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Precious Metals

All Aboard The Inflation Freight-Train – Peter Schiff Says Fed Doing “Too Little, Too Late”

Goods prices are up a staggering 10.7% That was the biggest 1-year increase since 1975.

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This article was originally published by Zero Hedge

All Aboard The Inflation Freight-Train, Schiff Says Fed Doing “Too Little, Too Late”

Via SchiffGold.com,

December Consumer Price Index data came out on Wednesday (Jan. 12). Month-on-month, it was again even hotter than expected. Peter called it an inflationary freight train that the Fed’s “field of dreams” monetary policy will not stop.

“Transitory” inflation has now been running hot for a full year.

The year-on-year CPI was 7%. It was the biggest annual CPI increase since 1982.

Month-on-month, the CPI spiked another 0.5%. This was hotter than the consensus 0.4% projection.

Core CPI (stripping out food and energy — as if you don’t have to eat or put gas in your car) was up 5.5%.

Goods prices were up a staggering 10.7% That was the biggest 1-year increase since 1975.

Keep in mind, this is using the cooked government CPI formula that understates inflation. If the government was still using the formula that it used in 1982, inflation would be higher in 2021 than it was then. In fact, we’d have the highest level of inflation in history. According to ShadowStats, it would be just over 15%.

Based on the methodology the government uses to calculate housing prices (owners’ equivalent rent), housing prices were up 3.8% in 2021. Meanwhile, the actual home prices rose about 16.5%.  If you take owners’ equivalent rent out and put home prices in the calculation, 2021 CPI suddenly becomes 10%.

Some people have recently claimed we shouldn’t worry about inflation. They say that wages go up along with prices, so it’s basically a wash. But wages are not going up as fast as prices. Real wages (nominal wage increases minus CPI) were down 2.4% in 2021. That means even with your raise, you have lost purchasing power. And you’ve lost even more than the official numbers reveal. If you use an honest inflation measure, real wages were down somewhere in the neighborhood of 10.4%.

As Peter Schiff said, “Consumers are going to have to live in the real world, not in the government’s fantasy world.”

 

Over the last year, the dollar has gone up and gold has dropped on hot CPI data. Instead of looking at inflation, they were focused on the possibility of Fed rate hikes. But on Wednesday, the dollar got clobbered and gold held steady with modest gains. Peter said he thinks this shows investors are starting to figure out that it doesn’t matter if the Fed hikes rates.

Any rate hikes that we get are going to be too little too late to do anything to derail this inflationary freight train.”

There has been a misperception in the markets over the last year. People have focused on nominal interest rates and ignored real interest rates. In fact, real rates are historically negative.

The real interest rate is -7% using the government CPI number. The Federal Reserve is only talking about slowly raising rates to 2% over the next two years. If inflation remains constant, real rates would still be -5% after two years of hiking.

That is not a positive environment for the US dollar and investors are starting to realize that and they are dumping dollars.”

And while there wasn’t a rush into gold, at least investors didn’t dump it.

Meanwhile, if you thought the Fed was about to embark on a successful war on inflation, Jerome Powell’s Senate testimony should have cleared up any confusion.

Powell admitted that even when the Fed raises rates and ends quantitative easing, monetary policy will still be “accommodative.” Peter questioned that policy.

If we have an inflation problem; if inflation is at 7%; why are we accommodating with easy money? If the Fed really wants to fight inflation, you can’t fight inflation with an accommodative policy. That’s the type of policy you have when there is no inflation. When you’re trying to simulate a weak economy, that’s when you do loose monetary policy.”

Powell is talking out of both sides of his mouth. He’s saying he’s going to fight inflation and continue stimulating the economy. You can’t do both.

You can’t put out a fire with gasoline. But that is what Powell is bluffing that he is going to do.”

Powell is still insisting that “supply chain problems” will resolve in 2022 and lower some of the inflationary pressure.

In other words, even though the Fed, or Powell, has claimed that they were wrong about inflation being transitory, they’re basically still clinging to that lie. Because they’re just saying that the transition is going to take longer than we thought because they think the inflation problem is going to take care of itself.”

Peter called it a “field of dreams” monetary policy.

