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What a difference a year makes!

December 15, 2021

In this issue

Bitcoin’s Year

It’s Crazy When Old Relationships Break Down What June 1982 Means

Buying The Most Gold For Your Money at Just 2% Premiums Tax Harvesting: Having Your Cake And Eating It, Too?

Is Shorting Rivian Smart?

The Dangers of Academia, And The Profit Opportunities It Can Create What We Have Instead

Getting A Perspective on The Start of the Last Big Inflation

Effect of Fed “Tapering” on Real Estate

Question From Reader On Inflation EQX In A Trading Range;

Silver and Miner ETF Still Hanging Above Late September Lows Is Japan’s Yen Now The Max Yield Currency?

It’s Nice To See Your Own Views Elsewhere

Irish Central Bank Raises Gold Reserves By 33%

What A Difference A Year Makes!

Longtime readers know that I take time in the last issue of each year (mid-December) to look back on any forecasts I made, normally in the year’s first issue, early January. The years are flying by, and the last couple of them in a kind of fevered blur….and by fevered I don’t only mean fever as in excitement. This Covid is still upending lives all over, and I get the feeling many are getting sick of hearing about it, more than are getting sick of it.

Well, anyway, chalk it up to the recent blur of years, but I pulled up the early January 2020 issue, when it should have been January 2021. I saw my mistake immediately: the following words greeted me:

Gold and Silver Have Best Years For A Decade;

Weber Portfolio Average Up 34.55% In 2020

But as I looked at the title’s end, I’m talking about 2020. How could I do that when the date printed on the bottom right of each issue page said “January 4, 2020”?

Well, the mystery was soon solved. The “2020” date on each page was an editor’s mistake. This was indeed the first issue of

2021: http://www.weberglobal.net/members/Weber20210104-hlyt.pdf.

That I could write about 2020 being such a great year seems particularly bitter one year later. I firmly believe that 2021 has been my very worst year. Maybe the fates were playing with me while I was ‘celebrating’ my 50th anniversary in this business, having started investing in 1971. In general, I’ve had the happy experience of having most every year since being one where I knew what was going on. On my 50th year, I couldn’t say that. My most common position was ‘at sea’. I saw thing after thing which didn’t make sense. Foremost among them was seeing inflationary fears come back stronger than they’ve been since the early 1980s.

Seeing that, I would have expected the 40-year bull market in long term bonds clearly end, and rates rise sharply from their current absurd and artificially low levels. This didn’t happen. The 30-year US government bond started 2021 yielding 1.845%. Things seemed to be developing as I’d expected during the first few weeks: by March 12, the yield had jumped to 2.48% (a steep jump in yield of 34% during 2021’s first six weeks).

But then all went haywire. As I write, this long yield stands at 1.867%, or almost exactly where it started 2021. Given inflationary worries, I would not have expected that. The answer seems to be that with so many other assets falling all of a sudden there has been a rush into the perceived quality of government bonds. But at such low rates, so very much lower than the current rate of inflation. If consumer prices rose 6.8% over the past year, then bonds paying less than 2% is a terrible proposition.

Granted, the year’s lowest yields took place just a few days ago: December 3 saw them at 1.678%, so maybe the 11% jump in the days since then may be the start of another, more realistic trend of upwards yield.

The more widely followed 10 year note did indeed rise in yield over the past year. It began 2021 at the absurdly low 1.071%: the lowest for the year. Hitting that same day peak in March, the 10 year roared to 1.73%, or nearly a 70% rise over those first six weeks. It is now 1.48% as I write, and may be higher by the time you read this.

 

Still, it is strange that with higher inflationary expectations now than back in March, yields should be so much lower now than then.

Maybe the bond market knows what it is doing. While there have been dramatic price rises this year, a certain portion of the blame must come from non-monetary sources. The pent-up Covid demand on the part of people given money by their governments for not working, and then until recently kept at home, plus the supply chain foul-ups, with too many important components like computer chips coming almost entirely from China. With tensions between China and the West up sharply from a year ago, things like the chip shortage may make the West wake up and decide to diversify international supply for key components.

Part of what we’ve seen is a huge drawdown of huge but temporary savings happening nearly all at once. Remember that at the peak of the “sheltering in place” days, US average savings rates soared to 34% as people just didn’t spend much and collected government stimulus checks. These past several months, with people free to travel and spend again, the current savings rate is down to 7%. While still high historically, it is clearly down from the artificially enforced peaks.

Smart and wealthy people have been taking advantage of the still very low borrowing rates. For the first time in years, having a mortgage became a mark of financial acumen. Those who didn’t need the money were able to borrow all they wanted at interest rates of around 2% and invest it, with hopes of getting much more than 2%.

I am one of those who took advantage of these low borrowing rates. I was smart in that much of that money went into real estate just before the world seemed to rush into that area of Florida. But I was far from wise in putting any money into the precious metals world. Coming off of 2020’s 35% average returns, I should have known that the best years are often followed by the worst.

Gold had its highest spot physical price of $1950 on the very first trading day of 2021. From there it was all downhill. From then on it was a dreary year-long series of lower highs ($1900 in late May; $1860 in November). As of my writing, gold, at $1783, is down 5.93% YTD.

Copper rose by 19.97% over the past year: a massive increase in electronic vehicle stations was in large part responsible for that.

At the other extreme, palladium plunged by 24%: being an industrial metal used in computer chips, the supply chain problems hit the metal hard. From 2021 peak to current price, the plunge was a punishing 41%.

Platinum is also used in chips and similar industries that ‘sat out’ 2021, so its price fell, especially from the February highs: from $1300 to $938, a steep 28% loss.

One of the few smart things I did over 2021 was to get out of platinum: I had a bad feeling about its use in industry early on.

And then we come to silver. Just as I called 2020 as “silver’s year to shine”, in 2021 it had its worst year since 2014, the worst in seven years. Silver started the year at a nice $27. We’d give a lot to see that level again at year’s end. High expectations coming off of 2020’s great performance were dashed. I should have realized that even the best investment can have a lousy year coming off a good one. Or two, actually: silver rose 15% in 2019, and 48% over 2020. Thus, I got excited, since silver should now be much higher than the $27 it saw in 2021 with. Next year should see silver resume its normally bullish path.

Yesterday, as I write, silver broke below $22 to make the lows of the year. Today, silver jumped over a percent to make $22.16. Big deal! From the even $27 silver started 2021, it has now lost 17.93% YTD. You’d have to go back to 2014’s 25% loss to ‘best’ that.

