Category Archives: Investing

The Latest Lie from on-High: An “Independent Federal Reserve”, by Matthew Piepenburg

Central banks are never independent from the governments that create them. From Matthew Piepenburg at goldswitzerland.com:

Earlier in July, U.S. President Biden came away from a meeting with Fed Chairman Jerome Powell and calmly announced that in addition to inflation being “short term,” we should fear not, as Biden also “made it clear to Chairman Powell that the Fed remains independent,” but “will act as needed.”

Whewwww. Where to even begin in unpacking the lighthouse of reality behind so much verbal fog?

When it comes to market analysis, no one wants to hear political opinions within finance reports, left or right.

We get this.

Thus, rather than run the risk of offending the left, right or center, I’ll be frank in confessing my foundational view that nearly all politico’s (and Fed Chairs) have been universally comical when it comes to math, history or blunt-speak.

In short, the math, facts and warning signs rising by the hour (and outlined below) make it easy to be an equal-opportunity cynic when it comes to fiscal leadership or political “truth.”

So, let’s get back to Biden’s recent observations…

Deconstructing Biden-Speak

As for inflation being “short-term,” we’ve written ad nauseum about our stance on this fiction many times elsewhere.

But as for Biden’s declaration about the Fed being “independent,” let me wipe the coffee I just spilled on my shirt and speak plainly: That’s a lie.

First of all, if the Fed were as “independent” as Biden claims, then how can Biden be so certain they “will act as needed”?

Aren’t “independent” actors supposed to act as they, rather than the politicians, decide or “need”?

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The Moment Wall Street Has Been Waiting For: Retail Is All In, by Charles Hugh Smith

If the average Joe was a good investor or speculator, the average Joe would be a lot richer than most average Joes are. As a rule, when all the average Joes are doing one thing, it’s time to do the opposite. From Charles Hugh Smith at oftwominds.com:

The ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

Old hands on Wall Street have been wary of being bearish for one reason, and no, it’s not the Federal Reserve: the old hands have been waiting for retail–the individual investor– to go all-in stocks. After 13 long years, this moment has finally arrived: retail is all in.

If you doubt this, just look at record highs in investor sentiment, margin debt and the Buffett Indicator (see chart below). Current valuations are so extreme that the previous extreme in the 2000 dot-com bubble now looks modest in comparison.

I have my own sure-fire indicators for when retail is all-in. One is my Mom’s financial advisor recommends shifting her modest nest-egg out of safe bonds into the go-go stocks that are topping out. Back in late 1999, it was Cisco Systems and the other dot-com leaders, today it’s the FANGMAN stocks. Sure enough, my Mom just informed me her advisor recommended moving money from bonds into a FANG-dominated stock fund. Bingo, we have a winner.

Second indicator: average people who have never traded stocks are all-in and supremely confident they can’t lose. When 20-year college students are trading based on a “genius” 22-year old friend’s advice, retail is all-in. When a worker cleaning a wooden deck pauses to put $100,000 in a company he knows nothing about (yes, true story), retail is all-in.

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Save, Invest, Speculate, Trade or Gamble? by Doug Casey

The way you deploy your money will determine the quality of your retirement and probably the rest of your life as well. From Doug Casey at internationalman.com:

save, invest

For some time, I’ve been saying that the economy is in the “eye of the storm” and that when it emerged, the weather would be far rougher than in 2008. The trillions of currency units created since 2007, combined with artificially suppressed interest rates, have papered over the situation. But only temporarily. When the economy goes into the trailing edge of the hurricane, the storm will be much different, much worse, and much longer lasting than what we experienced in 2008 and 2009.

In some ways, the immediate and direct effects of this money creation appear beneficial. For instance, by not only averting a sharp complete collapse of financial markets and the banking system, but by taking the stock market to unprecedented highs. It’s allowed individuals and governments to borrow more, and live even further above their means. It may even create what’s known as a “crack-up boom”.

However, a competent economist (as distinguished from a political apologist, many of whom masquerade as economists) will correctly assess the current prosperity as an illusion. They’ll recognize it as, at best, a natural cyclical upturn – a “dead cat bounce.”

What we’re really interested in, however, are not the immediate and direct effects of QE— “Quantitative Easing”, and ZIRP—Zero Interest Rate Policy. As much as I love the way they fabricate these acronyms and euphemisms, what we’re really interested in is their indirect and delayed effects. In particular, how do we profit from them? What is likely to happen next in the economy? Which markets are likely to go up, and which are likely to go down?

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The Death of Truth & the Rise of Centralized Government Control, by Matthew Piepenburg

Being criminal enterprises, governments destroy trust. From Matthew Piepenburg at goldswitzerland.com:

As I write this from a France making ever more bold moves toward forced vaccination, one can’t help but ponder the broader issues of centralized government control, regardless of one’s take on vaccine or no vaccine.

