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US Home Prices Are Soaring At The Fastest Pace In 7 Years : https://www.zerohedge.com/economics/us-home-prices-are-soaring-fastest-pace-7-years
My Comment : When does this insanity end ? I think a lot of "home buyers" are going to have buyer's remorse when it does end and prices collapse. Gold should be near a bottom with $1690 being support. For me, the mining shares are not cheap enough to buy yet. I'm just collecting cash now.
Excerpt:
Don't worry, there's no inflation - apart from in gas and home prices.
According to AAA, gas prices at the pump are back near their highest in 6 years, up a stunning 42% YoY.
And according to Case-Shiller, US home prices in 20 major cities are up a shocking 11.10% year-over-year.
I'm certainly glad we don't have any inflation -
I checked on the price of lumber at my local lumber yard today :
8'x2"x6" is $13.50 with tax
8'x2"x4" is $10.50 with tax
throw in the price of copper and other commodities and the cost of home building materials is skyrocketing. Just in time for the Green New Deal. So consumers are going to be facing high inflation and high tax bills. That ought to really goose the stock market...just keep printing more money. Meanwhile gold keeps dropping. At some point I expect gold to reverse and to break out (explode) to new highs. They can't keep it suppressed with inflation building.
Look for a big move in gold : https://www.kitco.com/commentaries/2021-03-25/Look-for-a-big-move-in-gold.html
My Comment: This guy has been right more often than not. But, who knows ? I just wait for big moves down to buy (and not before). This guy is long term bullish on the PMs.
Excerpt:
As the ranges tighten in metals, the power builds for the next big move. The longer and tighter the congestion pattern lasts, the bigger the next move will be. The probability is 90% lower, 10% higher. Either way, we will be prepared based on the price action, which will show indications before the move happens.
Are higher taxes coming? Janet Yellen talks 'revenue raises' and 'full employment' by next year : https://www.kitco.com/news/2021-03-24/Are-higher-taxes-coming-Janet-Yellen-talks-revenue-raises-and-full-employment-by-next-year.html
My Comment : I certainly do not want to bail out home buyers who have paid exorbitant prices for RE. It's the old tax and spend policy. The only hope is that the Republicans are able to block any tax increases which will be difficult if reconciliation is used or of the filibuster is eliminated. Where's MY stimulus check ? I just get a huge tax bill.
Excerpts:
(Kitco News) - Janet Yellen, Secretary of the Treasury, said in her testimony with Congress yesterday that tax policies may need to be revised in order to pay for stimulus programs and provide ongoing relief to Americans
"1 in 10 homeowners with a mortgage are behind on their payments and almost 1 in 5 renters are behind on their rent. There are 22 million people who say they don't have enough food to eat. 1 in 10 adults are hungry in America. I looked at data like these and I worried that the COVID economy was going to keep hurting millions of people now and haunt them long after the health emergency was over," she said.
Is Bitcoin worth $100k or $0? Debate with Saifedean Ammous, Steve Hanke, and Hong Fang : https://www.kitco.com/news/2021-03-23/Is-Bitcoin-worth-100k-or-0-Debate-with-Saifedean-Ammous-Steve-Hanke-and-Hong-Fang.html
My Comment : Bitcoin "as the best store of value that we have ever had" ? Heaven Help us if Bitcoin is a store of value, let alone the best store of value.
Full Text :
Steve Hanke, professor of applied economics at Johns Hopkins University, Hong Fang, CEO of OKCoing, and Saifedean Ammous, author of ‘The Bitcoin Standard’, debate Bitcoin’s utility, history, and its “fundamental value.”
Hanke argued that while cryptocurrencies will be more widely adopted in the future, Bitcoin, currently, does not qualify as a currency.
“All of these normal things that have been associated with every great currency for the last 2,500 years, you just can’t check the box on Bitcoin,” Hanke said.
He said that the “fundamental value” of Bitcoin should be $0 because it doesn’t generate any cash flow.
Fang said that Bitcoin has special characteristics that provide exemption from being labelled the same type of asset as securities that generate cash flow.
“Bitcoin is a very special asset class that actually provides essential utility as the best store of value that we have ever had,” she said.
Ammous said that even though altcoins have emerged that may have possessed superior technology than Bitcoin, they have all failed to dethrone the world’s largest cryptocurrency and drive the price lower.