Bitcoin’s Year

Bitcoin and the other major cyber currencies had their breakthrough year, with more new customers than ever before and higher prices than ever. However, if you traditionally put those two factors together, it almost always means –for any asset– that people jumped in near the top. With gold, that year was 1975, or maybe 2011.

For silver, it was 1980 or 2011: for both assets, average people began to talk about them casually, and a lot of new money poured in, always near or at the peaks. I fear that for bitcoin, it was the same story this past year.

Mind you, bitcoin is still way up for 2021: it began the year on January 4 at $24,007. By mid-April it had soared to $65,000. I’ll check, but it was around this time that I went out on a limb for my most dramatic forecast, that gold would beat bitcoin from then on. Bitcoin’s second peak came this past November 9 at $68,800.

Update: it was late April’s issue when I bet that gold would be outperforming bitcoin from there on out. So far anyway, this is correct: bitcoin is down nearly 25%, but gold rose slightly from $1738 to $1778, up 2.3%. Thus, so far I can say that this was one of my very few valuable forecasts over 2021. And I have to emphasize “so far”, since bitcoin is very volatile over the very short term.

In retrospect, it was fairly easy to make that forecast that gold would outperform bitcoin starting back in April. All the signs of a fevered buyer class was there: if you questioned bitcoin’s valuation you were sure to get an argument (as if those arguments ever changed

anyone’s mind; they only show that people at peaks in any asset always get far too emotional).

By April of 2021, bitcoin had risen by 19.6 million percent over the past decade. Think about that number. I thought my 5,000% was a lot: my mind has trouble comprehending a figure nearly 20,000,000%, and in one decade!

Mathematically, the chances of anything that has already gone up that much doubling from there (that is, going up another 100% to $130,000 are doable, but fairly small in an environment which saw many go “all in” in bitcoin. To have it go up another 1 million percent from $65,000 in another six months (and thus keeping to the schedule of adding this amount every half year since 2011) was extremely unlikely.

Because the measurements always began with bitcoin’s early January 2011 value of just 30 cents.

Bitcoin Price Chart, 2011 ($) https://www.in2013dollars.com/bitcoin-price-in-2011 This graph shows the conversion rate of 1 Bitcoin to 1 USD at the first of each month.

In short, if your starting point is $0.30, mere doublings (and even thousands of percent) are easy. But if your starting point is $60,000, 100% doublings are obviously harder to achieve. The decade from 2011 to 2021 had been bitcoin’s decade: one of the most impressive actions of any asset anywhere. It was simply that, at some point, the price stopped being a bargain.

I would be happy to see it at bargain levels again. I can’t tell you now what price that would have to be, but I hope to know it when I see it.

So, did I make any forecasts in that early January 2021 issue? Offhand, I don’t see anything, or at least anything clear and correct.

Instead, get a whiff of my unbearably brash confidence here: “Compared to silver, gold turned in another steady profit. It rose 21% over 2019, and in 2020 went up 25.1%. (Its last down year was 2018, when it lost only 1.55%.). If gold can keep rising twentysomething percent a year, holders should be quite pleased. Remember that Warren Buffett is pleased with a consistent 12% annual return. This isn’t always possible: Berkshire Hathaway was up only 2.6% over 2020.”

Oh, I’m so smart, comparing myself to the unfortunate Warren Buffett. By the way, Berkshire Hathaway is up 26.1% YTD (as of 15 December). While there are still almost three weeks left in the year, as I write, I can bet I won’t get anywhere near that gain.

In retrospect, last year there were no warnings that we might be in for a deep cessation of the previous few years’ gains. For that reason alone, I should have suspected I’d have probably the worst year of my career. Believe me, all of the brashness has been knocked out of me. Those unfortunate enough to meet me would see “a toy balloon that is fated soon to pop”. Actually, the pop already happened and I’m in the process of rebuilding a rational confidence that doesn’t slop over into hubris. I’m aiming for the quiet confidence Gregory Peck portrayed in “The Big Country” (my best discovery of classic movies this year).

What can we look forward to in the next year? I’ll give some forecasts next issue, but I point out that since early 2000 an entire stock average has doubled: the NASDAQ.A whole group has come of age believing that stocks can only go up. Can I point out how very rare it is for an entire stock average to rise 100% in less than two years, especially coming into the type of environment we may be subjected to.

What type is that? If the Fed really is scared of inflation, it will tighten money and credit conditions soon. It had another loose 2021: Fed credit has increased by19.6% from one year ago. [Update: as we go to press, Powell has announced that they will cut back on bond buying –and thus on Fed credit growth– if there is more inflation. But they have to be careful: if they cut back too much, inflated asset prices would plunge.]

Put all this together in a political world coming into not only the 2022 mid-terms and the 2024 presidential –where official Washington fears a return of Trump– and I wonder if the Fed will really do anything that would increase his chances. I know this is purely a political calculation, but this Fed has become more of a political creature than any Fed since Arthur Burns gunned up the 1972 economy in an attempt to have Nixon win what he was going to win anyway, except when Burns was done the economy had inflation for years afterwards. Carter got blamed for it, unfairly: we forget that it was Carter who appointed Volcker and supported his moves even though he knew they wouldn’t help his re-election.

The closest thing I got to a forecast in the first 2021 issue was to say that the USD may well be strong over the year. The ‘short USD’ trade was then extremely crowded, and like all crowded trades, was likely to be wrong.

So how did the USD Index do this past year? Pretty good. The year started with the index at 89.34. Late last month saw the Index scrape the 97 level; it is at present 96.04. That’s a 7.45% gain since 2021 began.

The euro fell more than many currencies vs the USD. Starting the year at $1.24, it is now $1.134.

So I limited myself to one outright forecast and it turned out OK. But then, you always have better odds when you take the most-crowded trade and invert it. That’s because a quote I used last year continues to make sense enough to repeat it:

“Don’t forget that the majority of people and the majority of opinions are nearly always wrong about everything, not always, but nearly always, and if you are ever in doubt and can’t make up your mind, and have to make it up, there are long odds in favor of your being right if you take the opposite view from the majority.” Bolitho

Actually, I made another forecast without saying it explicitly when I cut back or deleted stocks in the “Virus Portfolio”. With the new vaccines coming out, I thought the virus would be old news soon. I wish I would have kept PFE, Moderna, Abbot Labs, LLY, Clorox, PG and the rest. One year later, we are much more pessimistic about ever getting rid of Covid.

It’s Crazy When Old Relationships Break Down

The old relationships have not been working. Always in the past, if inflation starts to rear its head after so many decades of quiescence, you could have counted on two things happening. First, long term bond yields would have started to rise. Second, gold, silver and miners would also start big rises.

