In the markets, there is a ton of information. An analyst’s job is to separate the wheat from the chaff. And there’s a lot of chaff. The reasons for this are several, including incompetence and sloth, but high among them is the ease and low short-term cost of lying. The cost for lying today is so low that it pays to lie in many instances—again, in the short term. In the long run, chickens tend to come home to roost.
But who cares if lies make you fat and sick in the long run? In the short run, they taste sweet and come in 31 flavors. There’s exaggeration, selective omission, selective inclusion, shading the truth, developing or repeating propaganda, creative accounting, inaccurate insinuation, d*m#ing with faint praise. Of course Mark Twain had his categories: lies, d*#ned lies, and statistics. And there are whole arsenals of lies for politicians, lawyers, and pastors who have departed the narrow way. In short, if you’ll pardon the play on words, it’s a liar’s market—one way or another.
There’s also another way lies can win out in the short term. You can favor them in any way possible and actively suppress the truth. This is true in human affairs broadly, but we’ll look at just one way it’s done.
When Nixon closed the gold window in 1971, the U.S. effectively told the world that the dollar was as good as gold. Any halfway intelligent and diligent researcher could reveal the lie, but an entire infrastructure was built to support the pretender. Ways in which it could be borrowed into existence, supported by tax revenues, accepted in commerce, made the basis of a worldwide system of trade, easily stored, made highly fungible, sent around the world fairly quickly, and much more made the lie seem preferable to the truth.
But the truth will out. Always. Eventually. Lift and thrust might keep an airplane aloft much longer than you thought they could, but gravity and drag ensure that it will come down and stop. Gold is similar, but its gravity is up. It’s inherently valuable. Anything that lowers its value beyond its natural bounds is fighting gold’s anti-gravity, and will ultimately lose. And anything that decreases its supply or increases the need for it will increase the level of those natural bounds.
These are not the ramblings of a company that sells hard asset investments. These are laws written in the heavens that cannot be undone. Those who have tried to do so (central banks) are now buying gold like it’s water in the desert. Don’t listen to what they say. Do what they do. They might not tell you the truth, but they certainly know what it is.
Key Takeaways:
- The four horsemen of the stock market
- Are we at the end of the line?
- Is gold crouching before springing?
- Some greatly needed perspective
The McAlvany Weekly Commentary: David and Kevin continue their discussion of bonds, focusing on the inverted yield curve and its implications. Many people are taking on unnecessary risk for inadequate reward, and this discussion is particularly pertinent for them. The hosts also discuss the conditions that would need to prevail for the yield curve to revert to normal. Also on tap in the program this week are the four horsemen of the stock market and the fact that gold is at all-time highs in much of the world even as American investors are selling GLD and IAU. Should you take out a second mortgage on your house and buy Tesla stock, as one person did, or should you put some of your portfolio into the investment that has seen people through hard times for thousands of years—and that central banks are buying like there’s no tomorrow?
Credit Bubble Bulletin: Doug’s comments this week are grave and immense in their implications. He begins his analysis with comments from a 2009 CBB that set the stage for what we’re seeing today. Summarizing that earlier post, he notes that, “I’ve referred to the ‘global government finance Bubble’ as the ‘granddaddy of Bubbles.’… I’m repeating this analytical framework to reinforce a critical point: We’ve reached the end of the line. There’s no bigger Bubble waiting in the wings for post-government finance Bubble reflation. This ensures that Bubble collapse comes with momentous consequences. And these risks today place tremendous pressure on fiscal and monetary policymakers to perpetuate the excess necessary to hold Bubble collapse at bay.” This is crucial reading.
Hard Asset Insights: Calling the week past a “bloodbath” for the hard asset trade, Morgan is quick to point out that the move was strongly contrary to the fundamentals pertaining to precious metals. “HAI continues to believe that all signs point toward a secular shift in investment dynamics dramatically favoring years of hard asset outperformance over financial asset counterparts. Timing the turn, as ever, continues to deliver fits. Nevertheless, conviction remains that the secular turn higher in hard assets looms on the other side of volatility. Expectations are firm that hard assets represent the generational opportunity in markets today.” Pretty strong language. Might be a good idea to read the rest of his compelling letter.
Golden Rule Radio: Rob and Tory join Miles in the studio this week. After a heavy emphasis on technical factors affecting the metals last week, the hosts, like Morgan, pivot to the fundamentals. Tory points out the turn toward safety among many investors and non-investors, as well as some institutions. And he further points out that, under Basel III, allocated gold is deemed a zero-risk Tier 1 asset. However, he notes the point that David made in this week’s MWC that ETFs are selling gold, which means they don’t see the danger. Even as central banks buy record amounts of gold and gold reaches new price records around the world, many institutions in America are selling their gold. Miles follows up with a helpful view of the big picture and what investors and institutions are doing generally, then showing in charts that the apparent picture is only part of the picture. Tune in for important perspective and long-term analysis.
