Monday, September 21, 2020

We Interrupt Your Weekend For This Special Bulletin

by Turd Ferguson, TF Metals:

Our old friend, The Golden Jackass, reached out last week and suggested that he had some information and analysis that couldn’t wait for the next, three-day weekend podcast. Thus this special audio for your weekend listening pleasure.

So what did Jim want to discuss? Primarily the fracturing global bond and equity markets and how the BIS has been preparing for a “debt jubilee” and gold price revaluation for decades.

I’ve learned that whenever The Jackass has a lot on his mind, it’s best to just sit back and let him pontificate with as few interruptions as possible…and that’s what we tried to do here. So, sit back and take it all in. There’s a lot of information in these 57 minutes and it will require your full consideration.

Click HERE to listen

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Home-Price Movements in Top 100 Cities since Housing Bubble 1


by Wolf Richter, Wolf Street:

They shot up by far the most in Dallas. Manhattan turned south last year.

Among the 100 largest cities in the US, where did home prices soar the fastest over the past five years since 2012? No, it wasn’t San Francisco or any of the other housing markets where you need to have a top-notch income to buy a starter shack. And in five of these cities, home prices surged over 100% since the fourth quarter of 2012:

The winner (a dubious honor) is Dallas, TX.

From Q4 2012 through Q4 2017, the median home price in the city of Dallas skyrocketed 246%. In other words, during those five years, it multiplied by nearly three-and-a-half times, from $82,300 to $284,600. Since Q1 2008, just past the peak of Housing Bubble 1, prices have shot up 182%. Here are the next four cities in line:

Oakland, CA, is second. The median home price soared 128% in those five years, from $439,000 to $660,000. It is now 50% above the peak of Housing Bubble 1.

West Palm Beach, FL, is third. Its median price, at $200,000, soared 115% over those five years.

Austin, TX, is in fourth place. The median price, at $361,000, has shot up 114% over those five years.

Hialeah, Miami-Dade County, FL, is fifth. The median home price, at $237,500, has jumped 107% in five years.

The data I cite here was provided by ATTOM Data Solutions, the curator of ATTOM, a multi-sourced national property data warehouse. Note that these are the median prices: in each city, 50% of the homes sold for more, and 50% sold for less.

The entities are cities – not metro areas or Metropolitan Statistical Areas (MSA). The exception is New York City which is represented by its boroughs rather than the City as a whole. Also, median-price data is very different from the “sales pair” data used in the Case-Shiller home price index, though over time they move in parallel. Using the Case-Shiller data, here’s my most recent Update on the Splendid Housing Bubbles in US Cities.

The 20 Cities with the fastest 5-year price growth

Below are the 20 cities where home prices have surged the most among the 100 largest cities, starting in 2012. North Texas is represented by four entries on this list – Dallas, Arlington, Plano, and Fort Worth. In 12th place is Stockton, CA, one of the two cities near San Francisco that went bankrupt (2012) after the onset of the Financial Crisis. Since then, the median home price has surged 92% to $250,000. That may sound like a good deal for people who work in San Francisco, but they pay for it with a horrendously long and arduous commute.

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Venezuelans Are Paying Black-Market Dealers A 100% Markup For Worthless Paper Bills

from ZeroHedge:

Since the wheels came off Venezuela’s economy back in 2013, the US financial press has displayed an at times unhealthy preoccupation with the fate of Latin America’s favorite “Socialist Paradise” – once the region’s wealthiest economy.

So it’s hardly surprising that Bloomberg, in an effort to unearth more gritty vignettes about the hardships endured by Venezuelans – particularly those who were once middle class who have now fallen into abject desperation in the streets of Caracas, or elsewhere – is publishing a series of first person essays called “Life in Caracas”.

And in its introductory installment, reporter Andrew Rosati points out one of the most dumbfounding ironies of hyperinflationThe need to pay insane mark-ups to obtain paper cash from grey-market dealers.

Rosati describes setting up a clandestine meeting with his “cash dealer” in language that could be used for a drug buy.

My most recent order arrived by motorcycle, a loaded, black trash bag tossed my way. “This is what’s available,” the courier said gruffly before zooming off. I nodded. There’s no begging in the bolivar business.

What he delivered was cash, 200,000 bolivars of it. I, in turn, wired 400,000 bolivars to his bank account. Why such a huge markup? Because in hyper-inflationary Venezuela, we’re all desperate for paper money, a ridiculously scarce commodity but a necessity, even for someone like me with plenty of credit cards. You need cash for gasoline, to use the metro or park your car in a garage, to buy fried fish on the beach or a cup of coffee on the street.

So this is the question that’s all over Caracas: “You got a guy?” I hear it, in dive bars and at posh dinner parties, and in line at the bank, which, invariably, is out of the desired product.