Granted, the last time inflation snuck up on people, in the 1964 era, was at a time when both gold and silver prices were tightly fixed by the US Government, at $35 for a gold ounce and $1.29 for silver. That year of 1964 was just after the US removed all silver from the coinage: before this it had been at 90% since the US dollar began in 1792. Only the commemorative JFK half-dollars had silver in 1964; afterwards no US common date coin did.

Inflation started to be very much on the minds of many around 1964-66 era. Since gold and silver had price caps, smart investors went into mining stocks.

Look at the Barron’s Gold Mining Index, especially during the action that begins around 1964:

The Index soars thousands of percent from around 35 when the great inflation began until roughly 1300 in the early 1980s, when tough Fed action under Volcker finally ended inflation. It is no coincidence that recent price increases have been the greatest since 1982.

The miners soared so much because until 1975, the citizens of the richest nation on earth were not able to buy gold. Along the way, this miner’s chart showed big plunges. The first one came in 1968, when the newly-freed silver price quickly doubled and then just as quickly halved in value.

The second plunge happened from early 1975 to mid-1976, right after gold became legal for Americans. Much of the world had bought the rumor and then proceeded to sell the fact. Also, after rising thousands of percent in the previous ten years, it was no surprise that miners dropped on average by 66%. (The Index dropped from 600 to 200.) But then, starting in August of 1976, the Index soared from 200 to 1300 at the start of 1980, which were the peaks of gold and silver.

That 1980 high would not be bettered until nearly 30 years had passed. However, in early 2001 it became apparent to some of us that a new bull market was underway. This move took the mining Index from 220 to around 1300 ten years later at the 2011 peak.

After that, we had a huge crash in miners that took the Index from 1300 to 280, for an average fall of nearly 80%. The lows in the miners were reached in late January of 2016, at a time of absolute pessimism.

As the more recently plotted Barron’s Mining Chart shows, the action from the 2016 lows did not really start to catch on fire until November, 2018. The big push started from the March 2020 panic lows, when nearly everyone was afraid to buy anything.

From that 2020 low of 400, the Index soared to 1150 in mid-2021. We’ve had a bit of a correction since then, with the early December reading at 966.

The biggest thing that stares out at you is that the current level of the Barrons Gold Mining Index, at just below 1,000, is 30% lower than January 1980’s peak. And that’s in nominal dollars, not adjusting for inflation. Just think on how much more $1300 could buy in 1980 than how much $1000 buys you today.

Yes, the 1980 peak was far too high: a market at the peak of euphoria. But 32 years later we still have a lot to make up for. A dollar today only buys 29.65% of what it bought in 1980. To reach 1980 levels the BGMI would have to be 4,385 today. No one expects that anytime soon, but in real terms, the Index is 339.51. That’s a far cry from the 1980 peak, and shows you how cheap the gold mining sector is.

Obviously, some miners have done far better than others. Some have spent years doing nothing, and then all of a sudden just explode. For instance, I had come to view Freeport – McMoRan [FCX] as a long term loser: from March of 2008, when it hit $58.59, it spent the next 12 years losing, hitting $6.75 on the last day of 2019. Over the next 17 months FCX soared to $44 last May, or 550%. It has since come back down a bit to $38.50.

I’ve always had trouble viewing FCX as a pure precious metals play, since copper and oil comprise so much of its endeavors. And both of these have had a great couple of years. Thus, it is no wonder that FCX has shined more than the average pure gold or silver miner.

What June 1982 Means

For most investors today, the month of June ,1982 is just ancient history. I only bring this month up since the Consumer Price Index annual increase of 6.8% recently announced was the largest such price inflation since that June of 1982.

But it was a very different era, powered by a very different trend, when you compare the two months. And if you compare them, I think you’ll be very interested.

Let’s see a trend of the long term price inflation data, to see how the recent announcement stands out:

November 2021 CPI: Inflation Rose at Fastest Pace Since 1982 – The New York Times Prices are rising at the fastest clip in nearly 40 years, fresh data released on Friday showed, as supply chain disruptions, rapid consumer demand and rising housing costs fuel an inflationary burst. www.nytimes.com

Today, we are just now becoming aware that inflation can be a problem. In June 1982, we didn’t know it for sure, but looking back, we were just getting out of a 17 year spell of ever rising inflation, and the havoc it wreaked on markets and the economy.

Today, we are at or very near record highs in stocks. People have gotten used to the buy and hold strategy. Stocks have been rising since July of 1982. In fact, the last full month before the bear market in stocks was over –a bear that had started in 1966– that last full month was July of 1982.

The very next month, the Dow would hit a low of 775. Now it is nearly 36,000. But many years before, in early 1966, the Dow stood at 1,000. Now, 1,000 in 1966 meant a lot more value than 1000 would be in the summer of 1982. So with a Dow at 775, in real terms stock averages had fallen by much more than 60% since 1966.

Finally, interest rates. Though we weren’t sure, interest rates in July of 1982 were on their downside, just beginning the huge bond bull market. That prior September 30, 1981, 30 year rates were over 15%. In July of 1982, they were 14.24%.

Now, of course, 30 year yields are below 2%, 1.84% as I write.

And here’s a shocker: Ten Year Treasury yields on June 21, 1982 were 14.76%. Not long ago they had dropped to 1.07%. Rates in mid-1982 were on their way down, with the start of a 40 year bond bull market.

Now, if a new upward cycle of rates starts up, it will be the market that does it. No central bank can control long term interest rates with anything near accuracy.

The last time we had an inflation scare after years of stable prices was around 1964. The stock market began its ‘invisible crash’ in 1966, so called because even if it fell by 20% the high inflation caused the real rate of decline to be much more. Starting in 1964, bond prices began to fall in earnest….a process which would cause bonds to fall by over 60% in real terms.

And it was a process that would finally end by October of 1981. By June of 1982, the market was coming to realize that the hard part of suppressing inflation was over (though the CPI one year increase would be over 6.8%.

So to sum up, the world of June, 1982 was a world that stood on the brink of the greatest stock bull market in history. It was a world that was beginning a 40 year bond bull market, with yields falling nearly every month. It was a world saying goodbye to the long cycle of high inflation and destroyed stock and bond prices which had bedeviled those markets since at least 1966.

Now we are a world saying goodbye to that golden era of higher stock and bond prices, that era which began for stocks in July of 1982, and was already a few months into beginning for bonds.

Back in July of 1982, almost no one wanted to wade into the stock market. Why would they, given that the average stock in real terms had been falling over the past 16 years. No one listened to those few who said to buy stocks. It was all pessimism as far as stocks were concerned.

