LONDON – An old friend came to our office in London yesterday.
“What it shows – and clearly – is that the bear market that followed the dotcom crash was never completed. Greenspan intervened. [More on that below.]
“What I’m saying is that the most important trend in finance is the decline in the Dow-to-Gold ratio. Having peaked in 1999 at 41, it began its long walk “home” – to where it always ends up – below 4. That’s the real primary trend.
“And now, since October 2018, it’s reasserted itself. [Gold, relative to stocks, has been going up.] We’re looking at the biggest, nastiest, rudest correction in our lifetimes. It’s happening right now. And no one notices. And guess what? It’s tradable.”
In other words, we can make money on it.
“We” may not include your editor. He will stick with the trade… in its simplest form.
When the Dow stocks are valued at more than 15 ounces of gold, he will sell them and buy gold. When the Dow stocks are valued at less than 5 ounces of gold, he will sell gold and buy stocks.
In between, he will sit tight and await developments… as he has been doing since 1996, when the Dow-to-Gold ratio rose above 15 and he sold out of stocks.
But our friend Tom’s strategy is designed to make money – a lot of it. Your editor only hopes not to lose money. Which brings us back to the dear reader’s suggestion that we’ve been toying with for the last couple of days:
Why not get onboard the Trump train? As a capitalist, shouldn’t we give readers what they want? And wouldn’t we make more money if we did so?
Trump, many believe, is the Messiah. He will wipe away every tear. Mourning, crying, and pain will be no more. He will deliver us from evil, they think. Failing to have faith in Him is almost a sin… and a ticket to Hell.
But wethinks our dear reader mistakes what he wants for what is. Readers can get all the Trump adoration they want at popular news sites, such as Breitbart and FoxNews. They don’t need more from us.
What we all really want, and need, is to knock the scales from our eyes… so that we get a clearer picture of what is going on.
Besides, we’re too old to cater to readers… too rich to need the money… and too contrary to give a damn.
And as near as we can tell, the Trump train is headed in the wrong direction. And here, we admit a cluster of prejudices.
We don’t like being ordered around by morons; which is to say, we prefer fewer feds, fewer cronies, fewer zombies, fewer Swamp critters, and fewer jackasses telling us what to do.
And we sleep more soundly when people laugh at claptrap rather than use it as a basis for public policy.
Of course, we have nothing against Mr. Trump personally. He plays an ignorant, oafish bully on TV. What he is like in person, we don’t know. But Foreign Affairs gives him his due:
…showmanship, a buccaneering spirit, and go-for-broke instincts are also among the traits that made America what it is… Trump is a phenomenon… he knows how to command the attention of the highly educated and dominate the news cycle. There is a reason he proved able, in a single election cycle, to vanquish both the entrenched Bush and Clinton dynasties. Trump’s flaws and transgressions are now well documented. Yet he has not perpetrated a catastrophe remotely on the scale of the Iraq war or the global financial crisis.
In the last 20 years, there were probably only a couple of opportunities to stop this Debtball Express.
One of them came in June 2000, says our colleague David Stockman. Then, it was obvious – to Alan Greenspan, as well as others – that the monetary system inspired by Milton Friedman and put in service by Richard Nixon wouldn’t work. Friedman’s system – monetarism – called for controlling the growth of money, keeping it at around 3% per year.
But after 1971, when the final thread between gold and the dollar was severed, America’s real purchasing power came from a new source – credit.
And by the end of the 20th century, Greenspan noticed that the Fed no longer knew what “money” was… and could neither measure it nor control it.
Greenspan, the former goldbug, might have stood up straight before his fellow Fed governors and explained the situation:
“Uh… guys… this isn’t working. We’ve got to go back to a gold-based system.”
Instead, he let the credit money system erupt, reducing the cost of money/credit from a federal funds rate of 6% to a rate of 1% – the lowest at that point in history.
Credit/money flowed like hot chocolate… much of it into the honeypot money centers – New York and London.
The second, and last, opportunity may have come in 2017, when Donald Trump took the White House.
Of course, it may have been too late already. And perhaps no human being could have withstood the firestorm of outrage coming his way.
It would have meant actually draining the Swamp… undermining the power of the Deep State… and smacking down Wall Street, hard.
All the elite… all the powers-that-be… all the mighty Establishment would have been against him. He’d be lucky to survive.
But Donald J. Trump is a fighter, a disruptor… and he had won the White House by promising to set things right.
He also had Republican majorities in both houses of Congress; he effectively dominated the news cycle, and he had broad support in the Heartland.
What a treat it would have been to see him, in his first State of the Union speech, tell the truth:
“Obama and the Democrats have made a mess of our economy. The average working guy hasn’t had a raise in 40 years, while the elite have gotten richer. The game has been rigged. I’m going to fix it. It’s going to be rough. It’s going to be painful. But we’ll get through it. And we’ll have a beautiful economy again. MAGA!”
It didn’t happen. Instead, the soggiest part of the Swamp – the military – got more money.
The deficit budget rose three times faster than GDP. The deficit doubled; and federal debt rose by $2 trillion since 2016. And the Deep State got deeper.