The guy, of course, is a cash dealer. My phone is filled with a half-dozen numbers. They’re cab drivers and restaurant owners and produce sellers, anyone with a bit of hustle. It’s a booming business. The 100 percent premium I paid that day isn’t unusual.

While conventional wisdom might lead one to believe that ordinary Venezuelans sought to settle transactions digitally, this couldn’t be further from the truth: While bitcoin, monero and other digital currencies have become crucial sources of badly needed foreign capital, most Venezuelan merchants prefer to accept cash for small goods. This is true for restaurants and most food vendors, also.

As Rosati explains, the difficulty of obtaining enough cash before the value of the bolivar further disintegrates isn’t just a headache – in the slums, it makes a desperate situation worse.

For me, it’s just another of the frustrations of living in an imploding economy. Low-denomination bills—anything below 100 bolivars ($0.0005 at the black-market rate)—are often used nowadays for such things as confetti at baseball games. And the government is so broke, it can’t afford to print bigger bills fast enough. It’s a curiosity, this whole mess, almost bordering on a Yogi-ism: Hyperinflation’s rendered paper money so worthless that it’s become incredibly valuable.

The paper chase is most intense in the slums, where many people have no other means of payment. Fixers are everywhere in these neighborhoods, eager to get their hands on all the cash swirling around.

One flipper, Orlando Villarroel, told me he positions himself at a bakery check-out. One by one, he pays for customers’ items with his credit card, giving them a markdown and collecting their banknotes until he’s chased out of the place.

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Market Report: Hidden in plain sight


by Alasdair Macleod, GoldMoney:

Gold and silver sold off this week, with gold falling $11 from last Friday’s close to $1317 in early European trade this morning (Friday), and silver by $0.10 to $16.43 on the same time scale. At one point yesterday, gold was sold down to $1303 and silver to $16.20.

We can associate the sell-off in precious metals to buying of the dollar on Comex, where it had become oversold against other currencies. The dollar’s rally has now come to pass, and we shall have to see whether there is more in it yet. The other side of the dollar trade is commodities and precious metals. The dollar’s rally has therefore been mirrored in weakness for gold and silver.

There has been something mechanical about it all, and one imagines algorithms being in charge of price relationships. But looking at gold’s chart, the bullish picture is still intact, and any selling on Comex appears to be mostly done. This is shown next.

I have shown this chart a number of times before, with the theoretical area of supply bounded by the pecked lines between about $1360 and $1310. It was clear that from a technical perspective the run up to the top of that range in late-January was likely to be followed by some consolidation, and so it proved. Since then, a three-leg consolidation has taken place (circled) twice testing support in the $1300-1310 area. It looks like the correction has now done its work, and another test of the $1360 level is likely. This is partially confirmed in our next chart, of gold’s open interest on Comex.

Open interest has fallen over 85,500 contracts (266 tonnes) in a little over five weeks. Given that in a bull market, one can expect open interest to be generally healthy, this is probably enough of a correction to now support a rally for gold.

While it is easy to become preoccupied with these technical considerations, there are other developments that justify the title of this report. For example, Russia continues to accumulate gold reserves, adding a further 20 tonnes in January, bringing the total to 1,843 tonnes, more than China’s officially declared reserves. 

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Michael Pento: Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’


by Mike Gleason, Money Metals:

Bond Prices to Plummet in a ‘Complete Blow-up of the Income Market’

Coming up we’ll hear a tremendous interview with Michael Pento of Pento Portfolio Strategies. Michael shares his very troubling outlook for the 10-year Treasury note, the tipping point that will cause the destruction of confidence in the dollar and what this all means for gold prices. Don’t miss a must hear interview with Michael Pento coming up after this week’s market update.

Well, the new Federal Reserve chairman spoke this week, and markets got spooked. Fed chair Jerome Powell testified before Congress, where he touted the economy’s strength.

Click HERE to listen

Good news for the economy was interpreted as bad news for stocks and other risk assets. The Dow Jones Industrials plunged more than 700 points on the week through Thursday on concerns about tariffs and more rate hikes. Powell indicated to lawmakers that the Fed will continue with the rate hiking campaign even as he downplayed any concerns about inflation.

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Make Your Choice: Change By Pain Or Insight


by Chris Martenson, Peak Prosperity:

It’s time to make the decision. Choose wisely.

Most experienced investors know the four most dangerous words are: This time is different

It never is. 

And yet one of my key predictions here at Peak Prosperity is that The next twenty years will be completely unlike the last twenty years.

So am I saying that things really will be different this time?