Focusing on financial rather than viral data, the evidence of centralized state control over natural market forces in the stock and bond markets is becoming increasingly incontrovertible.

We’ve written elsewhere about the death of logic and the madness of crowds. It should therefore come as little surprise that the death of truth is yet another casualty of the increased central control we are experiencing in global markets.

Debt Crisis Disguised as a Health Black Swan

Long before COVID reared its highly controversial head (from viral source debates, baby-with-bathwater policy reactions, censored science as to vaccine efficacy and safety, distorted math on infection rates vs death rates, and centralized government control by officials acting “for your own safety” vs. Constitutional and legal issues of individual choice), the global financia

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Soaring Debts and Plummeting Yields… by David Stockman

It should be a supply-and-demand thing—an increasing supply of debt should drive interest rates up to attract marginal funding. Not, however, when yield-insensitive central banks can buy unlimited amounts of debt. From David Stockman at davidstockmanscontracorner.com via lewrockwell.com:

After decades of unhinged money-pumping, the Fed has driven real interest rates so low that there are no more bond investors — just traders and suckers.

The former have driven the 10-year yield in recent days to just 150 basis points in nominal terms (and deeply into the red in real terms in the face of surging monthly inflation numbers), because they are “pricing-in” one thing and one thing only: simple and supreme confidence that the spineless fanatics who occupy the Eccles Building will keep buying $120 billion per month of government and quasi-government debt.

Real Yield on 10-Year UST, 1985–2021

These are no longer even “markets” by any historical sense of the term. The bond markets and the stock exchanges are just mindless gambling casinos.

Inflation-adjusted yields had previously meandered around the 10%+ level for several decades. But no more. The real yield is so low that yield starved fund managers are throwing caution to the wind and setting themselves up for massive future losses.

That’s not an honest price discovery. It’s the crazed trading that has been fostered by fanatical central bankers who have literally lost touch with history, reality and every canon of sound finance.

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The Dollar’s Final Crash Down A Golden Matterhorn, by Egon von Greyerz

Produce enough of anything and you can drive i to worthlessness. That’s particularly easy with fiat currencies, and governments have done it throughout history. From Egon von Greyerz at goldswitzerland.com:

Was Richard Nixon a real gold friend who understood the futility of tying a weakening dollar to gold which is the only currency that has survived in history?

So was Nixon actually the instigator of the movement to FreeGold?

I doubt it. He was just another desperate leader who was running out of real money and needed to create unlimited amounts of fiat money. Although his fatal decision to close the gold window was clearly the beginning of the end of the current monetary system.

But although the decision was fatal, Nixon was clearly not personally responsible. What the world saw in August 1971 was just another desperate leader who realised that he couldn’t stick to the monetary or fiscal disciplines necessary to maintain a sound economy and a sound currency.

In history, Nixon should be seen as the rule rather than the exception. Since every currency has been slaughtered throughout history, one particular leader will also be required to be the executor.

So in 1971, history had elected Tricky Dick to be the inevitable destroyer of the dollar.

Nixon's lies
I don’t quite know what the definition is of “suspend temporarily” but 50 years seems to be pushing the limit!

And as regards the strength of dollar goes, we all know what happened to the “strength of the currency”! Please see the illustration of the dollar collapse further on in the article.

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Doug Casey on His 10 x 10 Approach

Doug Casey has an interesting approach to investing, which apparently works for him. SLL neither endorses nor condemns it. From Casey at internationalman.com:

10 x 10 Approach

Everyone who devotes any attention to investing inevitably develops his own specialties, approaches, and methods. In other words a style. There are many paths up the mountain, and all intelligent methods have merit. But the degree of merit can vary tremendously with the times. A value investor, who attempts to find dollar bills selling for 50 cents, is going to have a tough time in a mildly inflationary environment when the stock market is booming. A growth investor, who looks for companies with rapidly and consistently compounding earnings, is going to have a tough time during a deflation. A technician, who follows the price action of charts, has a tough time in trendless markets, or periods punctuated by unpredictable events in the world outside.

What we’re most likely to see in the years ahead are titanic moves in many markets, with hard-to-predict timing and direction. Massive forces of inflation and deflation will vie with one another, and it’s impossible to say which will dominate or for how long. In that environment safety, and keeping what you have, will be critical. But safety is unlikely to be found in traditional places, simply because the market will be so radically untraditional.

It makes sense to reorient your assets to deal with the market as it soon will be, not the way it recently was or how we hope it will turn out. This may require you to act contrary to your intuition, since you’ll need to sell investments that have established good track records during good times and buy investments with bad performance histories. But that’s the very nature of buying low and selling high. You’ll never buy low if you demand a good track record.

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The Bubble Epoch Gets Worse, by Bill Bonner

The problem with serial bubble blowing by central banks is that each bubble has to be bigger than the previous ones to keep them all from popping. From Bill Bonner at rogueeconomics.com:

YOUGHAL IRELAND – Yes, it’s the age of miracles. The Bubble Epoch. The silly season.