The Fed is living in this fantasy land and they just think, ‘If we print it, the supply will come.’ They think we can keep on with our easy-money supply, but just eventually, the goods are going to be there. As long as people want to buy stuff, eventually, the stuff for them to buy is somehow going to magically appear. It doesn’t work that way. Stuff has to be produced before it’s consumed.”

In this podcast, Peter also talks about Elizabeth Warren trying to blame inflation on price gouging, makes the case that Democrats are laying the foundation for price controls, and discusses Paul Tudor Jones’s bitcoin forecast.

Tyler Durden Fri, 01/14/2022 – 09:30

Author: Tyler Durden

Precious Metals

Gold Bull Catalysts Coming

  Gold and gold stocks showed unexpected strength last week, and although they closed the week in a disappointing fashion, their larger outlook is growing…


 

Gold and gold stocks showed unexpected strength last week, and although they closed the week in a disappointing fashion, their larger outlook is growing increasingly positive as multiple catalysts abound.

 

We have touched on the Fed rate hike cycle catalyst.

 

In seven of the last eight rate hike cycles, Gold and gold stocks gained after the first rate hike. 

 

As you can see, there are also some cases in which Gold and gold stocks bottomed before the first rate hike. However, if there is weakness over the weeks ahead, that would set up the post-rate hike rally that has been common throughout history.  

 

The other catalyst is the potential for an extended correction in the stock market. The three most recent significant lows in precious metals coincided with the three most significant stock market corrections over the past eight years.

 

The S&P 500 has corrected nearly 9%, and the Gold to S&P 500 ratio (bottom) has pushed above its 200-day moving average for the first time in 15 months.

 

Should the stock market correct further, then that could force a pause in the rate hikes. Gold would continue to outperform the S&P 500, and precious metals could embark on a sustained move higher. 

 

The gold stocks and Silver have held up well given the selloff in the stock market. They could get hit if the selloff turns into a steep decline, but one should recall their propensity to rebound after sharp declines. 

Even though there could be more weakness and volatility, the precious metals complex is setting up for a good run in the spring and summer.  

I continue to be laser-focused on finding quality juniors with at least 5 to 7 bagger potential over the next few years. To learn the stocks we own and intend to buy, with at least 5x upside potential after this correction, consider learning more about our premium service. 


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Economics

Gold Stable as Bitcoin Bounces Around $35K – Investors Offload Risky Assets

Cryptocurrencies have not been performing too well since the beginning of the year, and this week continued their downward slide…

Cryptocurrencies have not been performing too well since the beginning of the year, and this week continued their downward slide as major economies prepare to scale back generous monetary policies in face of rising inflation.

The price of bitcoin has fallen to around $36,800 at the time of writing, marking a decline of nearly 6% from Thursday. Since the start of 2022, the cryptocurrency’s price is down over 15%, which is a substantial drop from its record-high price of $98,990 back in November. Likewise, its counterpart, ethereum, isn’t faring too well either, falling by nearly 20% since the beginning of the year.

It appears that investors are becoming worrisome about major central banks pulling back their monetary stimulus policies a lot sooner than expected in an effort to rein in surging inflation. The Bank of Canada is expected to hike its key rate as early as next week, while the Federal Reserve recently signalled that it too, will begin winding down its support ahead of the timeline.

In the meantime, a number of major governments are attempting to curb the growing popularity of cryptocurrencies. This week, Russia’s central bank has proposed a complete ban on the mining and use of cryptocurrencies in the country, as digital tokens could pose a threat to the financial stability of traditional currency. Russia’s crackdown comes merely a month after China outright banned crypto mining and trading.

But, not everyone has a bearish view on crypto prices. Goldman Sachs forecasts that bitcoin will hit $100,000 within the next five years, as the cryptocurrency could increasingly erode at gold’s market share.

Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Bitcoin Tumbles Below $37K as Investors Offload Risky Assets appeared first on the deep dive.

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Author: Hermina Paull

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Economics

(R)evolution

(R)evolution

Authored by Sven Henrich via NorthmanTrader.com,

The first three weeks of 2022 have been brutal for risk assets including stocks…

(R)evolution

Authored by Sven Henrich via NorthmanTrader.com,

The first three weeks of 2022 have been brutal for risk assets including stocks and crypto.

