For the most prescient insight, Doug Noland's weekly Credit Bubble Bulletin was titled, appropriately, "Wrecking Ball" and contained a mountain of pertinent information and explained some of the underlying causes for what looks to be the beginning of a long-awaited bond market bust. Credit has eluded the grim reaper since the 1980s, but it appears that the reckoning has finally arrived.
Noland begins his narrative with an overview of the GameStop hearings in congress, pointing out how the cretins on Maxine Waters' House Financial Services Committee were more interested in scoring points on the predatory hedge funds and preening for the cameras than exploring the root causes and effects of the wild ride in a few selected companies.
Noland notes:
Listening Thursday to the House Financial Services Committee’s “GameStop” hearing, it was clear Washington has little appreciation for the seriousness of structural deficiencies revealed by recent market mayhem. The focus was more on blasting predatory Wall Street and the hedge funds, while looking into the cameras to defend the defenseless small investor. The broader point of a historic mania and potentially catastrophic infrastructure shortcomings was completely neglected. Millions of unusually synchronized buy orders almost led to a cascading market accident. It seems rather obvious at this point that existing market infrastructure will buckle under tens of millions of synchronized sell orders.
A dissertation on the Texas power grid catastrophe follows, with Noland pointing out that the Lone Star state's grid issues occur on a decade by decade calendar, like clockwork, with similar, though less extreme, episodes in 1989 and 2011, all due to Texans' desire for cheap energy while ignoring the need for winter weatherization.
Getting closer to the point, Noland reports how Fed officials harp on recent interest rate spikes as "transitory" and consider the rout in bonds not much of a problem. Such Fed-speak recollects Ben Bernanke's fateful pronouncement that "subprime is contained" back in March of 2007.
Noland points out other warning signs, such as the Producer Price Index (PPI) jump in January of 1.3%, the biggest gain since December 2009, the median price of an existing home sold in January at $303,900, a 14.1% increase from January 2020, the highest January price that the Realtors have ever recorded, and the Fed's incredibly loose monetary policy fueling further inflationary pressure, noting that they're still implementing QE in the amount of $120 billion a month when they normally would be tightening.
Further, Noland contends, "The point is the Fed is locked into the loosest and most asymmetric monetary policy imaginable. Slash rates to zero and inject Trillions of liquidity in days and weeks, while the return to any semblance of policy normalcy unfolds over quarters and years." He goes on to say, "I do not recall a period when the domestic environment was as ripe for inflationary pressures to gather momentum." Additionally, he points to global inflationary pressures in all fiat currencies with 10-year bond yields in developed and emerging markets rising dramatically.
Noland's weekly commentary is highly recommended. His research and expertise spans decades.
All of which leads directly to speculation in stocks, commodities, and cryptocurrencies, leaving the badly-damaged Euro-centric Western banking-dominated COMEX and LBMA spot prices for gold and silver struggling to maintain dollar (US$) hegemony in a world that is rapidly moving on toward Asian pre-eminence.
The thrust in Asia, particularly acute in China, is toward modernization and growth through infrastructure buildout. The US is lagging far behind in technology - importing most of it - and infrastructure, which has been stalled out since the 50s and 60s. US dominance over South America, and Europe's domination of the Middle East and Northern Africa have sent hordes of refugees from South to North, from the countries controlled and maligned to the global hegemons.
With the advent of cryptocurrencies - Bitcoin for the most part - and the mobilization of Chinese industrialization to South Asia, the Middle East, Africa and South America, the United States and Europe are being left in a void, the proximate causes being the hubris of supposed central banking infallibility, decades of stealth expansionism and colonization, and the short-sightedness of politicians who have failed to address the two main issues facing their economies and societies since the origin of the fiat epoch in 1970, infrastructure and immigration. Their answer has been and will continue to be bigger and more destructive deficits, lumping trillions more onto the national debt.