In other words, one heard all around the worst possible advice. And yet, I remember 1966–I was 11 and listened to my father talking along with such shows as “Wall Street Week”. In 1966, when the invisible bear market began, all you heard was bullishness. After all, stocks had been rising since 1949.

By 1966, when the Dow reached 1,000 for the first time, you heard cheerleaders for the stock market at every turn. Back then, the chosen were called The Nifty Fifty: 50 stocks that could only go up. Why? Mainly because they had kept going up.

But during and after 1966, something strange happened. Stocks would stay at roughly the same price, but inflation caused that price not to be worth what that same amount of money had been a year or two before. Then, in the late 60s and early 70s, prices began to fall. In real terms, due to the increasing inflation, they were worth even less.

Then came January of 1973. For the first time, the Dow rose above 1,000 and kept rising. I think it topped out at around 1053. Even though 1000 in 1973 was worth nothing like 1000 in 1966, people got carried away and poured money in.

Then it happened. From that 1050 in early 1973, in December that next year, the Dow reached 577.60. But inflation over just 1974 was over 11%; in 1973 it wasn’t much different. So even though from top to bottom over 1973 to 1974 was a decline of 43%, because of inflation over just those two years, in real terms the damage was well over 50%. Figure inflation over those two years equaled 20%, that official fall of 43% was actually 20% greater.

In fact, that start of 1975 revealed stocks at bargain levels: P/Es of 6 were common, as were dividend yields of 5-6%. For those few with courage, it was bargain time. However, it would be a tactical trade, lasting about 18 months. By 1977-78 a new general stock market decline, globally, would last until mid-1982.

To sum up, I think we are moving into a bad time, or rather the end of the good times that started in the summer of 1982. Most people are still wildly bullish: they know nothing about the history I’ve outlined here. In June of 1982, the world was about to fully emerge into great stock and bond markets: bull moves that would generally be with us until now. But what happens after “now”?

Buying The Most Gold For Your Money at Just 2% Premiums

The lowest premium way to buy gold is to buy the bars. However, when it comes to coins, which of course are more easily divisible, the long-standing way to buy the most gold for your money has been the Austrian-Hungarian 100 crowns (Corona or Korona). This coin contains 0.9802 ounces, unlike the others. If this does not bother you –and it has never bothered me– you can now buy this coin for a mere 2% premium over melt value if you buy at least 25 of them from Mish International, our favorite dealer. Compare this to the new Eagles from the US Mint, which sell for between 5 and 6%, depending on volume.

The one drawback to the lowest premium 100 Coronas is that there is not a huge supply: Those who own them are usually fiercely devoted to them and only rarely let them go. So if you want them at about the lowest premium I’ve seen in modern years, you’ll have to act rather fast.

Mish is at 1154 University Drive, Menlo Park CA 94025, tel. 650-324-9110

By the way, the rarely seen Bahamian gold coins from the 1970s now have very low premiums. These are much smaller, weighing just 0.29 oz each. The current premium is only 3% over gold melt value on these Gold Flamingo coins, which is very low for coins this small and requiring such a small outlay of cash: at current gold prices these coins go for around $525 each. After decades of study, I’ve noticed that (along with the esteemed Captain Obvious) people seem to enjoy getting gold coins for the Holidays and I’ve never heard of them being regifted, or forgetting the sender. Whether the year is 2021 BC or AD, or any in between, human nature doesn’t change that much. Human fashions clearly do change, but not when it comes to getting even small gold coins. My stupendous brain has even discerned the same pattern with silver coins, but not to the same extent.

To be able to buy gold coins at these prices and at these low premiums is a gift in itself. Not many people realize it, but I’m willing to bet this lack of knowledge will not stick around.

This has been a lousy year for gold. It didn’t suffer the huge sudden price drops and all-around volatility that bitcoin did (that one is down 33% in the past month, but is still up about 100% for the year. For the first time in modern memory, gold’s high came on the first days of 2021 (a $1,960 London fix on January 6) and never went higher than that the entire remainder of the year. February started out at the high for the month, $1860. And March started out at $1750 and ended it at the year’s low of $1685. Thus, both 2021 highs and lows for gold were put in during those first three months, making the remaining nine boring as well as generally bearish. The worst combination, though probably one that could have (should have) been forecast by an analyst knowing that two great years in a row cuts the possibility of a third good year.

The only good things you can say about gold now are that you can buy more of it for the same paper bills than you could a year ago, and that the odds now greatly increase that gold will be higher a year from today. If nothing else, it should all make us far less brash and braggadocios the next time gold soars to new highs. A year like this, for both miners and metals, teaches humility, and that is not without valuable. Only morons will quickly forget what bad times can do. I’ve always hated that phrase, “bragging rights”, believing that no one balanced ever has such a right. They only show themselves as fools enjoying temporary good luck.

This disease can visit itself upon anyone. I’ve kept the many letters written to me by subscribers in 2011. At those times of metals and miners’ highs, people took time to focus on how wonderful my advice had been when in fact the very time that optimism ran so high may have been a hint that the next 10 years would be nothing like that last ten, from 2001 to 2011. I hope we are now near the start of a new decadal trend looking far more like this century’s first one. Silver just broke under $22 very briefly. Let’s hope this will finally be the last time that happens. And that gold never again goes below its 2021 low of $1685.

Or that miners had their lows of the ’20s back on September 29 of 2021: GDXJ’s $37.31 or GDX’s $28.82. Both current prices of these are just a bit higher than these lows: GDX today is $30.48 and GDXJ’s is $40.45.

There is one other trend which I have been noticing about mining stocks and stocks in general. For so many years, it was the case where if general stocks rose, miners fell. And when general stocks fell, miners fell. Then, slowly since October, when the general markets began to stumble, when general stocks fell the miners fell less. Recently I think I am seeing a new trend, that there are days when general stocks fall at least one of the GDX or GDXJ duo will actually be up. Normal market balance usually calls for this reversal of a trend which had been in existence for so long and caused the two ETFs to become so low compared to their 2011 levels than the general Dow or SPY are. I think this trend will continue in 2023: miners will outperform the averages, after underperforming them for so long.

But these if not other forecasts should be in their usual place, next issue.

Tax Harvesting: Having Your Cake And Eating It, Too?

I don’t normally write about taxes, since the specifics usually pertain to one specific country. Even though Americans make up the largest single nation of my readers, the eyes of countless other nations see what I write.

Thus, I’m not going to spend much time talking about “US tax-harvesting”. I only hope your nation has something similar. In short, at the end of the year, if you have a losing position, you can sell that position and get tax advantages. However, this does not come without risk. If that losing asset all of a sudden turns around while you are out of it, you are in trouble.