Long forgotten is the traditional Santa rally and suddenly cheerful $SPX 5,000-5,300 price targets seem much farther away. The culprit can be multifold: Midterm seasonality, profit taking on last year’s winners, continued capitulation on last year’s losers, a long overdue technical correction, but more importantly and perhaps more profoundly the realization that the asset bubble brought about by excessive monetary intervention has started the process of imploding all around us as the Fed is now forced to raise rates and end QE having completely misjudged the persistence on inflation. In short, carnage:

The Fed may well try to engineer this market correction with hawkish talk versus hawkish action to produce a soft landing to lead to further rallies as alluded to in the 2022 Casino, but the tape highlights the devastating damage that is now inflicted on the exuberant investors of 2021 and again the now obvious point:

The monetary dominance over all things price discovery with all their dreadful consequences is again playing out in front of us and yes, my repeated contention last year of correlated liquidity flows is playing out with the 50% crash we’re currently witnessing in Bitcoin:

Heck bitcoin and $RUT currently have a 93% correlation on the weekly chart:

You’d think this price action may prompt a “told you so” type article, but rather I find the macro backdrop actually steer me in a different direction, that of becoming a Bitcoin supporter which seems odd given that currently my notion of the everything bubble apparently beginning the process of playing out.

Which brings me to the point of this article: (R)evolution. Revolutions are a rebellion against the status quo. Sometimes they are done for nefarious purposes, sometimes out of necessity against relentless and unjust oppression. In a political sense they can be violent, in the intellectual sense rebellions can be of the mind. Evolution is adaptation to changing circumstances. Both terms I sense apply to me in assessing the world we live in.

Specifically I am referring to my evolving views of our global monetary system and in contrast the efforts undertaken by many to create an alternative, Bitcoin being the current dominant expression of such an alternative.

I’m not writing this piece to push any particular agenda, rather I’m sharing my macro assessment to highlight how I’ve become a supporter of Bitcoin. In my discussion last summer with Michael Saylor I’ve called it a highly emotional space and it continues to be. I’m not a FOMO guy or relentless cheerleader, my personality is too analytically wired for that, hence my focus to call things as I see them and I’ve charted Bitcoin for a couple of years now publicly offering my as objective as possible view (see also The NorthCast).

Many people call it a scam, a bubble, others are fanatical supporters that aggressively attack dissenters and of course there are tons of scams around a new tech space that has filled many minds with greed and promises of easy riches. And riches have come to fruition for some while the volatility and massive price drawdowns also have resulted in massive financial pain for many others.

It’s a young space filled with emotions, greed, and lots of opportunities. But because it is young it is also immature. The relentless cheerleading in the recent year without discerning price flow and technical structure analysis has led many people off the cliff. Slogans are no long term substitute for analysis.

Frankly in many ways it all reminds me of the wild days of the 2000 tech bubble. Many companies also proved to be fantastic long term investments but the early over excitement of the day also ended in -90% drawdowns that wiped people out. I’m not a making prediction here, but just for reference such an analog drawdown could bring Bitcoin back down $7K. So entry points and exposure matter, but so does a long enough time horizon and vision to see the past the growing pains and search for opportunities that can change the status quo in a major way in the long term.

My relationship to Bitcoin specifically has been observational for the past few years and I’ve certainly taken my own potshots at the craziness of the explosion of this new industry with its flamboyant characters and classic type bubble actions we’ve seen in recent times.

But taking potshots is easily done from the cheap seats with no exposure and this is what I intend to change for myself. I want exposure. Not as a trade, but as a long term allocation as I see many macro changes taking place that frankly affect all of us in one way or the other. And to this end I’ve continued to explore, assess and to educate myself.

As I am writing this article markets are going through its first larger correction since the March 2020 lows. And it’s a brutal one. Absolutely carnage in the celebrated funds and meme stocks of 2020 & 2021 and the majority of the general stock universe . Small caps down 20% from the November highs, many individual stocks down 50%-80% from last year’s high. Carnage. And yes Bitcoin along with all other crypto currencies is getting mauled as well.

I’ve long spoken about the liquidity correlation and have questioned the validity of the hedge argument. At this stage Bitcoin has not proven itself yet to be a hedge again inflation or market selloffs or excessive money printing, I would argue it’s been a beneficiary of it as has all crypto. Think stimulus checks. Think unprecedented artificial liquidity that seeks a return.