“We already have 12 years of supposedly superior alternatives coming on and entering the market. There are thousands of digital currencies other than Bitcoin. Not only have they failed to replace Bitcoin, they’ve also all failed at getting to 10% of Bitcoin’s liquidity size. There’s no comparison with Bitcoin to other digital currencies in any meaningful sense,” he said.
Biden Team Preparing Up to $3 Trillion in New Spending for the Economy : https://www.msn.com/en-us/news/politics/biden-team-preparing-up-to-3-trillion-in-new-spending-for-the-economy/ar-BB1eQspQ?ocid=msedgntp
My comment : How do I denounce my US citizenship ? Biden is on a fast track to destroy the country. The US has lots of money to spend and they're going to tax the wealthy who do not pay taxes and never will. But, if I make a couple of $million in stocks, the government will take half in taxes. Absolute Insanity.
Excerpt:
WASHINGTON — President Biden’s economic advisers are preparing to recommend spending as much as $3 trillion on a sweeping set of efforts aimed at boosting the economy, reducing carbon emissions and narrowing economic inequality, beginning with a giant infrastructure plan that may be financed in part through tax increases on corporations and the rich.
Absolute Insanity -
It's not real. Don't these people realize that ? It gives a whole new meaning to the American Dream [world].
Biden just canceled $1 billion in student loan debt. Are you eligible? : https://www.msn.com/en-us/money/personalfinance/biden-just-canceled-1-billion-in-student-loan-debt-are-you-eligible/ar-BB1eLENj?ocid=msedgntp
My Comment : There's $1.7Trillion in student loan debt. Guess who's paying for all of the bailouts.
Excerpt:
The Biden administration will wipe away around $1 billion in student loan debt for borrowers who said they got ripped off by their schools.
It is interesting that the PMs are moving up this AM despite a higher US$ and higher rates. I really think that the PMs should move higher even with higher rates given that the higher rates are due to either expectations for higher inflation or due to the expanding national debt.
10Y Yields up to 1.75% today -
So is it due to expectations of an economic recovery and increasing inflation OR is it due to the ever increasing national debt and the need for investors to be compensated for the risk of holding that debt ? The Fed is going to have to buy a lot of Bonds.
"It's Gone Parabolic": Canadian Housing In One Shocking Chart : https://www.zerohedge.com/markets/its-gone-parabolic-canadian-housing-one-shocking-chart
My comment : Of course, it's a global phenomenon and it will not end well. Higher rates will exacerbate the high debt levels.
Ray Dalio on 'shocking' tax changes: Could see new 'prohibitions' against gold, bitcoin : https://www.kitco.com/news/2021-03-16/Ray-Dalio-on-shocking-tax-changes-Could-see-new-prohibitions-against-gold-bitcoin.html
My Comment : A ban on gold ? I think it would be hard to do since it is a globally traded market. But higher taxes are coming and it will be a challenge to navigate government policies once everything breaks down. Taxing the wealthy may sound credible, but the wealthy don't pay taxes. They just domicile in another country and HQ in the Cayman Islands.
Excerpt:
"Policymakers who are short of money will raise taxes and won't like these capital movements out of debt assets and into other storehold of wealth assets and other tax domains so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations. These tax changes could be more shocking than expected," the founder of the world's biggest hedge fund said.
"The economics of investing in bonds (and most financial assets) has become stupid," he pointed out. "Rather than get paid less than inflation, why not instead buy stuff — any stuff — that will equal inflation or better?"
Larry McDonald Warns "The Big [Market] Quake Is Coming" : https://www.zerohedge.com/markets/larry-mcdonald-warns-big-market-quake-coming
Excerpts:
What about precious metals?
When it comes to precious metals, we love silver miners like Hecla Mining. When the Fed eases its policy, the silver miners will outperform the underlying metal, and they will outperform gold because there is more leverage there.
The gold price is down more than 15% since its all-time high in August. What’s the problem?
Everyone thinks it’s 2013, so taper fears are sky high for gold. But the Fed cannot repeat its mistakes. They must cap yields if they want to preserve the global economic recovery. Thus, the convexity with gold is very attractive. Every leg lower in real yields will act like a slingshot higher for gold. That’s why we love Newmont. The stock trades at 6x EBITDA with a 4% dividend yield which gives you some downside protection. And remember: The 2011-2016 commodity bust has made the balance sheet of these high quality gold mining companies a lot stronger.
President Joe Biden has just signed off on a $1.9 trillion economic program. What are the chances of a second stimulus bill, aimed at infrastructure?