If you sell, you need to keep it sold for 30 days at a minimum. Selling at this time of the year and keeping out for a month has not always been great for precious metals lately. The correction lows in gold and silver took place in mid-December of 2015, and then, the next January 26, it was like a cannon went off for the miners.

However, there are legal ways to reduce this risk. If you have SLV, for instance and sell in December for the tax loss, you can buy SIVR or PSLV the same day. Selling GDX or GDXJ and buying RING, or selling GLD and buying IAU before the 30 days is up. In that way you can maintain exposure while realizing losses for tax purposes.

This strategy makes sense only if you have paper losses in the past year that are large enough. If you are interested in this and are a client of Weber Global Management, get in touch and tell Mr. Hill what you want to do. Otherwise, contact your manager or your accountant.

Is Shorting Rivian Smart?

A friend of mine recently put $1,000 down on a hybrid pickup truck by new carmaker Rivian. This is the company that dramatically debuted on the stock market last month (November 10) at $100 per share. It quickly soared to a high of $179.47 on the 16th. It fell back to around $120 a few days later, but has stood at that general range ever since.

Motor Trend magazine just named the R1T its “2022 Truck of the Year”. The funny thing is that when he put his order in, he was told to expect delivery next month in 2022. Now he has been told that he’ll have to wait until at least early 2023.

Common sense tells one that this is not the greatest news. You have to question the company’s ability to be around. They’ve had a slew of new orders, so money has flooded in. So why have they dramatically pushed back their initial manufacturing date? Are they in some way that I can’t understand victims of their own success? Or is something more bearish at work? And if the latter, does it make sense to bet against RIVN?

The close-in put option with the strike price of $65 closed today at $0,03 (three cents). It fell by 70% today (December 13):RIVN211217P00065000. But that one is almost about to expire. Puts that expire on January 20 of 2023 with a strike price of $55 are at $9.60. I’ll let options experts weigh the risks on those.

Of course, you can simply short RIVN and hope to buy back later at a much lower price.

I simply through this out as an idea. There just seems to be so much sizzle and not enough steak for me.

The NFT Scam

I’ve been getting some letters from people who feel that they are missing out on something because they don’t know about NFTs. “NFTs are a type of digital asset designed to represent ownership of a unique virtual item, such as a piece of art or rare sports trading cards. Ownership of these items is tracked on the blockchain, the technology behind most cryptocurrencies.”

People ‘mint’ NFTs and this is the sort of thing that’s been going on. One “Nikita Bier”

tweeted this past Monday: “I just minted an NFT today and bid on my own auction and “sold” it to myself for $100,000. Then I re-listed it and some sucker bid $30,000 and they were thrilled to get it for “70% off”. Don’t listen to anyone: NFTs are the future.”

Can you believe this? The guy even puts his scam on twitter and calls it ‘the future”. Yes, the future of scams. People are “minting” NFTs, and then “selling” them to themselves (not with real money of course; everything about this virtual stuff has the whiff of fakeness).

The sales price is enough to make it seem valuable, in this case $100,000. The NFT exchanges tell you the last price it was sold for. Thus, these suckers who “Fear Missing Out” buy them (with real money now) at a steep discount, but still buying something that has no actual value. Moreover, they feel great that they are getting a “70% discount”. I wonder when they find out how valueless these are.

These frauds are not illegal because they are not regulated at all. But these days, if you put “digital”, “virtual reality” , “blockchain” and sprinkle a dollop of FOMO, this is the lovely stew that you come up with.

The Dangers of Academia, And The Profit Opportunities It Can Create

In watching the popular US TV game “Jeopardy”, with the “Professor’s Tournament” I’ve noticed two things, up front and for the first time.

First, they are invariably afraid to venture very much, even in areas where their backgrounds and ‘guts’ tell them that they’d be relatively safe in making big, game-changing bets. I can only imagine that this tendency has been deeply bred into them over the course of their academic lives: don’t make courageous assumptions or play hunches. I suppose this is all right in normal times, but we know that the history of big advances of thought in all kinds of subjects come when people act in the opposite ways. And if you have a society in trouble, nothing less than brilliant new approaches have a chance to fix things. Therefore, we can’t hold our breaths in thinking that big, life-saving ideas will come from universities. They’d be much more likely to come from the research departments of private companies.

Second is the absurd specialization of modern academia. For instance, an expert in 19th century French literature will be at sea on questions of 19th century English literature… even if they are English.

I must have instinctively known about these problems when I decided to turn away from universities a long time ago. It really is too bad, however, in times like these, when bold thinking and ‘system building’ far beyond specialization is so rare. These were the types of people who made the connections not apparent to anyone else and solved thorny problems. We could use them today.

What We Have Instead

I listened in amazement as two economists who should know better demonstrated a lack of understanding about inflation. I don’t want to mention names, but the first was once regarded as an heir to the “Austrian” tradition of Mises, Hayek and Rothbard.

In an article entitled “Why I Remain on Team Transitory” he says the following. Note, this was the idea, advanced for a few minutes, that inflation would be a transitory evil. His article came out at the end of October. By the end of November even the Fed was off ‘the team’, but due to his silence on the matter since then, I can only assume that this economist is still “Team Transitory”.

Here is what he wrote for his Bloomberg column on October 28:

“The case for Team Transitory is not about whether the next pending inflation numbers will come in high or low. Instead it consists of the following two propositions:

The Federal Reserve can control the rate of price inflation.

The Federal Reserve does not want inflation to be very high.

And: When I encounter Team Transitory skeptics, I ask them: “What is it that you understand about the Fed that the broader market does not?” I have yet to receive a compelling answer.” In other words, we can’t have continued high inflation because the Fed can control the rate of price inflation, and it does not want to have it, so it won’t. His question to those who disagree with him is designed not to have any successful answers: it is asking individuals to prove that they know more about inflation than the central bank, and for a person like this economist, such a person cannot exist.

These academic experts use clever language to shade the truth. This is not true so much for the ‘hard’ sciences as it is for the ‘softer’ social sciences. You have to wonder if they can really still be called sciences at all.

These recent arguments remind me of the early 70s when Nixon administration economists and Fed chairs pretty much came out every month with the same arguments. “We can control inflation, and no one wants it to be high”. And yet as the early 70s passed into the late 70s inflation just got higher and higher. In fact, the Fed has much more control over the money supply, and if it prints or creates too much money, then prices are going to be higher than they otherwise would be. That a respected economist writing for Bloomberg does not seem to understand this fact is extremely depressing. How is the average person supposed to understand inflation if ‘experts’ are not able to?