Europe will implode as the European Union disintegrates. With the UK leading the charge via Brexit, other countries will soon follow. Greece, Italy, Spain, and Portugal are well on their way out, which would leave a very fractured alliance between Germany and France to fight over the bones and scrap. While politicians struggle to retain power, the citizens will struggle to survive. The ultimate solution is a complete dumping of the central banking fiat regime in favor of honest money, be it backed by gold or silver or a form of cryptocurrency, though it's obvious that the "leaders" and managers of these countries are well behind the curve, late to the emerging party.
In a few words, Europe and the United States are losing. China, Russia, and the so-called "undeveloped" countries are winning. Sooner or later, the privilege of printing dollars and euros in exchange for valuable goods and services will be denied. The process is already underway. It's manifested by inflation.
What's even more confounding for the Fed and their central bank cohorts is squaring higher yields in long-dated maturities while the short end threatens to fall below zero. While it's exactly their intention, the steepening of the yield curve beyond two years is frighteningly inflationary, a veritable crack-up boom in von Mises' terms, almost an exact opposite of an inverted curve which signals deflation and recession. This is inflation on steroids: the hyper variety. This set-up is very inconvenient for proponents of stability and measured growth.
Bitcoin and Etherium spent most of the week sprinting forward. Bitcoin topped out at $57,800, posting a 21.5% gain for the WEEK. Ether cascaded beyond $2000, a new all-time high, before settling back in the low-to-mid $1900s. It's rise for the week was a paltry 7.6%.
Gold and silver continued to be suppressed by the COMEX futures traders and LBMA. Silver ended the week at a laughable $27.24 per troy ounce, while gold priced out Friday at an absurd $1784.05. Meanwhile, Money Daily's Single Ounce Silver Market Price Benchmark (SOSMPB) was pegged at $43.94, up 95 cents from last week ($42.99).
According to prices for both gold and silver via the LBMA's daily spot "fix" and the phony COMEX futures markets, the world is to believe that these two monetary metals are stable at low levels while everything else is inflated away. By most accounts, both should be multiples higher. A fair price for gold could easily be upwards of $8,000, with silver tagging along at a 12:1 or 16:1 ratio, or somewhere in the neighborhood of $500-$675 an ounce.
A recent shortage of silver at dealers may prove to be short-lived as the threat to the futures market was unexpectedly short-circuited by the r/wallstreetbets crowd, which has splintered into at least two opposing groups consisting of die-hard silver longs and stackers and those who believe the "silver raid" was never actually sponsored by the redditers. If silver dealers are able to restock quickly, both the COMEX and market prices could fall under short-term pressure, making for one huge buying opportunity similar to last March's smackdown to under $12/ounce.
For gold bugs, buying bars at under $1800 an ounce is like living the dream in technicolor.
Most recent prices of common 1 ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included) follow:
Item: Low / High / Average / Median
1 oz silver coin: 38.00 / 54.95 / 44.64 / 42.30
1 oz silver bar: 38.49 / 52.15 / 44.33 / 44.48
1 oz gold coin: 1,909.99 / 2,160.00 / 1,984.99 / 1,979.50
1 oz gold bar: 1,895.00 / 2,105.99 / 1,925.64 / 1,906.11
Prior data here.
Stocks spent the week gyrating around break-even, with the NASDAQ losing a percent. With the main indices floated near all-time highs, there's no indication that stocks are going to be pressured, though a pull-back or correction would be considered a healthy episode. Wall Street and the Fed simply will not have it, however. They're mortally bound to higher stock prices and suppression of everything that doesn't support the "recovery" narrative, be it gold, silver, shrink-flation, international news, vaccination horror stories, or traditional values.
The thrust is higher and higher as inflation (which the Fed still insists is too low) rages. Hyperinflation is proceeding at breakneck speed. By fall, food prices could be 20-30% higher than a year ago. Energy is already beyond the norm, with oil surpassing pre-pandemic levels. A barrel of WTI crude settled out Friday at 59.01 after reaching a fresh 52-week high of $61.14 on Wednesday, Feb. 17. A year ago, the price of crude was under $50 a barrel and falling. In February alone, WTI crude is up 13% as of Friday's close.