It’s important to note that a second fiscal deal for 2021 is not a slam dunk. To pass the present $1.9 trillion stimulus bill, the Democrats used reconciliation. It’s a very special trick in US politics, because with reconciliation you don’t need 60 votes to pass a bill in the Senate. All you need is 50 votes. Yet, reconciliation has to be tied to a budget year. This means the next time the Democrats can use it is probably in the fourth quarter, late November or December, and tie it to the following year's budget. So the only way to do an infrastructure bill in the next six months is with a traditional piece of legislation.
Is that even possible, given how wide the rift between Republicans and Democrats has opened in recent years?
For that you need essentially ten Republicans. Right now, the centrists on the Hill, people like Mitt Romney on the Republican side or Joe Manchin on the Democrat side, are the most powerful people in Washington. They want to do an infrastructure program, but they want to finance it with tax revenue. They don’t believe in things like Modern Monetary Theory where the Fed is financing the deficit. So you are going to need a tax hike. And in this regard, we’re hearing they could go after some type of flat tax on the FAANGs, the big technology companies.
What does this mean for Apple, Google, Facebook and other tech heavyweights?
Keep in mind, we’re in a populist revolution: The risk of inequality leading to social unrest is high, and that puts pressure on politicians to pass bills to tax the rich. But a wealth tax is extremely complicated, it would take years. The simplest way to do something in terms of taxes is to tax larger companies. In the eighties, the top 100 companies in the US maintained about 45 to 50% of total profits. Today, the largest 20 companies command about 85 to 90%. In addition to that, close to 40% of the S&P 500’s market cap is related to tech. So tech is the low hanging fruit for the populists in Congress to go after.
What are the biggest dangers to watch out for in the coming weeks and months?
One spot to watch are all these forbearance deals in commercial real estate. When we come out of Covid and the vaccines and the stimulus money are juicing through the economy, the market will be forcing the release of the forbearance on a lot of these loans. So if people don’t come back fast enough to the cities, these commercial real estate loans are going to get reset. This would mean some big defaults, and the banks own a lot of these loans. Also, a lot of leveraged loans are really rich. And then, there is potentially a fiscal cliff: The sustainability of the $1.9 trillion stimulus package isn’t that great because a lot of it is just transfer payments replacing lost income for people staying at home. That’s why the US needs a second stimulus bill. If we don’t get a second bill, we are going to have a problem in about a year from now.
Fed's catch-22 scenario and why it means gold price will shine in 2021 - Adrian Day : https://www.kitco.com/news/2021-03-15/Fed-s-catch-22-scenario-and-why-it-means-gold-price-will-shine-in-2021-Adrian-Day.html
My Comment : Inflation is also a key ingredient
Excerpt:
He added that sentiment could once again shift in gold's favor as inflation pressures pick up and keep real interest rates in low to negative territory. Day noted that the rise in nominal 10-year yields would soon take its toll on the U.S. economy.
"I think we are very close to the point where the Fed is going to start talking about rates moving too far, too fast," he said.
Day added that the U.S. central bank could not afford to raise interest rates or let bond yields rise much higher because of the growing government debt.
"If you look at the federal government today, only about 10% of federal receipts are going to interest payments. That's the lowest rates in history," he said. "If the 10-year yield goes to say 2.5%, which is still low on a historical basis, those interest payments would more or less double. That's not a good place to be."
Not only will a low interest-rate environment be positive for gold, but Day said that more liquidity in the financial system would also provide long-term support for the precious metal. Last week Congress and U.S. President Joe Biden approved a $1.9 trillion stimulus bill, which includes a $1,400 for consumers.
Day added that financial markets would see a lot more liquidity later in the year when the economy opens up, and people start going back to work and spend the money they have been saving during the pandemic.
Biden Plans Biggest Federal Tax Hike Since 1993 To Fund Infrastructure, Climate Initiatives : https://www.zerohedge.com/political/biden-plans-biggest-federal-tax-hike-1993-fund-infrastructure-climate-initiatives
My comment : How do you raise taxes without crushing the markets and causing a financial crisis ?
Excerpts:
Biden is embarking on what could be the biggest federal tax hike since 1993 (remember 'no new taxes'?) to finance an infrastructure plan, Biden's climate-change initiatives, health care and economic inequality.
The overall program has yet to be unveiled. Nevertheless, analysts are penciling in between $2 trillion to $4 trillion.
