NORMANDY, France – First, a quick look at the markets.
The Dow bounced yesterday, recovering 239 points of the nearly 400 it lost on Friday.
Why the comeback?
The financial press has a ready answer: “Stocks gain with cautious Fed comments,” reads a headline.
Yes, dear reader, the Fed is in charge now. At least, according to the press.
Prices are no longer discovered by willing buyers and sellers. They are imposed by a central bank that lives in fear – fear that investors will discover that the recovery is phony and stocks and bonds are not worth what they paid for them.
Janet Yellen and her fellow PhDs at the Fed built a fake world… a hothouse for stocks and bonds.
Now, they can’t open the doors; the plants might die!
Weird and Unnatural
“The rift in the time-space continuum continues to widen,” reports our ace researcher, Nick Rokke.
“On Tuesday, German household-products giant Henkel and French pharmaceutical company Sanofi issued a total of €1.5 billion ($1.7 billion) of new bonds at yields of minus 0.05%.”
Nick might have added an exclamation point; never, in the last 5,000 years for which we have records has loaned money yielded less than nothing.
And since money didn’t even exist before that, we can presume that it has never before happened in the history of the universe.
Of course, today never happened before either. But time is linear. Every day is a new day. Interest rates are cyclical. They go up and they go down. In each direction, there are limits.
Temperatures are cyclical, too. They go up in summer and down in winter. Occasionally, the media announces the “hottest day in 20 years” or “the deepest snow since 1957.” We get out the fans or rubber boots. We brace ourselves for something unusual, but not unheard of.
Records are broken from time to time. It’s part of the cyclical nature of things. But when the media announces “the hottest day in 5,000 years,” watch out. Something else may be going on… something weird and unnatural.
It is certainly more than passing strange that a private company should be paid to borrow money. Or that investors are willing to pay for the privilege of lending. It bespeaks more than a new record. It tells us that the feds have made a damned mess of things.
A First in 5,000 Years
We admit that our generation is the greatest, smartest, and most advanced in all history.
The Fed has more than 1,000 PhD economists on the payroll. Compare that with the Bank of England under Sir Isaac Newton… or the central bank of Cuba under Che Guevara. Neither had a single PhD in its employ.
We now have computers that can beat grandmasters at chess and hook you up to a porn site at the speed of light.
We have robots that can make automobiles… and 3-D printers that can make robots.
And we have large, shiny machines that lift up hundreds of people at a time and fly them across the oceans. (It’s true; we’ve seen them ourselves.)
Think of all the empires that rose and fell over the last 5,000 years: the Akkadians, the Hittites, the Egyptians, the Chaldeans, the Sumerians, the Assyrians, the Persians, the Babylonians, the Greeks, the Romans, the Sassanians, the Seljuqs, the Mongols…
Think of the conquests and defeats: Attila, Genghis, and Tamerlane… stout Cortés on a hill in Darien… Pizarro and his room full of gold… William at Hastings… and poor Harold with an arrow in his eye… Bonaparte in Moscow and then the crossing of the Berezina… Hitler in his bunker… Nagasaki…
And the last ditch stands… the lost causes – the Charge of the Light Brigade… Pickett’s Charge… the Little Big Horn… Culloden… and Dien Bien Phu…
The great battles of Vienna, Waterloo, Huaihai, Cajamarca, Antietam, Leipzig, Stalingrad, Yorktown…
Alexander conquered the known world… Hannibal crossed the Alps… Caesar crossed the Rubicon… and Lord Byron swam the Hellespont…
And think of the lost languages – and the whole races of humans – that lived and died: the Neanderthal, the Denisova, Homo floresiensis…
And the forgotten tribes – the Paiute, Shoshone, Omaha, Mandan, Hidatsa, Ojibwe, and Nermernuh – wiped out by disease…
The lost cities… the lost peoples. Hundreds of millions killed in wars… starved to death… burnt at the stake… tortured… murdered…
And the lovers: Cleopatra and Antony… Catherine the Great and Potemkin… Burton and Taylor… Gertrude Stein and Alice B. Toklas… Prince Edward and Wallis Simpson… Helen of Troy and Paris… Juan Perón and Eva Duarte…
Think of the great geniuses, too: Euclid… Aristotle… Pythagoras… Archimedes… Galileo… Da Vinci… Pauling… Wittgenstein… Einstein.
And yet as far as we know, in not a single instance did anyone (not Nebuchadnezzar, nor King Solomon, nor even “The Bard” himself)… driven by love, or money, or madness… ever have the idea of lending money to get back less money later on.
Further Reading: Negative interest rates are another weapon in the Deep State’s arsenal – one it uses to exert complete control over you and your family. To learn how this shadowy group came to wield such dangerous amounts of power, let Bill tell you the whole sordid story.
By Alexander Green, Chief Investment Strategist, The Oxford Club
There are seven key reasons why gold, “the barbarous relic,” has been sought after as a store of value for thousands of years.
Unlike stocks or bonds, it is tangible.
Unlike wheat, corn, or rice, it is durable.
Unlike lead or copper, it is convenient.