Finally, to the question he puts to everyone who disagrees with him on his view that inflation will be only transitory; a question he has yet to find a satisfactory answer to: “What is it that you understand about the Fed that the broader market does not?” Again, he seems not to know history. The Fed was not worried about inflation all during the late 1960s and early 1970s: but smart investors were. They bought miners along with gold and silver and were ultimately richly rewarded. Sometimes the ‘broader market’, which can also be described as a herd of sheep, simply is operating on false premises. It doesn’t happen all the time, but when it

does, you can take a position opposed to the feelings and thoughts of the broad market and then simply wait to be proven right. We may be seeing this happening again these days: Gold, silver and the miners are all so low that it is clear the markets do not consider inflation to be a coming danger. This indeed happened 50 years ago, and I think it is happening again now.

I mentioned two economists earlier. The second one was a Biden economist on MSNBC trying to tell people that the recent bursts of inflation are not a terrible thing. One statement stood out for its foolishness: “Inflation is not the economy.” I would have answered: “as well to say ‘cancer is not the human body’. Sometimes it can be controlled and go into remission, but the greater danger is that it attacks the entire economy”.

Since these two came maybe the most shocking. Nobel winner Paul Krugman tweeted this: “Is there any good reason to believe that inflation hits low-income households especially hard?” Words fail me when I read this. He’s old enough to remember the 1970s. Of course, he spent that decade not in the real world, but on the academic campus. So maybe he never saw old ladies on fixed incomes with ever-dwindling buying power standing in market aisles focused on what they’d have to give up: when I recall the memories, the choices all looked very necessary to me. In the 70s, ladies in their late 60s and 70s were born around 1900. After a few years of the last golden rays of the gold standards, they saw people losing their heads in the 20s, and then hit their 30s, with children, smack during the Great Depression. Then they knew men who died in World War 2 and entered their 50s–an old age back then–having lived pretty tough lives. Now as they aged out, to their 80s they faced large cuts in their standards of living from inflation.

As the saying went among that generation, “we picked a poor time to be born”.

But surprisingly, our most famous American economist never sees or apparently thinks about any of this. It really is hard to believe that he thinks inflation is so benign. I wonder if politics plays any role in this. Would he be so nonchalant about inflation’s effects on poorer people if Trump were still president?

So these are our thought leaders and economists that have the ear of the powerful. I can only repeat that it is only a matter of time before the traditional inflation hedges of gold, silver and miners will be shown to once again have great value. If so many of the ‘great’ minds of our time think inflation is not harmful, it is hard to see inflation being “Transitory”. Instead, it is only in its early stages.

My view is that the central dilemma of modern central banking is the stark choice of “Inflate Or Die”. If they become worried about inflation, they can reduce it by essentially raising interest rates and killing economic growth. As long as it is easier to inflate, then that is what they will do. Too much inflation has already gone on to cause asset prices to soar. To stop inflation would be to stop those bull markets. The beneficiaries of those asset price increases are the rich and the powerful. Those who get hurt the most by inflation are the poor and those who don’t invest in the hot asset sectors. Which group do you think central banks will protect the most?

Getting A Perspective on The Start of the Last Big Inflation

While most people too young to remember assume the last big inflation started in the 1970s, in fact it happened in the early 1960s, around 1964.

I was interested to read an article from a 1959 magazine entitled “How Much Money Do You Want?” The following example says it all: A Suburban Doctor [I’m assuming suburban NYC] dreams of doubling his annual income–to $30,000. By the end of the sixties, people were accustoming themselves to getting an income they had only dreamed of ten years earlier. The strange thing was that the newly increased income didn’t go any farther: the price of everything had increased tremendously. I think we are at the 1964 phase of inflation now.

At the same time, a four-story house on Manhattan’s Upper East Side was bought by Andy Warhol for $60,000 (he paid half down). This was about his annual salary back then, but even though he was the best paid commercial artist in New York at the time, he longed to create fine art. He got an idea while eating his daily Campbell’s tomato soup can….

Question From Reader On Inflation

I hope life is treating you well either in Nicaragua or Florida. I am writing today to make a suggestion for content in one of your next issues. How about explaining the mechanics of inflation, how it unfolds over time? For example, at the beginning of the cycle, real estate owners are happy because prices of real estate rise, same may apply to equity investors as the stock market rises… until consumer prices go up, then salaries, then interest rates, then mortgages become much more expensive, then… Better understanding the inflation cycle would probably help your more anxious investors relativize and stay calm.

Happy holidays to you, your family and to Briton!

CW: the problem is that each cycle was different. In the 60s and 70s, real estate really didn’t do much, nor did stocks or bonds. All those happened in the 80s, as high interest rates for real estate started to come down, which also helped bond and stocks.

You can trace it back thru all Western inflations for 200 years… not always the same sector in not the same order. Also, the sectors can change during the course of the inflation: from the mid-60s to 1980, the gold miners started out the best, but at times advance too far and had corrections. But one can say that those who latch on earliest to the sectors that end up benefiting the most, but I suppose that’s rather obvious.

Effect of Fed “Tapering” on Real Estate

From a reader:

“What are your thoughts on house prices after Fed tapering and rate hikes in 2022 and possibly, more rate hikes in 2023?”

CW : First of all, I’ll believe ‘tapering’ when I see it. I’ve been hearing this word for months, but the Fed’s balance sheet is still 20% higher than it was one year ago.

And as for rate hikes, I’ll also believe them when I see them. If the 30 year yield, which the Fed doesn’t control except to buy them in huge amounts (and if they continue to do, then how can they be ‘tapering’.

A person quite close to me bought a house on one of those islands in Biscayne Bay in Miami/Miami Beach. She was lucky to have bought in late 2020, just before the herd rushed in from NY and environs. Realtors told her today that the house could sell at almost double the price she paid. Nearly double in just over a year? That’s crazy.

Now, not everyplace is on a lovely island in Miami. That city has the hottest of all possible property markets. Rentals there are not to be had at any but crazy prices.

But how long can this go on? There are a lot of places where real estate has been on fire. Brit Hill says that in Utah the building boom now exceeds what there was before the 2008 crash, which barely touched Utah at all. There’s just so much more debt involved than before.

So this question is hard. Certainly, if the Fed is serious about stopping their bond buying (or ‘tapering’ it off enough) the whole house of cards could collapse in a giant deflation. But do they want to be responsible for this? For them, it’s either Inflate or Die.

My answer depends on location. If your area has seen a huge new surge in new housing supply, that area could be more vulnerable than those which have seen no new building. But other, unique things could come into play. Maybe that new building can be supported with new industries and jobs that can manage to be immune from any general real estate crash, the way Salt Lake City was in 2008.

I don’t feel comfortable in giving a blanket answer that is divorced from a deep look at the specific location.