Bloomberg has a list of proposals that are reportedly under consideration, though they all likely won't make it into the final bill. Notably the first two bullets would effectively unwind the two biggest components of the Trump tax cuts.
Raising the corporate tax rate to 28% from 21%
Paring back tax preferences for so-called pass-through businesses, such as limited-liability companies or partnerships
Raising the income tax rate on individuals earning more than $400,000
Expanding the estate tax’s reach
A higher capital-gains tax rate for individuals earning at least $1 million annually. (Biden on the campaign trail proposed applying income-tax rates, which would be higher)
But the most consequential factor for Americans in the wake of the retail trading boom isn't the effect on the labor market, but the effect on the markets.
How A Small Rise In Bond Yields May Create A Financial Crisis : https://www.zerohedge.com/markets/how-small-rise-bond-yields-may-create-financial-crisis
My Comment : The Fed has no choice but to continue to suppress rates for fear rising rates will burst the bubbles, but that only makes the bubbles larger and it supports inflationary pressures which forces rates higher.
Excerpt:
What worries me the most is that most consensus comments messages are that central banks should accelerate financial repression to avoid a market slump. Instead of paying attention to the risks built in the past decade due to abnormal rates and bond valuations, instead of raising the alarm on the numerous bubbles we can see in markets, most are asking central banks to inflate the bubble further at any cost.
However, this time it may not work. Why? Because this time inflation is actually rising, and rates rise even with central bank dovish policies and financial repression. You wanted inflation, you got it. What is the problem of a bounce in inflation if the economy is recovering strongly? The problem is that, for years, investors have been told to take massive and rising risk betting on one thing and the opposite: That the economy is going to grow, and inflation recover but central banks will keep low rates and high liquidity regardless.
There is no problem in a 2% US 10-year bond yield in normal conditions of a growing economy with 2% inflation. There are a lot of problems when entire markets have based their valuations on inflationary policies not generating inflation.
The risk of a financial crisis does not come from rising bond yields. The risk of a financial crisis was created by lowering bond yields to unrealistic and unjustifiable levels in the first place.
$4-$5Trillion deficit in 2021 ? WOWSA !!!! -
Inflation Is Broken : https://www.mauldineconomics.com/frontlinethoughts/inflation-is-broken
My Comment : The current national debt is $28Trillion with $1Trillion of that from the first 5 months of 2021. So, adding $3-$4Trillion onto $28Trillion would mena the national debt would be $31-$32Trillion at 2021 fiscal year end. It's not hard to imagine that $40Trillion national debt by 2025-2026. But we may very well get that major financial crisis before then.
Excerpts :
I have been writing for many years that the US in particular and the Western “developed” world in general were approaching a time where none of our choices would be good.
We have arrived. Any choice the government and central banks of the US and the rest of the world make will ultimately lead to a crisis. Just as the choices that Greenspan and Bernanke made about monetary policy created the Great Recession, Yellen and Powell’s choices will eventually lead us to the next crisis and ultimately to what I call The Great Reset.
I believe we have passed the point of no return. Changing policy now would create a recession as big as Paul Volcker’s in the early ‘80s. There is simply no appetite for that. Further, the national debt and continued yearly deficits force monetary policy to stay accommodative.
The fiscal 2021 US deficit will certainly be more than $4 trillion and approaching $5 trillion, and the Treasury has more debt that has to be rolled over. The US government simply can’t afford higher interest rates. Financing costs would overwhelm the budget. Further, we are beginning to see Treasury auctions coming in “weak,” meaning investors demand higher yields.
re SOX -
I read that semiconductor production is being impacted by drought in Taiwan and the need to reduce water consumption and thus produce less semiconductors.
A Grim Look At The Exploding US Budget Deficit : https://www.zerohedge.com/economics/grim-look-exploding-us-budget-deficit
My comment : As I stated in the previous post, I expect the national debt to double in the next 15 years (to $60Trillion), not 30 years and for the debt to reach $40Trillion by 2025 ($2Trillion annual deficits). The deficit for the first 5 months of this fiscal year is $1Trillion and that does not factor in the $1.9Trillion stimulus. Got Gold ?
Excerpt:
We are on auto-pilot for a global currency crisis because the current path is not remotely sustainable.
