A bit of a surprise as Fed Chair Powell released that they were taking a more aggressive strategy than many analysts' expected. Citing strong employment indicators, a commitment to limit inflation and overall production growth the Fed maintained interest rates. There is strength in the US approach of late and gives hope that real full-time jobs can be added for building infrastructure and fixing bridges, roads. This is desperately needed and will invigorate the country with projects that that investment will help buoy the economy. The big thing to remember is that the stock market is not the economy. Everything is interlinked but as we know from economics and history things repeat themselves and come in cycles. We are poised for a commodity cycle, for a mining cycle and perhaps people should be looking less at consuming personally and investing within the country. We should take a longer perspective and forgo a new Apple iPhone and put $1000 in gold. Your last year model is just as good, no matter how hard they sell you. The smart money compounds itself, the not so smart is spent or rather consumed. A strong look inward by the US to improve infrastructure with acknowledgement of the incredible growth through the One Belt One Road Initiative should put mining in the spotlight.
The key to focus on is that there is a lot of troublesome data that people do not want to talk about in the mainstream. But with all of that data there is incredible opportunity. I have posted some charts and visuals under Core shack which hosts company photo's, info graphs relating some wonderful facts and those highlight why, even if there is major upheaval money still most move to profitable sectors. There is no doubt that electric cars, computers, cell phones, video cards by NVDIA ( for crypto currency mining) are growing at incredible rates. Non of that is possible without mining. Non of it is possible without copper, lithium, cobalt etc.
The other big idea is infrastructure. We know the US needs to work on its infrastructure and there are articles and synopsis pieces within here that touch on this. There is also some wonderful info graphs under Core Shack that walk through these themes. All infrastructure requires mining. From aluminium, copper, lead, and on and on. Finally, the One Belt One Road Initiative in China is a massive undertaking to build the new Silk Road to China. This is massive undertaking that we will be looking at moving forward. Demand for mining and minerals is extremely high. Funds are already shifting this way. Does this sounds reasonable to you? Does investing in a sector that actually provides the materials to build actual product seem like a good investment? I hope it does because it is time people got their heads out of crypto currency and weed companies and focused toward companies that are creating the world.
Rome is the Empire of antiquity that debased itself and fell ruin to, well itself. This simplistic but the decline of the Roman financial system is well documented, and fascinating. We are facing this same situation but on a global scale.
The article linked explores the debt to GDP as a ratio and has some alarming results. The top 10 countries are the most industrialized and sophisticated and it would appear would have no ability to ever meet its obligations. (assuming economic theory is correct and that you could not just print money indefinitely). In Japan the ratio is %250 and GDP is $10 trillion which is being serviced at 1.1% which requires 20% of tax revenue to maintain. If rates are pushed to 5% which is likely, and historically normal than all tax revenue will go to service the coupon. Even if, by some magic we can continue pretending we can print our way out of this and we make it to 2041 Japan will still, at that point be taking all of their tax revenue to service the debt. Now look at Europe, Canada and the US. Those are staggering numbers well over 450%. We have been borrowing for decades. We get to live like this because some one else has a smarter, long term plan. The West has been borrowing mainly from the Chinese and not building factories, infrastructure but rather outsourcing all of it, oddly enough back to the Chinese while selling its own population to be consumers, selling them on concepts, abstractions and mainly buying toys. The globalist plan seems to be to run the show from the West and use the rest of the world as a playground and/or factory. The people were massively inundated with marketing, propaganda and advertising to not save, or invest for themselves but to just live for the moment, spend wildly and enjoy the day. Instead of buying shares, creating wealth people bought phones and cars that they do not need. This leads to obvious failure unless you can dramatically increase one of the inputs.
As a continuation of yesterdays buyback piece, we take a quick look at what a buyback does for the overall economy. Nothing. A buyback does not mean investing in a plant so that perhaps the US should build some of the things it needs, rather than a potential enemy like China. A buyback does not mean training or even hiring employees because of expanding markets. It means there is so much free cash that they cannot even dream up cool new things! So how does this help? Well, it helps the globalists make more money. As we have hinted at before many executives get paid bonuses upon the stock hitting certain prices. It seems reasonable for executives to get paid for increasing share value. The general population seems quite content on paying these people for gadgets and services instead of buying the stock. The company simply sells them stuff and the company buys’ the stock itself. Interesting. Is your tax relief or rebate going to go to buying a stock? Paying down your massive debt? Or towards a new gadget?
The first thing is be able to run a monopoly. This is imperative. If you are given the go ahead to run a monopoly in your business sector then sales will flow. Secondly, and this also requires the help of government is that you pay no tax, or barely any. The single most important factor effecting your paycheck is your government tithe. This blurb focuses on Amazon and its ability to not pay federal tax and depending on source paid anywher from $0 to $220 million or less than 5% of profit.