But yes, while my evolution in thinking may have left me miss out on some opportunities I also feel validated by my liquidity analysis and I would argue I haven’t really missed much in the last year from an investment perspective only from an opportunistic trading perspective. But I’m viewing all this through the lens of a long term investment.

So with rate hikes coming and the Fed supposedly rolling off it balance sheet will Bitcoin not continue to suffer? It may well do that and for me that then offers a long term entry point, as I sense the correlation dynamic will change in due time, but I’ll get to that point later.

As readers know I’ve been of the view that excessive central bank liquidity has driven the largest asset bubble in our lifetime. The one trick pony of ever more intervention successfully and repeatedly employed by central bankers time and time again is seeing the previous denied consequences unraveling before our very eyes and the events of the last few months were really the last straw for me.

You intervene to rescue the system from a crisis. Fair enough. No problem with that. But if you keep relentlessly intervening despite the larger crisis being over you are inviting disastrous consequences and we see vast structural impacts now. Wealth inequality has taken on obscene extremes while rampant inflation is now hurting the middle class and the poor with consumer confidence in the proverbial toilet. No, the institutional arrogance of central bankers have hurt people. Look, it may well all be that they see themselves as the saviors with all the best intentions in the world. Although the revelation of insider trading by several Fed officials last year should dispel this self anointed notion of them being the good guys. Greed and profit motive runs deep at the Fed, the supposed public officials serving the public interest. After all, recent Fed presidents have made it a point of cashing in big time pig time by collecting millions of dollars in speaking fees from the very institutions they were previously in charge of regulating.

And be clear: Fed leadership has revealed itself to not only be self serving, but also grossly wrong about key issues facing the economy with disastrous consequences for the public. The housing bubble was easy money induced and the threat from subprime openly denied by Bernanke caused millions to take the bath for that costly mistake. The Fed mandate of full employment as a cause celebre to keep rates low was revealed to be a straw man as the Fed cut rates 3 times in 2019 when unemployment was at a 50 year low of 3.5%. And now the inflation fiasco, stubbornly insisting on a transitory inflation narrative while growth was exploding higher and fiscal stimulus was flooding the system, through all of it they kept relentlessly printing exacerbating the asset bubble we see imploding around us.

The Fed, the supposed lender of last resort, has devolved into a creator of a repetitive boom and bust cycle with a proven track record of perversely benefitting only the few often at the long term expense of the many. And in process they have debased the monetary system and distorted all normal functioning of price discovery under the illusion that they can keep it going consequence free.

Actually it’s not an illusion, they know exactly what they have done. After all Powell in April 2016 highlighted what was to come to pass:

“it’s plausible to me that rates will have to remain very low for a very long time to achieve stable prices and full employment, but that such low rates will drive excessive credit growth and create irresistible upward pressure on asset prices, including real estate prices. I’m thinking of a situation in which a broad range of asset prices are moving up well beyond what fundamentals would justify; where the other tools we have don’t seem to be addressing the problem or have failed to do so; and where low interest rates are pushing up asset prices and driving credit to excessive levels, probably over many years, and thus are a principal cause of the threat.”

The very threat we now face, an asset bubble bursting, having made housing unaffordable for many, the rich richer and leaving the less well off to take the bath for what is to come.

Indeed it was during the same meeting that the Fed’s Williams warned against the Fed to lose sight of it price stability mandate:

“In thinking about monetary policy, I am drawn to the Hippocratic Oath of doing no harm. Our primary focus should remain on our dual-mandate goals. We know from the history of central banking that when you lose focus on price stability, that has very significant costs to society. But assuming that we are in the vicinity of our goals, we should take care that monetary policy does not inadvertently contribute to fostering the emergence of imbalances in the economy, because the cost of trying to use monetary policy to tame imbalances after the fact are simply too large.”

And here we are, the Fed having lost focus on price stability with very significant consequences to society with imbalances too many to count.

They did this, they knew better, but they did it anyways even though they were urged my many to ease off last year. They didn’t.

And citizens have absolute no say in this incompetence imposed upon them. You and I have no say, but now we’re all stuck with higher prices whether year over year inflation will come down or not doesn’t matter. Prices are not coming down. And Powell knows this too:

They knew in 2016, they knew in 2021, and now they are chasing their tails trying to fix last year’s policy error.