The national debt -
My comment : I think the national debt will double to $60Trillion in 15 years, not 30 years as suggested by the article. The CBO does not consider the impact of recessions in their analysis. Furthermore, the debt reaches $60Trillion in 15 years by having only $2Trillion annual deficits. I'm expecting a $40Trillion national debt by 2025. I just don't think we can have "economic prosperity" into perpetuity. Just how are deficits expected to shrink as a % of GDP from 2022 to 2031 ?
March 4 – Reuters (David Lawder): “The U.S. federal debt burden will double over the next 30 years, reaching 202% of economic output in 2051, as deficits grow and interest rates eventually rise, the Congressional Budget Office said… The non-partisan CBO projected that federal debt will reach 102% of gross domestic product in 2021 due to massive spending associated with the coronavirus pandemic. This spending is expected to fade over the next decade, shrinking annual deficits to an average of 4.4% of GDP in the 2022-2031 period, from 10.3% in 2021. But deficits are forecast to then grow to average 7.9% of GDP in the 2032-2041 period and 11.5% of GDP in the 2042-2051 period…”
Brutal March? Gold price at risk of a flash crash to $1,600 - analysts : https://www.kitco.com/news/2021-03-05/Brutal-March-Gold-price-at-risk-of-a-flash-crash-to-1-600-analysts.html
Yeah, I'm looking into what would constitute a residency change (ie months/year) to another state. The tax will face legal challenges. The thing is the state does not need the tax to balance the budget, but they claim it is an equity tax (tax the wealthy and give it to the lower income). I'm expecting Biden to treat capital gains as ordinary income and to also increase the tax rates. Once that happens, the government would take 50% of your capital gains in taxes.
Market Stumbles As Rising Rates Undermine Outlooks : https://www.zerohedge.com/markets/market-stumbles-rising-rates-undermine-outlooks
Excerpt:
Given that economic growth is debt-supported, rate increases have an almost immediate negative impact. While the Fed may not be discussing a “tightening monetary” policy, the bond market is doing it for them.
The Fed can’t hike rates or reduce QE voluntarily.
Eventually, market forces will do the job for them via surging inflationary pressures and a destabilized bond market.
It will be known as the “Great Financial Crisis 2.0.”
He won't quit his job no matter what the outcome is. Predicting a stock market correction is dangerous business given that the Fed will do everything to support the market. The markets are beyond surreal. Especially the RE market. Seattle RE is absolutely absurd as multiple offers force prices as much as 50% over an already high asking price (one home sold for $1.2M with an asking price of $800K). The median price is about $750K in Seattle and prices are up 10%-20$ YOY. IMO, we desperately need a recession/depression. And to make matters worse, the WA state legislature just passed a 7% tax on capital gains (for stocks and bonds, not RE) by claiming it is an excise tax, not an income tax. Tax would take effect in 1/22.
re: Condor -
I'm not worried about Condor. I don't expect anything to happen until they start drilling which at this point hinges on financing. They are scheduled to get over $5Million by 4/22. That's a long wait, but I've waited over 10 years already so what's another year. The good news is once they start drilling Pucamayo, it will not take long to determine the size of the deposit given the geology. And if they come up with 5Million or more ounces, then the share price will appreciate substantially. Then they have a silver deposit at Huinac Punta and a copper deposit at Cobreorco. Condor has 12 projects all of which are in Peru and some of which they have joint ventured. Patience.
re: "A cessation of tapering by the Fed might prevent the yield from breaking out"
My Comment : What tapering ? Actually if they started tapering (ie bought fewer bonds), rates would rise. But, the Fed just keeps buying more bonds and they will have to buy even more bonds as the government sells bonds to pay for the $1.9Trillion stimulus. They will have to buy a lot of Treasuries to suppress rates. But all of that QE will weaken the US$ and eventually mean more inflation.
The Fed is in a bind and the economy is still slow due to the pandemic. Watch out as the economy opens back up and more stimulus gets distributed.
From the article: "investors are starting to fret about an acceleration in inflation that might prompt the Federal Reserve and other central banks to tighten policy sooner than expected."
My Comment : No way will the Fed tighten. It would crush the stock market.
From the article: "European Central Bank Executive Board member Isabel Schnabel said more stimulus could be added if the surge in yields hurts growth,"
My Comment : Is she nuts ? More stimulus will only force rates higher.