Yes, I am. But to understand why, you have to look closely at the unprecedented moment in history in which we live, as well as how the Three E’s – the Economy, Energy and Environment – all tie together now in a way they never have before.

For those who prefer their conclusions right up front, the simplest summary I can provide is that everything we think we know about “how things work” is just plain wrong.

This explains why, among many other grotesque distortions, the stock and bond markets are spectacularly overpriced and overvalued right now.

This danger is important to be aware of because when things correct, as they inevitably must, the next crash will be incredibly damaging. It could be as profound as that which dethroned Spain as a world power, permanently.

Peak Prosperity user Gyurash put this risk in context within his comment to our recent podcast on Economics for Independent Thinkers:

The mention of Paul Volker was interesting. I remember listening to a lecture given by Mr. Volker played on public radio in the mid 80s. He talked about the Spanish empire in the 16th century and the easy money train they had coming from South American gold and silver. He said that although it seemed to create great wealth it also made for a false economy in Spain. In addition to creating price bubbles, the Spanish did not use it to build much of anything other than big villas, built by itinerant foreign labor by the way, so when the gold and silver flow slowed when the biggest mines were effectively depleted, their economy crashed so hard that it never recovered, even up to today.


Delusional Thinking

What’s worse than wishful thinking?  Delusional thinking. 

The sort of ideas that harm rather than help those who hold them.

Of the many current policy delusions I could rail about, perhaps the greatest of them all is the quite-impossible belief that we can have infinite growth on a finite planet.

I know, I know, refuting this is so brain-dead easy to debunk that it seems pedestrian, if not childishly so, to raise it here again. It’s quite an impossible proposition.

Even the most cursory of reviews of mining data (just one of many possible examples), show that many critical ores and minerals are vastly more difficult and expensive to extract and bring to market than they were just a few decades ago. And the trendlines keep getting worse.

But let’s go through this once again, because it’s such an important point.  For those of you already on my side of the boat, please bear with me.  Perhaps something new will emerge for you on this next go around.

The Harsh Math

Exponential expansion requires not just some new minerals coming to market, but exponentially more. 

It works out like this.  Suppose that 100 units of copper were produced in year 1, and output (as demanded by economic growth) was expanding at a 3% rate.  How long would it take for production to double?  The answer is that after 24 years we’d find that 203 units were being produced.  So a 3% growth rate means that it takes only 24 years to fully double production.

However, the more interesting fact is that over that same 24-year stretch, if we add up each year’s production into a cumulative total we discover that 3,546 units of copper had been produced.   How much copper would you guess was produced over the prior 24-year stretch (the one that got us to 100 units in the first place)? 

The answer is just 1775 units.  In other words, half the amount produced during the next doubling.  Going back further and adding up all of the doublings of copper production throughout all of history  we’d discover that each new doubling produced (and consumed) as much as the sum total of all the prior doubling periods combined.

You can prove this to yourself by looking at a doubling sequence such as 0.25, 0.5, 1, 2, 4, 8, 16, 32 etc.  Note that 4 is larger than (0.25 + 0.5 + 1 + 2) and that 8 is larger than (0.25 + 0.5 + 1 + 2 + 4) and that 16 is larger than (0.25 + 0.5 + 1 + 2 + 4 + 8) and so on — into infinity.

Again, each new doubling involves an increase that is larger than the combined values of all the prior doublings in history.

For the visually-minded, here’s that same idea expressed in an image:

How Many More Doublings Can We Possibly Have From Here?

Only the most delusional would argue that we can dependably double our extraction of key natural resources forever. 

Every two decades (or so), will we always be able to use twice as much farmland, twice as much fish in the sea, twice as much oil in the ground, as has been used before throughout all of human history?

Of course not. Planet Earth is a finite system.

This is why I claim that everything we think we know about “how things work” is wrong. Our entire economic and financial systems, their associated monetary models and their current financial asset prices, are predicated on the principle of continuous growth. And not just any sort of growth: Exponential growth.  Predictable doubling — forever.

Look, it’s ridiculously easy to prove that there won’t always be twice as much copper (or nearly any other key natural resource) as has been extracted throughout all of prior human history. Things run out. They deplete. They become more dilute as the high grades are exploited first.

At some point, doubling becomes impossible. That’s when you’ve past the point where half has been extracted and half still remains in the ground.  After that, there are exactly zero doubling periods remaining! 

Why care?

Because once the doubling periods are over, every single economic model and financial asset that is predicated on continuous expansion breaks. Our systems stop  steadily growing; and instead start increasingly shrinking.

This not a hard concept to grasp, intellectually, for most people with an open mind. But in practice, because it challenges our comfortable understanding of the world, because it collides with an entire Disney World of incompatible social belief systems, it’s pretty much impossible for the many people to even begin to wrestle with. Forget about a mainstream economist or central banker, whose salary requires them to adhere to the status quo.