And again, I’ll believe any tapering when I finally see it. Some locations have soared so much that they risk falling even if tapering is small. And maybe even a small decline in Fed bond buying on the open market (a minor tapering) will be enough to cause prices of homes to fall. There are cases where even a slight decline in the rate of increase is all it takes for trouble to start, and by trouble I mean the withdrawal symptoms that alcoholics and inflated economies go through to get better again.

So focus on the location you are referring to, and then keep trying to see if the Fed is actually tapering, and if so, to what extent. And then keep an eye on the interest rates of the 30 year bond to see if that starts to rise, as it surely will if the Fed stops or cuts back on buying it.

The Fed today announced it was tapering the amount of bonds bought each month from $15 billion a month to $30 billion. That means they say the will buy $360 billion fewer bonds than they would otherwise be buying. But what would they otherwise be buying? Who knows? But we are supposed to believe that whatever amount they add to Fed Credit next year, that amount will be $360 billion less than what it would otherwise be? That’s a bit confusing, but then I’m not very bright.

EQX In A Trading Range;

Silver and Miner ETF Still Hanging Above Late September Lows

Well, after going from $5.95 in late August to $8.51 in mid-November, EQX is back below book value: currently 0.83 under. It is at $6.30, so it is still above the lows of the year. I advise buying more at this level for your non-taxable money, and hold it until it goes to $8 again. You should already own it for the long term, but EQX never stays much below book value for long.

Silver can once again be had for under $22. This has in the past also proven temporary. GDX and GDXJ are still hanging above their September lows. I won’t sell if they break, but I will hope that it will be the last bull throwing in the towel. I wonder how many bulls are still out there: can’t be many.

Is Japan’s Yen Now The Max Yield Currency?

Of course, in a world with negative real interest rates, any talk of a new Max Yield currency is ridiculous. And yet for many years, this last issue of each year had to update Max Yield and name the next year’s Max currency.

The chart below shows how Japan’s consumer price ‘core’ readings, meaning taking out fuel and food, both of which Japanese are reputed to use. Thus, I’m not sure, but I think I’d rather see the full consumer price index. For the US, it would be 6.8% rather than the 4.5% shown here. But Japan’s consumer price measure is the only one that shows a deflation, meaning that its yen would buy more this year than last, again excluding fuel and food. So I don’t know how valuable this measure it.

Let’s say that Japan’s economy has not been as inflationary as the US or Western Europe. When you get zero percent yield on your currency, can that currency rank as a Max Yield money?

Only if the deflation is so marked that even getting no yield, the currency deposit still is worth more than your own money.

And yet as the chart below shows, the yen has fallen against the USD over 2021.

From 0.975 USD per yen as the year started, to 0.8815 at the end, less USD to buy a yen means that the USD rose nearly 10% vs the yen. As for the FXY, the yen ETF fell from 90.82 to 82.61, for a fall of just over 9%.

The yen has usually been declining vs the USD over the past several years. The last big move up for the yen was from 2007 to 2012, when it soared from 82 to 1.32, or a jump of 61%.

Then from 2012 to mid-2015 the yen plunged from 1.32 to .81, a 39% fall. Then we saw a big one-year gain from 2015 to mid-2016: a 25% jump. Since 2016 the yen has never been as high as it was then. From late 2016 to today, late 2021, the past five years has seen a yen decline of nearly 12%. And in just the past year, it has fallen 9%.

So I’m quite neutral on the yen. Maybe it is due for another rise. And price inflation has clearly been less than in the US. But I’m old-fashioned: I go by comparing yield. And that worked fine as long as there was yield. But in a zero-yield world what do you go by? Which economy is deflating faster? If prices are rising by 7%, and the yield paid to you is 1%, then you are enjoying a negative yield of 6%.

I can’t advise Americans to hold too much cash in USD, even though that dollar has risen over all the major currencies this past year: the pound from $1.37 to $1.322, the euro from $1.23 to $1.13, the Canadian dollar, after some large swings, ends 2021 at the same 0.78 cent level that it began. The Aussie dollar slipped from 0.78 to 0.71; the Kiwi from 0.73 to 0.6736. The traditionally strongest paper currency, the Swiss franc, fell as well vs the USD, from $1.14 to $1.0867.

I haven’t been able to find a currency that rose against the USD this past year, except if you include bitcoin, which I know many people do. Its current decline would have to fall from the current $46,460 to about $23,000 in the next two weeks in order to mark a decline. And I wouldn’t bet on bitcoin being that weak. And while I want to have some cash to take advantage of bargains, I can’t advise people to hold too much of it. I hold more USD than I do any other currency, but to me it still is the best of a very bad bunch. The fact that gold and silver fell vs the USD only makes sense when you see that the prior two years saw big increases in both those metals vs USD.

It could be that the USD will fall next year, but unlike last year when I had a bullish opinion, this time I have none at all. My chosen currencies are gold and silver. It is possible that gold did not lose so much in terms of other currencies as it did in terms of USD. Still, I not only desire, I expect them to rise clearly from today’s levels even in USD terms, even if the USD is again the strongest national currency.

If gold, silver, and the miners continue to act in an overall bearish pattern next year, I will truly come to believe that something is wrong. That maybe those who are so sure of conspiracies in dire times, but are silent about them in bullish times might possibly be on to something. But I still am not convinced when I see them strangely silent when prices go where they want them to. Is there only a conspiracy when prices go against your wishes?

It’s Nice To See Your Own Views Elsewhere

I’ve gotten so accustomed to seeing views the complete opposite from mine that it is almost jarring to read the December issue of The Aden Forecast and find myself so much in agreement. I’m going to quote just a small part of it here, and leave off their famous charts, which they make themselves and have long been the envy of many.