Indeed, "Watch out if the Fed ever loses control" and they will lose control. Even small changes in rates have a dramatic effect when there's so much leverage in the system. So, with $1.9Trillion in new stimulus to be followed by at least another $1Trillion in infrastructure spending, rates are destined to go even higher. The Fed can buy more bonds, but that means more inflation due to both US$ weakness and added liquidity which in turn increases rates requiring the Fed to buy even more bonds, creating even more inflation. QE becomes self defeating since it is the problem. At some point these bubbles collapse of their own weight. RE buyers are some of the most irrational consumers. In Seattle, there's less than 2 weeks of inventory and buyers are making multiple offers which are as much as 20% over asking and that can be $100K-$200K over asking. Some of these buyers are going have a lot of buyer's remorse. I would much rather buy RE when rates are sky high than when they are rock bottom...the principle amount is greatly reduced and rates can always be reduced through refinancing.
Yeah and RE is the most insane bubble ever.
10Y Treasury at 1.51% -
My Comment: We need more QE (Bond buying) to force rates down. The US$ is at 90.27 after dipping below 90.00 this AM. So, the Fed prints more money, forcing rates lower and the US$ plunges, causing more inflation at a time when we have not even opened up from the pandemic. The only solution is yield control. And add in $1.9Trillion in fiscal stimulus followed by at least $1Trillion in infrastructure spending and things start to heat up.
Inflation debate: Famous ‘Big Short’ investor signals risk as Fed's Powell downplays concerns : https://www.kitco.com/news/2021-02-24/Inflation-debate-Famous-Big-Short-investor-signals-risk-as-Fed-s-Powell-downplays-concerns.html
Excerpt:
Burry went on to say that in an inflationary crisis, the government would try to crush assets like gold and bitcoin.
“Prepare for inflation. Re-opening & stimulus are on the way. Pre-Covid it took $3 debt to create $1 GDP, and it is worse now. In an inflationary crisis, governments will move to squash competitors in the currency arena. BTC. Gold.”
Burry is short bitcoin at the moment, tweeting that the “long-term future is tenuous for decentralized crypto in a world of legally violent, heartless centralized governments with lifeblood interests in monopolies on currencies.”
It's all about the debt -
David Rosenberg: "We're Getting Closer To A Breaking Point" : https://www.zerohedge.com/markets/david-rosenberg-were-getting-closer-breaking-point
Excerpts:
And then, we have to assess how these massive deficits and debts are going to be regressed. At the peak of the last bubble in 2007, the level of global debt outstanding was $100 trillion. Here we are at the peak of the next bubble, 13 years later, and it’s over $200 trillion. It has more than doubled from bubble peak to bubble peak. This is a very unstable situation. That’s why we can’t have interest rates rise for any length of time or any meaningful degree. It’s because of the implications from a debt servicing standpoint, and the impact rising rates will have on economic growth, defaults and delinquencies and so forth.
Let me put it this way: The level of outstanding debt in the United States today at all levels of society, government, households, businesses, is just about $80 trillion. If the general level of interest rates goes up by 100 basis points and stays there, you’ve just pushed $800 billion or 4% of GDP into debt servicing. The US economy can’t really afford to have bond yields back up more than they already have.
All that is happening is that we are borrowing from future growth; that is the overriding story: Money spent on borrowed money from the government. So we are building up for a "fiscal cliff" of epic proportions in 2022, and very likely a renewed economic downturn
I own gold not to make a killing but as a ballast in the portfolio, a source of diversification and insurance policy against the gargantuan levels of outstanding liabilities. It’s a hedge against inflation, if we ever get it, and it’s also a hedge against deflation given these destabilizing financial imbalances we have. They’re not that apparent obviously when you look at the markets this year: The junkiest bonds have outperformed the most, and the junkiest stocks have outperformed the most. That’s how you know that we are in a speculative mania. So gold is an insurance policy against things going wrong, especially in a time when most asset markets are priced for perfection. You hope your house doesn't burn down, but you still have home insurance.
The Tesla-Bitcoin connection
Tesla (TSLA) is "on a trajectory to make more from its Bitcoin (BTC-USD) investments than profits from selling its EVs cars in all of 2020." That's according to Wedbush's Dan Ives, which gave the estimate in a research note on Saturday. While he didn't lay out the numbers, Bitcoin has climbed about 65% since Jan. 31, which would put the profit on Tesla's $1.5B bitcoin investment at around $975M.