Of course, as a I business I applaud this! This is the model to become rich but it is funny because Bezos is part of the liberal, equality, egalitarian crowd for optics but his actions are clearly not in favour of those ideologies. We all know that if you as a citizen did not have to pay tax that your life would be changed monumentally for the better.
What happens when more and more people become frustrated with this system? It is happening, it takes 24/7 tv shows, talk shows, advertising, movies and music to keep the narrative on this Western population. What happens as people stop listening to it and wake up?
It is happening. Moving some funds into safe commodities, as China is doing; as Russia is doing with gold is the smart play.
Mentioning how economic expansion is underway in the US, after all it was the big push for President Trump being elected, founder and CEO of Double Line Jeffrey Gundlach urges people to get into commodities:
"Most investors are underweighted or completely not invested in commodities because they've been so quiet, so sleepy," he said. "Commodities is my choice investment for investors to get diversified at low prices now."
He further comments that during this type of cycle commodities increase anywhere from 100 to 400%.
Stock buybacks are when corporations use their cash to buy the stock. Basically, boasting earning per share and easing the float of outstanding shares. It makes the company look better particularly if its EPS is absurdly high. The most positive way to view this is that when a company produces more cash than it can actively invest in productivity it will damped volatility buy initiating a buyback scheme. This is a great strategy for growth companies in which stock price gains are still high. If you are in a more conservative growth sector one might pay dividends while having more modest stock price gains. Here is the critical or bear attitude towards the type of buybacks that have been going on. Companies like FANG make up a significant percentage of gains in the exchange buyback their own shares because they have free supply of debt free cash.
Jim Cramer of CNBC gets credit for coining the term FANG: Facebook Inc Amazon.com, Netflix, and Google, the digital artists now known as Alphabet Inc.
…Since then Alphabet has more than doubled, Amazon is up over 250% and Facebook and Netflix have gone up over 400%.
The total market cap of these four stocks is now $1.55 trillion.
These companies borrow, do not have to meet any rational model of earnings and usually executives get bonuses derived from stock performance. It makes sense to see this continuous drive of capital being used to boost stock price. Does it mean that these are artificially high? Does it mean that they along with their hedge fund, banker friends are supporting the market? It would seem to be hinting that way because we know that most of the populace, or people do not have much excess money. They are busy spending it not multiplying it.
These stocks do a couple things: one they serve to sell you things both by ideology and consumerism; and they are data collectors analyzing, spying and reporting on you. These approaches to business are horrible things for society, which despite them being profitable, is why I have no interest in promoting them.
One of the biggest stories was the incredible climb of cobalt in the markets as mines struggle to produce enough of this mineral which is required in the creation of lithium ion batteries for electric cars, computers, and cell phones. According to Global Energy Metals, total global cobalt demand is on track to exceed 120,000 tonnes annually by 2020, up approximately 30% from the 93,950 tonnes consumed in 2016. The bulk of this is due to the lithium ion battery.
Apple decided to go straight to the mine itself and start doing deals. The market quickly started to recognize that demand was exceeding rapidly which left Apple in a tough position as they obviously feel they deserve a deal, and not have to go to the market.
Commerzbank reports that ETf’s have regarded this past dip in gold as a major buying opportunity and increasing their assets of gold and silver. ETF’s are often thought of as being the easiest, fastest way for participating in the physical gold space. This is false. ETF’s are simply numbers on a computer screen which reflect the price movement in spot gold. There is no claim to any asset or wealth. At WWPM, you can open an account and purchase gold with less paperwork and less hassle while buying actual physical gold. The good news here is that more and more major players are realizing the importance of increasing their physical gold holdings. I am a firm believer in following what the smart money does. There is a reason why central and investment banks are increasing their holdings of gold bullion. My philosophy is to look for what people are doing, not what they are saying. Should you consider the safest storage value of wealth in these tumultuous times?
Nothing says confidence in your government than a massive short position by the largest hedge fund like Bridgewater. What started out on Feb.1 as a $3 billion short against a broad spectrum of European stocks began building and quickly. By today that position had accumulated to a record $22 billion by Ray Dalio. The below link lists the companies and countries weighted in this incredible short position with Germany being the largest country to get the thumbs down by this massive hedge fund. It appears smart money is not as optimistic about global stocks markets. Of course, this presents more questions to motive: is it because of exposure to the US? Is it because of the crumbling of the authoritarian non-elected EU? In any event money should move to safety but where can we find reasonable safety?
The one thing that we know is that Dalio has increased his gold position by 400%.
It is time to step out and position yourself ahead of the curve. Stop listening to ideas and follow what many central banks, what hedge fund managers and investment banks are doing and purchase physical gold. Do what they do, not what others say. Consider 5-10% of your portfolio as gold, not as cash, fiat products or in idea stocks like Bitcoin. You can shift to gold as insurance, as well. It is not only open to elites.
Look under the Commodity section of the site, and or contact me to discuss precious metals.