Now, like it or not, we are all on the Debtball Express. And with nothing to stop it, it’s picking up speed.
TECHNOLOGY INSIGHT: A REGULATORY AGENCY TAKES A SHOT AT BLOCKCHAIN
By Jeff Brown, Chief Technology Analyst, Bonner & Partners
The Financial Action Task Force (FATF) is an international regulatory body with 38 member countries. Its stated purpose is to combat money laundering. And it just took a shot at the budding blockchain industry…
FATF wants to apply the “travel rule” to all cryptocurrency transactions. The rule says that anytime you send money to someone, you must also send your identifying information: full name… address… banking information… that type of thing.
Of course, this would make cryptocurrency transfers just like wire transfers: slow, expensive, and cumbersome. Which almost entirely defeats the purpose of blockchain technology.
Now, FATF will tell you this move is for “safety.” But here’s the thing: The blockchain industry has been proactive in complying with Know Your Customer and Anti-Money Laundering regulations.
While there have certainly been some scams in the industry, the majority of projects have been professional and proactive in their efforts to maintain compliance with these regulations.
Major cryptocurrency exchanges, trading platforms, and financial institutions that provide the on-ramps to the world of digital assets all confirm the identities of their customers.
Industry trade organizations like the Chamber of Digital Commerce in Washington, D.C., of which I am a member, have been proactive in supporting policy makers in understanding the complexity of blockchain technology and collaborating on policy that’s good for the industry.
What’s ironic is that the majority of blockchain technology is a transparent transaction ledger. You can see the details of every transaction that’s ever happened. Every transaction is visible on the blockchain, and can be traced back to the exchange, and thus the individual, that sent the cryptocurrency.
So why push this new rule at all? I think I know…
The beauty of cryptocurrency is that funds can be rapidly transferred across borders at any time, for almost no cost, in a matter of seconds.
There is no such thing as a bank holiday. No humans in the loop. Just an immutable ledger (a blockchain) that is cryptographically secure. Far better than any bank can provide.
Compare that to sending a wire. You have to go through a bank during business hours… provide documentation… fill out paperwork… and pay $20 or more in fees… just for the bank to basically rubber stamp your wire. International wire transfers typically take days to settle as well.
In other words, transferring funds over blockchain is far superior. And the incumbent financial institutions (the big banks) know this. They’ll spend whatever it takes to lobby government agencies and slow down the progress of blockchain adoption.
I suspect the new FATF rule might have the backing of some very powerful financial entities…
– Jeff Brown
P.S. There’s an easy way to stay up on the insights from the world of tech. I recently launched a free-to-read technology investing newsletter called The Bleeding Edge. In it, I’ll show you the real tech developments that the mainstream media misses or simply doesn’t understand. Subscribe with one click right here.
Why We May Be Headed Towards a Full-Blown Trade War
Economists are growing increasingly pessimistic about the trade war. That’s because the effect of the conflict between the U.S. and China is spreading. Both the technology sector and U.S. GDP have taken blows. And if agreement isn’t reached soon, the impact could be global… and painful…
Some Presidential Hopefuls Turn to Cryptocurrencies
While organizations like the Financial Action Task Force try to slap rules on cryptocurrencies, it doesn’t seem to have affected the technology’s popularity. In fact, some of the 2020 presidential candidates are now accepting your donations… in the form of cryptos.
Gold May Be Down But It’s Never Out
There’s one ratio to pay attention to if you’re looking to buy gold. That’s according to master trader Jeff Clark. And while the gold sector has been “dead money” for two years, this ratio may be flashing a “buy” right now…
Today, dear readers jump to our editor’s defense after one reader gave a provocative suggestion…
I read today’s Diary, as I do each day. And I read the note from a reader suggesting that you should change to “giv[ing] your customers what they want” from “giv[ing] them what you think they should have.” Don’t you dare. If people just want to hear what they want to hear, there are plenty of sources for that garbage. Your readers expect you to give them what you honestly think they should hear.
Your readers, for the most part, are reasonably intelligent persons, and can make decisions for themselves, but only on the basis that they understand you are being straight with them. Life is too short to do otherwise. Keep up the good work.
– Walt H.
Good morning, Bill. Despite the claims of the reader whom you quoted in Tuesday and Wednesday’s Diary, you are giving me what I am looking for. You skewer Democrats and Republicans alike for their foolishness, horrible economic decision-making, and destructive politics.
It is too bad that many readers cannot seem to get past partisan favoritism and see how current policies are nothing but more of the same malarkey that has plagued this country for decades. Politicians and bureaucrats cannot “manage” an economy. Thanks for continuing in your attempts to hammer that point home.
– Al D.
As you surely know, you wouldn’t be you if you pulled punches or developed a case of self-censorship. Your criticisms of The Donald are rather measured and reasonable. If you would care to foam at the mouth, that also would be fine with me. The very fact that you annoy such a wide swath is witness to your effectiveness. Keep up the good work.
– Paul G.
IN CASE YOU MISSED IT…
The California man who predicted the 2008 crash is urging all Americans to brace for a market move that could either destroy your savings… or make you a fortune… if you’re ready.