And it just gets sillier and sillier.

Christine Lagarde, who holds the top spot at the European Central Bank (ECB), announced that she’s going to continue pumping up the money supply by 17 billion euros per week.

She says it is going to add 1.8% to Europe’s growth over the next two years. That is, somehow the fake money will be magically transformed into real wealth.

How does she know that?

Strange Voodoo

Oh, Dear Reader, is that a serious question? Of course, she has no idea…

And by the way, if her €17 billion per week would add precisely 1.8% to the economy, why not print €18 billion and get 1.9%, we wonder? Or €100 billion?

Apparently, none of the journalists who cover the ECB thought to ask… So we’ll just have to go on wondering.

What strange voodoo is this… that 17 billion per week is the exact number of euros needed to raise GDP by 1.8%?

A Good Deal

Meanwhile, her co-delusional over in the U.S., Federal Reserve chief Jerome Powell, says he’s going to continue the money-printing, too – at the rate of $30 billion per week.

His aim is to hit 2% inflation – not 2.1%, not 1.9% – which he’s convinced is some sort of sacred number guaranteeing uninterrupted growth and full employment.

What it actually guarantees is higher prices, as we see in the asset markets. The S&P 500 just hit another new all-time high. As did house prices.

The Fed is buying $40 billion worth of mortgage bonds each month, driving down mortgage rates to the point where you can get a 15-year mortgage at a negative rate.

That is, your mortgage interest will be less than the going rate of consumer price inflation.

A good deal? Apparently.

And it’s likely to be a better deal if tomorrow’s inflation makes today’s mortgage rates even more negative.

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ESG Investing – The Great Wall Street Money Heist, by Lance Roberts

Any time Wall Streets touts virtuous investing over mere investment returns, put your hand on your wallet and leave the room. From Lance Roberts at realinvestmentadvice.com:

Wall Street is once again in the midst of a “money heist” from naive investors. This time in the form of “woke activism” called ESG.

ESG refers to the Environmental, Social, and Governance risk theoretically embedded in a business. However, while ESG investing is about taking these risks into account in investment decisions, these are all the things NOT on a company’s balance sheet or earnings statements. Such is the inherent problem.

However, as is also the case, with the recent surge in liberal policies, woke activism, and demand for social justice, Wall Street is more than willing to sell products to fill a need. Not surprisingly, with plenty of media coverage, ESG investing has become an enormous business.

Following the financial crisis, ESG funds had roughly a ZERO market share of total assets under management. Today, ESG-labelled funds in the United States exceed $16 trillion.

The question is whether investors are getting what they are paying for?

What Are You Paying For

In the late ’90s, there was a significant movement by Wall Street to limit investing in “sin” stocks such as gambling, tobacco, etc. Just as it was then, investors initially jumped on board, but when returns failed to match the S&P index, that “fad” died away.

The same occurs today as investors who want to be “woke” are demanding products that make them feel good to purchase. However, there are many problems with ESG outside the labeling.

There are currently no universal rules to analyze ESG risks. Nor are there any clear frameworks to police ESG-labelled investment products. As Eco-Business recently noted:

“For example, deforestation is a major driver of climate change. You would think it’s being used as a filter to ensure companies in ESG-labelled funds are not turning a blind eye to deforestation, but you would be wrong. Carbon Tracker, an industry ‘think tank,’ found that 78% of mutual fund providers offered ESG investments. However, none specifically excluded deforestation risk. Not a single one actively priced climate risk either.”

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One Mad Market & Six Cold Reality-Checks, by Matthew Piepenburg

There are some commonly held notions out there that in no way comport with reality. From Matthew Piepenburg at goldswitzerland.com:

Fact checking politicos, headlines and central bankers is one thing. Putting their “facts” into context is another.

Toward that end, it’s critical to place so-called “economic growth,” Treasury market growth, stock market growth, GDP growth and, of course, gold price growth into clearer perspective despite an insane global backdrop that is anything but clearly reported.

Context 1: The Rising Growth Headline

Recently, Biden’s economic advisor, Jared Bernstein, calmed the masses with yet another headline-making boast that the U.S. is “growing considerably faster” than their trading partners.

Fair enough.

But given that the U.S. is running the largest deficits on historical record…

…such “growth” is not surprising.

In other words, bragging about growth on the back of extreme deficit spending is like a spoiled kid bragging about a new Porsche secretly purchased with his father’s credit card: It only looks good until the bill arrives and the car vanishes.

In a financial world gone mad, it’s critical to look under the hood of what passes for growth in particular or basic principles of price discovery, debt levels or supply and demand in general.

In short: “Growth” driven by extreme debt is not growth at all–it’s just the headline surface shine on a sports car one can’t afford.

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