How The Next Crash Happens (How Bitcoin could trigger the next one)
https://www.zerohedge.com/news/2021-02-22/how-next-crash-happens
My Comment : As I've noted in an earlier post, I think companies that are buying a lot of Bitcoin and companies that are dealing in Bitcoin are potential shorts.
Excerpt:
How Bitcoin Could Lead To A Broader Crash
If Bitcoin crashed tomorrow, it might not cause a market crash. What would make the stock market more vulnerable to a Bitcoin crash would be broader corporate exposure to Bitcoin. That may be starting to happen. In a recent post, we mentioned how the CEO of one of our top names, MicroStrategy (MSTR), convinced the CEO of another of our top names, Tesla (TSLA), to add Bitcoin to Tesla's balance sheet.
Bitcoin has become detached from reality, but you ain't seen nothing yet if you believe this guy :
Another Day, Another Record High For Crypto: What Happens Next? : https://www.zerohedge.com/markets/analyst-sees-bitcoin-hitting-4-million-18-24-months
My Comment : I think some of these companies that are buying bitcoin in volume are potential shorts. Timing is everything though.
Excerpts:
Why the rise?
Decrypt notes the reasons are likely manifold and various:
One obvious candidate is US business intelligence firm MicroStrategy, which yesterday announced that it will sell off $1 billion of debt to buy more Bitcoin. MicroStrategy has done this before: it sold $400 million in convertible senior notes in December, which it added to a pool of money used to buy billions of the coin.
MicroStrategy is headed by CEO Michael Saylor—the crypto critic-turned-evangelist. Industry leaders who spoke to Decrypt credited him for his influence on Tesla’s buy of $1.5 billion worth of Bitcoin, which has since contributed to the price surge.
The new all-time high comes as the crypto benefits from a recent wave of "mainstreaming".
Last week, BNY Mellon announced that it will invest in crypto for its clients. Industry leaders told Decrypt last week said that the move will change how asset managers view Bitcoin, pushing its price even higher in line with the long-term price predictions by JPMorgan, Guggenheim and others.
Guggenheim CIO Scott Minerd said that Bitcoin's long-term price could reach $600,000 and JPMorgan predicted that it could reach $146,000.
And while $57,000 may sound like a lot, but the record high price which Bitcoin just hit may be just a little over 1% where it eventually trades according to Global Equities Research analyst Trip Chowdhry, who said in a note to clients said he thinks the digital coin will rise to $4 million in the next 18-24 months.
Putting that move in context: at a $4 million price, bitcoin - which today surpassed a $1 trillion market cap for the first time ever..
...would have a valuation of over $80 trillion, which while 8x bigger than the value of all above ground gold would still be a fraction of all financial assets in circulation.
"We are of the opinion that Bitcoin will get to $4 million per Bitcoin, in the next 18-24 months," Trip wrote
The question in the minds of serious investors is whether this is a safe place to put your wealth. The main driver of what could be described as a "mania" is the "fear of missing out," and it runs rampant in this market.
With wild predictions of Bitcoin surging to six figures or more, many people claim cryptocurrencies are like gold. Many people view it as a way to shelter themselves from the falling value of paper currencies and the dollar in particular. Since the dollar is the reserve currency of the world many Americans that fail to see its major competitors such as the euro and yen are even worse places to store wealth have magnified the possibility of a dollar collapse.
A big risk to investors in Bitcoin is that it could be made "Illegal" or the trading of it banned. If this happened in many countries it would drastically damage its appeal. This could be done under the claim that it protects investors from themselves or because it was not sanctioned by those in charge. The greatest reason for this is that it would protect the power of Central banks across the globe and their fiat currencies. It is rather silly to think those in control of fiat currencies would surrender their power over the financial system and go gently into the night.
Risk On vs Risk Off -
My Comment : Industrial commodity prices are surging while PMs falter. For now risk on prevails. What happens when there's risk off. And with all of the projected stimulus, is risk off even possible in the near term. Inflation is certainly a likely possibility. Will inflation wake up the PMs ?
February 17 – Bloomberg (Naureen S. Malik, Gerson Freitas Jr. and Michael Tobin): “There’s no sign yet of a pause in the dramatic rally in natural gas prices across the central U.S., where spot rates have now breached the $1,000 mark, more than 100 times their level just a week earlier. Prices for immediate delivery are skyrocketing as consumers scramble to find additional supply. U.S. production has fallen to a four-year low, causing a shortage that has left millions of homes and business in the dark and forced food giant Cargill Inc. to halt production at three of its meat processing plants… Supply for next-day delivery at the Oneok Gas Transportation hub in Oklahoma traded at $1,250 per million British thermal units on Wednesday… That’s up from $999 on Tuesday, and just $9 a week ago.”
