, Inc. still possesses would be destroyed in a matter of seconds. And it is virtually impossible to see how the U.S. dollar could survive such a revelation without plummeting. – Stewart Dougherty

Stewart Dougherty has written another compelling, thought-provoking essay about gold and the United States Government’s intentional omission of gold as the foundation of monetary and fiscal policy.  Please note that Mr. Doughtery’s view of Trump does not represent IRD’s view of Trump or his efforts as President.

“Passivity is fatal to us. Our goal is to make the enemy passive. … Communism is notlove. Communism is a hammer which we use to crush the enemy.” Mao Tse-tung, proclaiming the founding of the People’s Republic of China, 1949

Circumstantial evidence is mounting high that there is something seriously wrong with the amount of gold reportedly owned by the United States government, or more precisely, the American people.

After nearly two generations of being brainwashed into believing that gold is a meaningless relic, western citizens have lost all concept of gold’s crucial monetary importance. If it turns out that the United States does not, in fact, possess and own the gold it claims to, the monetary, fiscal, economic, and humanitarian fallout will be unprecedented in its destructiveness. Unfortunately, the people have no idea what is at stake.

The largest corporation in the world, by far, is the United States government. No other corporation has anything even close to its $3.4 trillion in annual revenues, and $4.4 trillion in annual expenses. And no other corporation has ever suffered multiple annual losses exceeding $1 trillion dollars, nor could it have, as such losses would have financially annihilated it. To be able to print money at will and without limit, as USG, Inc. can do, has blinded it to the powerful beast called Consequences that is slowly and methodically hunting it down.

USG, Inc. employs thousands of accountants, many of whom work at the Congressional Budget Office. The CBO prepares detailed budgets, one of which looks forward thirty years, and then extrapolates the numerical trends for an additional forty-five years, for a total forward horizon of 75 years. The 2015 report examines USG, Inc.’s projected performance until the year 2090. According to that report, not only will USG, Inc. lose money every single year for the next 75 years, the losses will actually accelerate each year and total more than $300 trillion. In 2047 alone, the deficit is estimated to be $5.3 trillion, on a cash accounting basis. On an accrual accounting basis, it will be far worse, if USG, Inc. even makes it to that point in its current state, something we find it difficult to envision. It is arithmetically impossible for the dollar to avoid destruction in such a scenario.

It should be no surprise that USG, Inc.’s finances are such a disaster, because for the past generation and longer, the CEOs of USG, Inc. have never in their lives held real jobs in the productive economy, other than GW Bush’s brief stints as a member of an oil and then a baseball investor group, which is not the kind of real job we mean. Instead, these CEOs have all been professional politicians, who by definition do not contribute to the real economy, but rather, feed upon it.

This pattern was about to repeat itself in 2016, with the Deep State’s planned installation of Hillary Clinton into the CEO role at USG, Inc. Clinton, too, has never in her life had a real job in the productive economy, and has precisely zero experience managing anything even beginning to resemble a massive corporation with millions of employees and projected $1+ trillion, accelerating annual losses extending as far as eyes can see. This is exactly what the Deep State wanted: a corrupt, financially clueless, ideological figurehead, who would be oblivious as they ramped up the looting of USG, Inc. to a new level of rapaciousness while she was busy hectoring the nation’s producers and taxpayers about their deplorable selves. It is this looting that is the precise reason why USG, Inc. is now drowning in losses and debt, and is strategically paralyzed.

While anyone with any common sense would immediately understand that it would be ridiculous to expect that someone with zero education, training or experience in engineering could oversee the design of a spacecraft capable of landing on Mars, or that someone with zero medical education, training or experience could successfully conduct brain surgery, for some unfathomable reason, people think that someone with zero business education, training or experience can successfully manage the world’s largest corporation. USG, Inc.’s catastrophic financial results demonstrate the regrettable stupidity of that thought.

TO READ THE REST, PLEASE CLICK HERE:   IF YOU DON’T HAVE GOLD…