Unlike real estate, it is invariable.
Unlike artwork, it is divisible.
Unlike aluminum or copper, the supply is greatly limited.
And unlike, say, molybdenum or rhodium, it has a long history of acceptance as money.
That said, I am not a gold bug.
And the physical metal, in my view, is a lousy long-term investment.
Yes, it has intrinsic value, unlike paper assets. It affords you a measure of privacy that you can’t get with most financial assets today. And the coins, in particular, are lovely to behold.
But if your coins are locked away in a safe deposit box, as they should be, you really can’t enjoy them much. In the meantime, they’re not drawing any interest or paying any dividends. And it’s costing you money each year to store or insure them.
Don’t get me wrong. I do own some physical gold, for the same reason I have a homeowners policy on my house. (I hope I never have to collect… but just in case.)
Of course, you could trade gold options or futures instead. But I don’t recommend it. The short-term price movements in gold are completely inscrutable. That’s something to consider when using leverage or buying a contract with a rapidly diminishing time premium.
However, despite the uncertainties that exist in the gold market, shares of gold producers have a place in every investor’s portfolio.
Why? They are a great diversifier. And they are a leveraged play on the price of the metal. If gold moves up 10%, for instance, blue-chip gold shares generally rally 30% to 40%.
Right now, central banks around the world are using every weapon in their arsenals to revive economic growth, including negative interest rates.
I don’t need to tell you that the long-term effect of this – combined with runaway government spending – may well be inflationary.
And gold stocks are an excellent inflation hedge. Better still, they tend to move independently of both the stock and bond markets. Gold-related investments have a near-zero correlation with other assets.
So make sure you own gold shares in your portfolio.
Blue-chip gold stocks are cheap and unloved right now, even though the metal has moved higher. They are a fine inflation hedge and a great portfolio diversifier.
And if institutional investors start climbing on board, these shares could move sharply higher in the weeks ahead.
Editor’s Note: Proper diversification is just one piece of Alexander Green’s wealth-building formula. Another important part is legally reducing the amount you pay Uncle Sam. That’s why his team wants to tell you about a new program that entitles 119 million taxpaying Americans to a cash rebate on virtually every 2016 purchase. Watch their presentation here for details.
Triggers for a Global Economic Meltdown
All signs point to a coming global meltdown. And a legendary international investor says one particular country is at the epicenter of several potential crises that will spark this worldwide disaster…
Goldman Sachs Just Slashed the Odds of a September Rate Hike
Goldman Sachs is losing confidence that the Fed will raise interest rates next week. And it has dramatically cut its September rate-hike odds to just 25%.
Why Negative Rates Do More Harm Than Good
Negative rates are supposed to stimulate the economy by spurring lending. But one Stanford economist says they do more harm than good… especially when it comes to savers.
In Case You Missed It…
Bill’s friend and colleague, Mark Ford, will hold a top-level meeting with his crack team of experts tonight at 8 p.m. ET… and you can sit in as they reveal a unique plan that could turn every $50,000 into $1 million or more during retirement.
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The subject of yesterday’s Diary – how the feds will ban cash. And it’s gotten readers thinking…
I’ve been following your thoughts on the Fed buying up debt and subsidizing interest rates for a while. But I have never thought about what you wrote today: “Theoretically, they could buy all the world’s stocks and bonds. And theoretically, they can leave the feds with almost complete ownership of the planet’s capital.”
If the Fed did buy stocks, wouldn’t that increase the value of the dollar? Instead of being backed by gold, as like it was pre-Nixon, wouldn’t it be backed by the assets of the companies whose stocks the government owns?
Keep up the good work. Also, good luck on your South American ranch situation.
– Jon L.
Suppose the government printed enough money to buy all the stocks in the U.S. stock market – or all the corporate bonds, or both – wouldn’t it then own all of corporate America?
Would the government have the voting rights attached to the stocks it owns? And if it were there majority shareholder of all U.S. corporations, couldn’t it then demand seats on the board?
Has a government ever NOT exercised power, once it has given itself the ability to do so?
– Mike K.
Unless you have read [Harvard economist Kenneth] Rogoff’s new book, The Curse of Cash, it might be best to reserve judgment and not dismiss his comments so flippantly.
Many who want to retain our outmoded system of cash are those that are profiting from its illegal use. For example, drug cartels. They would fight the change every inch of the way.
– Donald L.
Meanwhile, our recent Weekend Edition from colleague Nick Giambruno at Casey Research about how Turkey could be a trigger for the next global crisis has been nothing if not controversial.
The Greeks have an abominable human rights record to this day. They deny the existence of ANY ethnic minority in Greece. I wonder, how they managed to sneak into the EU in the first place.
– Lazlo G.
Your author is wrong. Greece did not push for the war in Cyprus with Turkey. Just the opposite. Turkey was wrong to attack Greek interests in Cyprus, and in my opinion, deserve their demise, notwithstanding Greece’s duplicity in matters of self-defense.
– George L.
Turkey and Greece have been at each other’s throats since the 16th century? No, they’ve been at each other’s throats since before the time of Alexander the Great!
– David M.