The Bloomberg Commodities Index added 1.5% (up 9.3% y-t-d). Spot Gold fell 2.2% to $1,784 (down 6.0%). Silver slipped 0.3% to $27.2899 (up 3.4%). WTI crude dipped 23 cents to $59.24 (up 22%). Gasoline surged 6.8% (up 28%), and Natural Gas jumped 5.4% (up 21%). Copper surged 7.6% (up 16%). Wheat rose 2.2% (2%). Corn gained 1.0% (up 12%). Bitcoin jumped $7,682, or 16%, this week to $55,629 (up 91%).
Is bitcoin a threat to U.S. dollar? Emerging markets see an explosion of interest in crypto : https://www.kitco.com/news/2021-02-17/Is-bitcoin-a-threat-to-U-S-dollar-Emerging-markets-see-an-explosion-of-interest-in-crypto.html
My Comment : So, is Bitcoin safe ? Or is it a bubble ? It certainly is expensive.
Excerpt:
New research points to a connection between emerging markets and increased interest in crypto, putting into question comments by some Federal Reserve officials that bitcoin is no threat to the U.S. dollar.
Gold setting up major bottom so could we see a breakout rally begin soon? : https://www.kitco.com/commentaries/2021-02-18/Gold-setting-up-major-bottom-so-could-we-see-a-breakout-rally-begin-soon.html
Excerpts:
My research team and I believe the recent downside trend in Gold has reached a support level, near $1765, that will act as a launching pad for a potentially big upside price trend.
The February 2021 Gold contract expires on February 24 – only a few days away. The CME Delivery Report shows an incredible amount of contracts already giving notice of a “Delivery Request”. This suggests that on or near February 25, a supply squeeze for Gold and Silver may become a very real component of price.
For example, there are 32,831 contracts requesting delivery for February 2021 COMEX 100 Gold Futures as of February 16, 2021. That reflects a total delivery obligation of 3,283,100 ounces of Gold. The Silver contract deliveries are similar in size. As of February 16, 2021, there are 1,865 February 2021 COMEX 5000 Silver contracts requesting delivery. That translates into over 9,325,000 ounces of Silver.
We still have another five trading days to go before the February contract expires. How many more futures contract holders will pile into the Delivery Que at COMEX and how will this translate into any potential price advance or decline?
Silver has already begun to move higher while Gold continues to wallow near recent lows. Our research team believes the next few days of trading in Gold and Silver could become very volatile as global traders suddenly realize the demand for Deliveries may squeeze prices much higher.
We need to watch how Gold reacts near this support level and to pay attention to the delivery data from COMEX. If these levels continue to increase over the next few days, before the February 24 expiration date, then we need to consider how and when the price will start to reflect this strong demand. Currently, Gold price activity does not properly reflect what is happening in Silver and Platinum related to the demand for metals. We believe, over the next 30 to 60+ days, this will change as Gold may enter a new bullish price phase – targeting $2400. At this point, we believe the answer to this question will become known by February 25th or so.
Silver Shortages Suggest We Are Only Months Away From $50 Silver
https://seekingalpha.com/article/4404967-silver-shortages-suggest-are-only-months-away-from-higher-silver
My Comment : Meanwhile cryptocurrencies (eg Bitcoin) are exploding as a hedge against a depreciating US$ (but not silver). Are the banks behind the curve ?
Excerpts:
In that sense, a silver run is similar to a bank run. Bank runs tend to feed on themselves. Monetary demand for silver is essentially a run on the dollar, which is itself primarily a monetary reserve. The way you stop a run on the dollar is you raise interest rates on the dollar. But what if doing that is impossible because the level of debt in the economy is so enormous that raising interest rates would collapse the economy and the stock market?
But if you can’t raise interest rates, the only way to stop a dollar run and a flight into precious metals as a monetary reserve is to push the paper price of silver down by shorting silver futures. Banks have a vested interest in doing this because if the dollar falls too fast, the value of the bonds on their balance sheet plummet, causing a systemic banking crisis. If silver stops rising in dollar terms though on the paper markets, the demand for it as a monetary reserve tends to eventually ebb, stabilizing the dollar that way.
Silver is about to blow sky high -