Every time I plant a seed, they say 'kill it before it grows'
-- Bob Marley and the Wailers, "I Shot the Sheriff”
Thank goodness for three-day weekends... and four-day work weeks.
Money doesn't take any days off. While humans rest, or work, or recreate, money (or, currency, as it should be called in the age of fiat) continues to flow. From one hand to another. From one account to others. From the few to the many, from the many to the few. Like rust, it never sleeps.
And so it is that on Friday, February 12, Bitcoin was priced at about $47,500 and on Tuesday it popped briefly above $50,000 for the first time ever, and this morning roared past $51,000. Money never rests and money going into bitcoin has turned from a trickle to a steady stream and will soon become a torrent. Considering that bitcoin has tripled since November, $100,000 is not some far away, distant price. It is likely to exceed that number before September, possibly before June.
In a similar vein, the rush into silver wasn't just about some kooky Reddit group going by the name r/wallstreetbets. Silver has been sought by investors and industrial users for thousands of years. Not since 2009, as with bitcoin, and not since 1913, as is the case with Federal Reserve Notes, those greenish printed pieces of paper we carry around in our wallets.
No, silver has a certain millennial quality to it. Silver coins are possibly the oldest mass-produced form of coinage. Silver has been used as a coinage metal since the times of the Greeks; their silver drachmas were popular trade coins. The ancient Persians used silver coins between 612-330 BC. Silver has been money, real money, for nearly 3000 years.
But, some may point out, if silver is so valuable, why is the price of it so low? It's hovering around $27 an ounce on the COMEX. While that may be true, why then are all dealers worldwide virtually out of stock? Why is the US Mint out of stock? All of their silver pieces are either on an out of stock, or pre-order basis with weeks to wait for delivery.
The only place that silver can be purchased for immediate delivery is on eBay, and on Sunday, Money Daily pegged the Single Ounce Silver Market Price Benchmark (SOSMPB) at $42.99, which was up from $41.22 the prior Sunday, and that's probably already too low.
Dealers will need weeks to replenish their stock, if they are able to do so. There's huge demand and supply has been crimped as was the case last March, when silver dumped below $12 an ounce on the COMEX and the rush to buy was unprecedented... until now. The longer the crowd at the COMEX keeps a lid on the price for their 5,000 ounce contracts paper silver, the longer the delays on shipping from dealers, and the higher the price in the retail market for 1, 5, and 10-ounce products.
I shot the sherrif, but I say it was in self defense.
-- ibid.
Which gets to the point of the 10-year note, which rocketed Tuesday, from a yield of 1.20% to 1.30%. That's huge. That's an eight percent move in one day in one of the largest, most steady markets in the world. The US treasury market is upwards of an $18 trillion market and it affects everything from credit card interest rates to mortgages to the price of corn... and wheat... and silver and gold and the purchasing power of those FRNs in your pocket. By comparison, bitcoin is still under a $1 trillion market cap.
Silver's market cap is around $5 trillion. Gold's is $12 to $15 trillion, so it's easy to see why the central banks are trying so hard to keep the "official" prices of gold, silver, platinum and crude oil down via the futures markets. Because if they go up too much, the US dollar - and with it the yen, yuan, euro, pound and every other fiat currency in the world (all of them) - all go to fiat money hell. They become worthless.
The huge move in the 10-year note has a purpose. It's to deflect interest away from silver and gold and the plight of the dollar. Already this morning it's 1.314%, reflecting the unusually large level of distress in the financial system. It's very much worth keeping a tight eye upon, because if it goes much higher, stocks will be under pressure. The situation is such that there are so many different stress points presently, any one of them could cause massive dislocations, a bank failure here or there, derivative unwinding, severe damage to your retirement fund, and other nasty stuff that could make a trip to the grocery store resemble a trip to Wall Street, complete with beggars, liars, thieves, and snake oil salesmen.
The last time the Fed tried to raise interest rates was from December of 2016 through nearly the end of 2018, by raising the federal funds rate from 0.50% to 2.50%, via a series of well-timed, well-publicized 25 basis point hikes. What happened to stocks?
Initially, stocks shrugged off the rate increases. But, as the Fed persisted, by January, 2018, stocks began to slip, and then, in October, and again in December, 2018, stocks fell out of bed, to the point at which the Fed had to reverse course and start lowering rates again.
That was then, and that was the overnight lending rate between banks, not the 10-year note, which is the world benchmark for anything that matters. If the overnight rate at 2.50% caused a run on stocks, how high does the 10-year have to climb before investors take flight from equities to fixed income? Three percent? Five? It could go there, but tighter money works against everything the Fed has been working towards: loose monetary policy, free cash flow to Wall Street, enormous government debt. Reversing course here is a pathway to nightmare scenarios, especially for the government, who will be servicing the monstrous $27.8 trillion debt at higher and higher rates in such an outcome. It's devastatingly deadly.
Don't take our word for it. Listen to Ed Steer discuss the silver squeeze and its implictions. He's an expert and it's a safe bet he didn't shoot the sheriff, or the deputy.
Every day the bucket goes to the well. One day, the bottom will fall out.
-- ibid.
At the Close, Tuesday, February 16, 2021:
Dow: 31,522.75, +64.35 (+0.20%)
NASDAQ: 14,047.50, -47.97 (-0.34%)
S&P 500: 3,932.59, -2.24 (-0.06%)
NYSE: 15,423.02, +53.42 (+0.35%)
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