I don’t pretend to know where this journey is going. All I know is that they’ve expanded money supply and by extension facilitated a historic debt expansion by ungodly amounts and that everything is historically imbalanced and consumers are now taking a bath for it with coming monetary tightening possible causing a recession as a result of the asset bubble bursting. Imagine:

And so yes, it is frankly very hard to want to trust these monetary unelected regimes. Be it in the US or in Europe with the arrogance of ECB president Lagarde not even wanting to pretend to want to stop QE or to raise rates in the face of the European citizenry taking the bath for higher prices. Yes, year over year inflation will eventually prove transitory, but the long term damage inflicted on society could last a generation.

Which brings me to the revolution part. We have no say. I can rant against the system all I want, but it won’t change a thing I can only control my behavior and my allocations. And I want an alternative in my allocations versus the institutionalized system intent on devaluing my hard earned cash and purchasing power. Something they can’t touch. What other alternatives do we have? Real estate? Already have a nice house, thanks. Not interested in buying into a monetary induced housing bubble. Been there, done that. Thanks. Bonds? You jest. Gold? Yea I like it technically and there’s a possibility if you have the patience of a glacier. Stocks?

Markets, despite the recent correction, remain historically horrifically overvalued:

Yes there will be rallies, heck maybe even new highs still, but downside risks remain vast for years to come and the recent obliteration of many individual stocks serves as a stark reminder that last year’s bubble warning were well rooted in fact.

Which brings me to the unproven hedge argument from earlier: While crypto and Bitcoin has rallied with everything in recent years equity allocations last year took on historic proportions. I propose that the coming long valuation adjustment in the broader market will have current holders of equities eventually seek for an alternative and Bitcoin as a digital asset class will offer such a long term venue. There is a hell of a lot of more money in equities than there is currently still in Bitcoin. And heck, perhaps my own conversion process is sign of things to come. Or perhaps I’m pulling a classic Isaac Newton and join the party late just before it all blows up for good. But I don’t think so because I’m not coming here near a top, but rather with a view to patiently look for entry opportunities in the year ahead letting technicals be my guide.

No, the revolution may still be in the very early stages and it may yet have to suffer a much larger drawdown in time versus the current 50% shellacking from the November highs. After all the Fed hasn’t even started to withdraw liquidity and regulation is still outstanding which brings me to other points in favor of Bitcoin:

Regulation is coming but it’s not coming in the form of a ban, institutions are looking to invest but they hate uncertainty and regulation will give them certainty. While retail may have gotten burned to a certain degree by shorter term leveraged trading strategies institutions will have a longer term horizon and more stamina to withstand drawdowns.

The final point is a human component. Yes, there is all kinds of craziness in the space and scams and bots, but my impression is there are people, many of whom much smarter than me, who generally care about making a contribution to changing the world for the better by creating an alternative to the monetary North Koreas that rule our financial world. Jack Dorsey strikes me as such a person and his effort with CashApp is such an example.

I don’t know personally many people in the space but I’ve had the opportunity to speak with Michael Saylor at length twice now, including a bit outside the podcasts. While he, like myself, gets a lot of hate and derision on social media, he strikes me as very earnest in his conviction and arguments. Doesn’t mean he is right, or that I am right. Only time will tell. He has now got more skin in the game than anyone I know. I can’t speak to his investment strategy, nor is it my place nor is it anyone else’s. We are all responsible for our own decision making and our investment allocations and I am making a choice of wanting to seek exposure into Bitcoin this coming year.

As I’ve pointed out earlier I’ve been charting Bitcoin for a couple of years now and I find it technically very appealing and precise, hence I aim to keep charting it to find entry points to start accumulating. Feel free to follow my chart process in The NorthCast, it’s free. As I said I’m not pushing any agenda just sharing my thoughts as incomplete as they may be, but these are my main points.

The revolution is a conscious choice to find an alternative to an imposed monetary system, the evolution is to come to the conclusion that Bitcoin is such an alternative. So to fans of Bitcoin I say this: One of you. To those that are not: Don’t hate, appreciate ;-). That’s what makes a market.

On a final note, Michael Saylor and I have recorded another in depth discussion this week and you may find it of interest for your own decision making process:

*  *  *

For the latest public analysis please visit NorthmanTrader and the NorthCast. To subscribe to our directional market analysis please visit Services.

Tyler Durden
Sun, 01/23/2022 – 10:30













Author: Tyler Durden

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