Trepidation Nation

This week, while you were busy working, Jamie Dimon, CEO of JP Morgan Chase, took time out from rubbing elbows with fellow movers and shakers at the World Economic Forum in Davos, Switzerland, to share his trepidations:

 

“The only thing I have trepidation about is negative interest rates, QE, and the diversion between stock prices and bond prices and yield and stuff like that…  I think it’s very hard for central banks to forever make up for bad policy elsewhere, that puts them in a trap.  We’re a little bit in that trap today with rates so low around the world.”

 

Jamie Dimon having nightmares in his money bunker [PT]

 

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An Unloved Sector

We rarely discuss individual stocks in these pages, but we make an exception now and then when we spot exceptional opportunities. This time the reason is actually more mundane: the vast majority of gold exploration stocks failed to benefit from the rally in precious metals prices last year. As a result many of them came under even greater pressure in the tax loss selling season at the end of the year. We made a list of such stocks late last year – a download link to the PDF document is provided below this post. Here is an example of such a stock:

 

ATAC (ATADF), one of many exploration stocks that came under selling pressure in last year’s tax loss selling period.

 

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Involuntary Early Retirement of a Middle Eastern General

The procession of news through the week – namely that chronicling the aftermath of the targeted drone strike and killing of Iranian General Qasem Soleimani – advanced with an agreeable flow.  The reports at the start of the week were that Orange Man Bad had spun up a Middle Eastern mob of whirling dervishes beyond recall. World War III was imminent.

 

The recently expired general, when he was still among the quick – and seemingly in a good mood.  [PT]

Photo via harpy.ir

 

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Fiat Currency Rankings – From Bad to Worse

Today, as we step into the New Year, we reach down to turn over a new leaf.  We want to make a fresh start.  We want to leave 2019’s bugaboos behind. But, alas, lying beneath the fallen leaf, like rotting food waste, is last year’s fake money.  We can’t escape it.  But we refuse to believe in its permanence.

 

This is what “monetary stability in the Fed-administered fiat money regime looks like: in the year the Fed was established it took $3.80 to buy what $100 buy today – provided the government’s CPI data are actually a valid gauge of the dollar’s purchasing power. [PT]

 

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GDP – A Poor Measure of “Growth”

Last week the prices of the metals rose $35 and $0.82. But, then, the price of a basket of the 500 biggest stocks rose 62. The price of a barrel of oil rose $1.63. Even the euro went up a smidgen. One thing that did not go up was bitcoin. Another was the much-hated asset in the longest bull market. We refer to the US Treasury.

 

BofA Merrill Lynch high yield master II option-adjusted spread: on Dec. 23 it tightened to the  lowest level of 2019, fairly close to its post-crisis low established in 2018. This seemingly signals that risk is very small –  in reality, risk is probably extremely high. [PT]

 

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World Class Entertainer in the Cross-Hairs

Christmas is no time to be given the old heave-ho.  This is a time of celebration, redemption, and excess libation.  A time to shop ‘til you drop; the economy depends on it. Don’t get us wrong.  There really is no best time to receive the dreaded pink slip.  But Christmas is the absolute worst.  Has this ever happened to you?

 

The verdict: Orange man bad! [PT]

 

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Disrupted Disruptor – Legal Setback Sweepstakes

It seems Uber just can’t catch a break these days. First its license to operate in London was revoked. At issue was apparently that 43 unlicensed drivers were able to take an estimated 14,000 “unauthorized trips” due to a flaw in the Uber app (note that 45,000 licensed Uber drivers are working in London) .

 

Uber’s service has become an important part of London’s transport infrastructure – and a thorn in the side of established taxi services. [PT]

Photo credit: uber.com

 

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Plans and Consequences

You are probably already getting into the holiday spirit, perhaps you are even under a little stress. But the turn of the year will soon be here – an occasion to review the past year and make plans for the new one. Many people are doing just that – and their behavior is creating the strongest seasonal rally in the precious metals markets.

 

Anonymous industrial stackers showing off their freshly purchased silver hoard. [PT]

 

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A Critical Appraisal of a Hero of Central Monetary Planning

We apologize for publishing this Report late. We have been very busy developing the business. Last week the price of gold moved up $16, and that of silver $0.39. Almost two groceries leaked out of that store of value par excellence, bitcoin. But hey, stocks are up!

 

We admit to having a soft spot for the politically incorrect Paul Volcker. He frequently expressed bemusement at the newfangled obsessions of his successors at the Fed (as an example, at a conference in 2006 he remarked on the increasing emphasis on “core” inflation: “A great mantra of central bankers these days is ‘inflation targeting.’ I don’t understand that nomenclature. I didn’t think central bankers were in the business of targeting inflation. I thought we were supposed to be targeting stability.” h/t Grant’s). Nevertheless, we are on board with the criticism voiced below. Volcker was indeed instrumental (along with Milton Friedman, otherwise a champion of free markets, but oddly blind to the insidious nature of a monetary central planning agency) in persuading Nixon to abandon the last remnant of the gold standard, the Bretton Woods “gold exchange standard” that permitted foreign central banks to exchange their US dollar reserves for gold at a fixed exchange rate. Not only did this decision unleash a decade of economic and currency market chaos, it ultimately paved the way for the unbridled expansion in money and credit in train since the early 1980s. In the meantime we have arrived at a juncture where central banks are “forced” to adopt ever more insane policies as they rush from trying to prevent one potential systemic collapse after another. [PT]

 

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Addicted to Spending

There are many falsehoods being perpetuated these days when it comes to money, financial markets, and the economy. But when you cut the chaff, three related facts remain: Uncle Sam needs your money. He needs a lot of your money. And he needs it bad!

 

The inescapable logic of tax & spend: empty vault… empty pockets… gimme more! [PT]

 

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Re-Purposing of Tractor Parts in South Dakota

 

The price of gold was all but unchanged, but the price of silver dropped another 46 copper pennies last week.

We came across an article showing pictures of something we have previously described: sculptures made from parts taken from farm tractors.

Here is a picture I took:

 

The good old Predator made of tractor parts – looks almost like the real thing! Here is background information on the artist and more pictures of his work. [PT]

 

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Panem et Circenses

The transfer of wealth from workers and savers to governments and big banks continued this week with Swiss-like precision. The process is both mechanical and subtle. Here in the USA the automated elegance of this ongoing operation receives little attention.

 

Give them bread and circuses and they will never revolt… so said Juvenal, reportedly [PT]

 

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