The warning here is that we our deluding ourselves as a society. We are herding ourselves, lemming-like, straight towards the cliff ledge.

Think Critically!

Our mission here at is to Create a World Worth Inheriting.  While we help people make informed decisions to imbue their lives with greater abundance and satisfaction today, it’s our dedication to the long-term picture that shapes everything we do.

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by Egon von Greyerz, Gold Switzerland:

Gold is hated by governments around the world because it reveals their deceitful actions in totally destroying the economy. It is not an accident that gold is the only money which has survived for 6,000 years. Gold is the only money that tells the truth. And gold is nature’s money which means it cannot be destroyed and it cannot be manufactured.

This is why governments cannot live with gold as money for more than short periods. Because over time governments always spend more than the country earns. At that point their survival can only be assured by buying votes. And printing money is a very cheap way of buying votes. It costs nothing when you own the printing presses (or computers) and it is very effective short term. The problem is when that little boy shouts out: “The emperor has no clothes”. At that point everybody will realise that we all live in a world based on lies and debt.

In the next few years, country after country will find a naked emperor and empty coffers. The irresponsibility and incompetence of regimes know no borders. Take a country like Venezuela which hit the jackpot by sitting on free oil reserves of massive quantities. Venezuela has the biggest oil reserves in the world. But in spite of that, Venezuela has today reached economic misery.

This is what Charles Dickens wrote in David Copperfield:

“Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”


But that simple rule for happiness seems impossible to follow for any nation today. Almost every country in the world is on the side of misery with the deficit being made up by debt or printed money. Margaret Thatcher said it better than anyone: “The problem with socialism is that you eventually run out of other people’s money.” And that is exactly what the world is doing. By borrowing more and printing more, socialism is not creeping but flooding into most Western countries as well as the rest of the world.

The table below shows total government spending as a percentage of GDP. In ten countries the government spends 50% or more of total GDP. These include all the Nordic countries with Finland the worst at almost 60%, as well as France, Greece, Belgium, Italy, Austria and Hungary. The US is just under 40% but is likely to increase substantially in the next few years as the economy falters and the government opens up the money spigots. When a government spends 40%-60% of total GDP, this is not just socialism. No, it is a total waste of a country’s resources. It means stealing 40% to 60% of what the people produces and then wasting it on bureaucracy and irresponsible spending.One hundred years ago, there were minimal or no income taxes in most Western countries and today the government burdens the people with 50% or more in many countries.


Venezuela is an excellent example of a prosperous country, with natural resources (oil), that is severely mismanaged and eventually turns socialistic leading to a total collapse of the economy. In 1935, Venezuela had the highest per capita GDP in South America. After a number of economic crises and corruption in the 1980s and 1990s, Hugo Chavez was elected president in 1999 and remained in that position until his death in 2013 when Maduro took over. Gradually the country’s economy deteriorated. In spite of its massive oil reserves, corruption, mismanagement, inflation, collapsing currency, big debts and socialism drove Venezuela to ruin. There are exchange controls, major shortages of most food products and even shortages of fuel. And Caracas has the highest murder rate of any capital in the world.

In 2016, the average Venezuelan lost 8.5 kilos in weight due to lack of food. If this had happened in the US or in some European countries, there would have been major health benefits. But the poor Venezuelans were not overweight to start with so this clearly affects the population and especially young children.

Venezuela had 367 tonnes of gold in 2015 and now allegedly still holds 187 tonnes. Sadly, this is not enough to save the country. And the people have not held any gold either. Most people in Venezuela have not had enough money to buy gold for in later years. But if they had just put a fraction of their income into gold, that could have saved them. 13 million Venezuelans are today on minimum wage which is $7 per month. With hyperinflation, that dollar amount collapses fast. Just imagine if 20 years ago some Venezuelans could have saved enough over to buy just one ounce of gold at $300. That ounce of gold would today be enough for 5 years’ minimum salary. But very few, if any did it. This is why I am telling people today who don’t have a lot of money to put aside just a small amount every month and buy gold. One gram of gold is $43. Most people in the West can afford to put that aside. And if you do that for 32 months, you have one ounce of gold. Remember that in Venezuela today, as I mention above, one ounce of gold goes a long way.


To determine the state of a country, you don’t need to look at balance of payments, budget deficits, debts etc. All that is needed is to look at the value of gold in the currency of the country. I have shown the graph below a few times but it is worth showing again and again because this graph is the key to what will happen in the next few years. And if we don’t understand history, we will not understand the present or the future. The chart shows that over a 100 year period, all major currencies have declined 97%-99% against gold.

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