The Debt Squeeze

Friday, 9th August 2019

The Federal Reserve’s Job 1

Perhaps you think that the Fed’s priorities are defined by its official mandate…price stability and full employment. Or, if you have been following the news, you may add the third mandate which has emerged in Chairman Powell’s statements…continuing the current economic expansion. Or as a cynic, you might also add […]

The Phony Wealth Effect and Gold

Our contention is that gold is real wealth. Gold is its own final settlement and no one else’s liability. What this means is simply that gold stands for itself, it does not depend upon the faith and good credit of any other person or thing…it is universally accepted as final settlement. It has been so for thousands of years.

And in […]

It Looks Normal But it Ain’t

Buy equities and sell gold because the economy is strong and the Fed is supportive? Really?

We think you should not be fooled by the reigning narrative. Consider the following:

In 2018, US real GDP growth was the best in years. Nominal GDP rose more than 5% while the national debt grew by more than $1.2 trillion, about 6% of […]

The Logic Behind Buying Gold Now

In our view, the gold story is getting much simpler and much more urgent.

Here is how we see it. The Fed cannot exit QE. QE is a failed policy. More QE is coming. Buy gold to preserve capital.

To combat the financial crisis of 2008/9, the world’s central banks created an enormous amount of new money…about $15 trillion…to restore liquidity to […]

The FOMC Opens the Door to a Higher Gold Price

The January 30th FOMC statement and the subsequent news conference with Chairman Powell removed the last significant headwinds for gold. We think that a new bull market for gold is about to commence.

Essentially, Chairman Powell trashed the Fed’s forward guidance of the last several years which he had enunciated as recently as October, 2018. There is now no commitment to […]

Markets Reject the Fed?

On Wednesday, the Fed raised the Fed Funds rate by a quarter point as expected. The Federal Open Market Committee (“FOMC”) statement was suitably ‘dovish’ by reducing the consensus forward guidance on future rate hikes from three to two. The Fed also signalled that its Quantitative Tightening program (selling $50 billion of assets per month) would continue on “autopilot” as […]

The Stock Market and Gold

What is the stock market trying to tell us?

First and foremost, valuations are too high. Third quarter results have been disappointing. Investors are realizing that sales and earnings cannot grow fast enough to keep the market at record valuations.

Second, the stock market is telling us that its advance has been too narrow…too dependent upon a handful of stocks driven higher […]

The Gold Market Is Turning (We Think)

As we have noted, markets are deep into what we have called the Tariff Trade based on the assumption that Trump would win his trade war with China and that he would do so before it had any serious negative impact on the US economy. The Tariff Trade was to go long certain US equities and the dollar and short […]

Why the Next Market Crash Will Not Take Gold Down

The global financial crisis of 2008 was essentially caused by excessive leverage, a loss of confidence in real estate credit and a resulting sudden collapse of liquidity in the financial system. The central bank response was to lower interest rates and flood markets with liquidity. Since then, debt loads have increased more than 30% and the percentage of higher risk […]

For Gold, It’s All About the Dollar

Positioning, sentiment and market structure continue to favour a powerful rally in gold. The Commitment Of Traders report released by the CME Group on September 7, 2018, shows the gross speculative short position grew 1.3% to 213,259 contracts, just shy of the all-time record set two weeks ago. On a net basis, speculators are short 13,500 contracts, the largest short […]