Comparisons to year-ago levels are going to become more and more stretched. WTI crude fell from the 40s into the 20s and teens from March through May of 2020 as the coronavirus and lockdowns spread worldwide. With global recovery eyed, there's no doubt a huge difference in price everywhere from the wellhead to the gas pump. Without sounding like punidtry, energy costs fuel inflation. Higher prices for pumped oil will pump prices everywhere else.
A slew of companies will be reporting Q4 2020 and full year earnings in the coming week. Monday, after the closing bell, Marathon Oil (MRO) and ZoomInfo (ZI) announce. Tuesday, before the open, Home Depot (HD) and Macy's (M); after the close, Square (SQ), Intuit (INTU, Toll Brothers (TOL). Wednesday, Overstock (OSTK), Lowe's (LOW), TJX Companies (TJX), and Casper (CSPR) report pre-open. After market's close, Nvidia (NVDA) reports. On Thursday, before the open, Moderna (MRNA), Domino's (DPZ), Best Buy (BBY), Wayfair (W). After the close, Salesforce (CRM), Etsy (ETSY), Beyond Meat (BYND), Workday (WDAY), Airbnb (ABNB). The week's reports closes out Friday morning with reports from Draft Kings (DKNG), Foot Locker (FL), and Cinemark Holdings (CMK).
Finally, it appears that capitulation by commercial banks, leading to destruction of central banks, is afoot. Reports by Morgan Stanley and JP Morgan each signal that cryptocurrencies have made the leap from speculation to an acceptable asset class. With listed companies - Microstrategy and Tesla, led by visionary CEOs Michael Saylor and Elon Musk, respectively - now lining their treasuries with Bitcoin and banks (the nation's oldest bank, BNY Mellon announced that it would engage in crypto investments for high net worth individuals) now admitting the error of their prior denunciations, it's surely off to the races for crypto. All manner of cliche can be used to describe the current mania. The horse has left the barn. The ship has sailed. The train has left the station. The bloom is off the rose.
Simply put, all the fears of owning Bitcoin have been negated by the powers which opposed it. Now that institutional money is interested and flowing into the cryptocurrency universe the Fed or the federal government would be derelict in banning, barring or limiting holders of crypto or of the exchanges like coinbase. It’s bad enough that the IRS targets gains in cryptocurrencies as regular income. That designation may be rescinded soon enough. Any further interloping by government entities would not only raise the ire of millions of individual “hodlers”, but now would endanger the welfare of publicly-listed companies and the mega-banks. Government regulation of Bitcoin and other cryptos has been permanently and irrevocably neutered.
The bottom line is that if you don't hold any Bitcoin, you'd better get some, and soon. Price is not relevant. Look at it like seeing Amazon's (AMZN) stock in a rear-view mirror. It matters little if you bought in at $50 in 2003 or $500 in 2016 now that it's well over $3000 a share. While those who bought into Bitcoin early are reaping massive returns, even those who bought at $16,000 as recently as this past November have already tripled their stakes, in just three months!
Even more to the point is that Bitcoin is the anti-dollar, the new paradigm and the pathway to freedom from debt slavery and depreciating fiat currencies. There's every indication that the US$ and the euro will both soon fail and devalue massively as the rest of the world refuses to subsidize the United States and Europe, being non-productive members of the global community. At the very least, if not bitcoin, some (rather large) percentage of a portfolio should be dedicated to gold or silver, preferably both.
Here's Max Keiser and Stacy Herbert gloating a bit and explaining why:
At the Close, Friday, February 19, 2021:
Dow: 31,494.32, +0.98 (+0.00%)
NASDAQ: 13,874.46, +9.11 (+0.07%)
S&P 500: 3,906.71, -7.26 (-0.19%)
NYSE: 15,362.69, +72.05 (+0.47%)
For the Week:
Dow: +35.92 (+0.11%)
NASDAQ: -221.01 (-1.17%)
S&P 500: -28.12 (-0.71%)
NYSE: -6.91 (-0.04%)
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