Gold is the traditional inflation hedge. And today inflation jumped up to a 39 year high. So yes, gold is lagging and it’s been a bit disappointing, but we believe it’s just a matter of time until it catches up and overpowers the other safe havens. METALS SECTOR: Best value today Keep in mind, unlike other markets, gold and the other metals related markets are at rock bottom, bargain prices. Plus, the fundamentals are excellent for the metals, including the huge spending increases, monetary policy, big inflation, negative interest rates, greater demand, more central bank buying and so on. So even though it’s been taking its time to get going, gold and the gold universe are still positioned to head much higher as we embark on the new year. And we’re confident your patience will be well rewarded. [bold added by CW]

“If you’re holding a large stock portfolio, we would advise lightening up on stocks at this time, and especially if the Dow Industrials declines below 32700, thereby confirming the bear. That would be further reinforced if the other stock indexes turn bearish too. This would happen if they decline and stay below the following levels Dow Transportations 14100, Nasdaq 13700, S&P500 4080, Russell2000 2125. IF A BEAR TAKES HOLD… Should this occur, it’ll be a bad sign for the economy, and the outlook for the new variant. Keep in mind, the stock market is a leader. It looks ahead by about 3-6 months. So if stocks do turn bearish, it would coincide with bear markets of the past (which we’ve shown many times). In each case, it also coincided with a financial crisis, like the dot. com collapse in 2000, for instance, and the real estate crash in 2008. So let’s hope for the best. KEEP AN EYE ON… For now, it’s also interesting to note that the Dow Jones Transportations and copper have been moving together for quite a while. The reason this is interesting is because you’ll recall that copper is an economic indicator. For now, it’s telling us the economy is firm. But if the Transports decline and take copper with them, this would be yet another sign of caution for the U.S. economy. And s ince the global stock markets tend to generally move together, it would be a red flag for the global economy and the

The Weber Global Opportunities Report

world stock markets as well. So there’s a lot riding on what happens next and we urge you to keep in touch. We’re literally at a crossroad.

”PRECIOUS METALS BULL IN EARLY STAGE

We believe these metals and miner bull markets are still in their earlier stages and the explosive phase is still to come in the years ahead. And if you have doubts about this, just consider all of the debt and deficit spending that has happened in recent years, along with all of the money that’s been created. It’s totally unprecedented. It’s never happened before in human history and gold has not yet reflected on the effects of this out of sight monetary policy, not only in the U.S. but in other countries too. But it will, and when it does, the prices of both gold and silver will soar to unheard of levels. Just remember… these things take time and we need to be patient. That can be hard at times but we’re looking out to the long-term. These long-term trends always prove to be the most profitable, so stay with it and we believe you’ll be glad you did.

Gold Shares Have Been Rising For Six Years

As for the miners, once the HUI Gold Bugs index rises and stays above 280 (its 65 week moving average), it’ll be set to head higher.”

CW : to me the entire December issue of The Aden Forecast has valuable things. If you would like a copy of it, contact info@adenforecast.com. They offer a three month trial for $65, click here if you’re interested https://adenforecast.com/product/package-aden-1/.

Irish Central Bank Raises Gold Reserves By 33%

I’ve been keeping track of central bank purchases of gold. Strangely, I’m not hearing of any of them selling. Instead, they are taking advantage of these low prices to add more, in Ireland’s case 33% more:

They Always Have To Come Up With Some Reason

This just flashed over my newswire: “Gold poised for fourth weekly fall as investors hone in on US inflation data.”

The words all make sense, but taken together, what does this actually mean? Over the past four to five weeks inflation has been more of a preoccupation than usual. So, we are asked to believe, it is thus perfectly natural to have gold weak. Inflation worries are now blamed for gold falling? I’m old enough to remember that fears of inflation served to vault the prices of miners, or silver, or gold. It had been thus back to at least the Roman times, and even before that. And certainly since. I have the feeling that had gold gone up these past few weeks, the exact same ‘reason’ would have been trotted out.

The truth is that those headline writers almost never know what they are talking about. They are just good at giving people what they want to hear, that is to say, some reason. How many times have I been asked, upon saying that stocks or gold, or any investment had gone up or down that day or week, “Why?” is the question most asked.

At some point, people began asking this question every day. Maybe they simply copied the news reports, which always had to come up with some reason, however absurd.

There are certainly some few days where actual news results in activity in some price. But those days are very few. Most of the time; indeed, almost all of the time there is only one answer: When a price falls, it is because there are more sellers than buyers. When a price rises, it’s more buyers than sellers. The great Richard Russell taught me this decades ago, and I’ve never forgotten it.

A 150 Year-Old Election That Sounds Very Modern

As the polls closed in the 1876 US presidential election, no one would know who won until a few days before Inauguration Day (then March 4). It got ugly. In several states there were two sets of ‘winning’ electors, one of each party. There were serious threats to march armed men on Washington DC. And in late 1876, people knew that a new civil war was very possible; the old one had ended just a decade before and emotions were running high.

That all this was avoided, and that a peaceful transition of power was affected, was all due to one man. In the final months of his second term Ulysses Grant was a clear ‘lame duck’. Normally such a man sees power and influence slip from him daily.

But suddenly Grant was at the center of the crisis, a rare man who nearly all sides trusted, mainly because he had nothing more to gain, or prove. A Republican, he had distanced himself from Hayes, the nominee.

The little-known story of how Grant stepped forward to save the nation one last time has never been told in a popular history. But Bret Baier, a Fox newsman with a reputation for objectivity few can match today has written a new book called “To Rescue the Republic: Ulysses S. Grant, the Fragile Union, and the Crisis of 1876“.

It is not a totally happy story. The main losers to the compromise that kept the peace were the former slaves, which saw their newly won freedom in the South quickly vanish and the new term “Jim Crow” win for nearly another century. With Grant no longer there to protect them, lynching began to grow, along with the start of a great migration to the perceived safety of northern cities.

What does emerge from the book is the story of how evolved Grant was, and from a very young age, about the evils of slavery.

One of the most absurd victims of the destruction of statues in the summer of 2020 was the one of Grant in San Francisco’s Golden Gate Park. The charge against him? He was a slaveholder. But the whole story is this: Grant grew up in an abolitionist home. However, he fell in love with the daughter of a Missouri slaveholder. Grant’s family was so angry that they boycotted the wedding. As a wedding present, Grant’s new father-in-law gave Grant a slave. Grant was a man who hated confrontation, especially against the man who was essentially supporting him, and Grant’s children.

For Grant was a failure in everything he tried after he left the Army in 1854. Things had gotten so bad that for money he cut wood on the property his father-in-law had also given him, and then hauling it to downtown St Louis, selling it on the street corner. An old Army acquaintance, one William Tecumseh Sherman, was shocked to see Grant doing this, still wearing his one frayed old coat from the Army days. “What are you doing, Grant?” “Fighting poverty”.

Now, about the slave. In the midst of all this, Grant quietly took the man down to the main courthouse and formally freed him. Seeing the ragged Grant doing this, the official felt he had

to remind Grant that he could sell the man and get around $1,000 for him. To compare, Grant would have counted it a great year had he made $300.

I wonder how many of the mob tearing down Grant’s statue would have been willing to make three times their annual income by doing something they could talk themselves into being a good act to support their families.

So yes, technically Grant was a slaveholder. I suppose he could have done what is now known as “virtue signaling” and ostentatiously refused the gift. But that was not Grant. He did not want to antagonize the only support in his family’s life. This was true even as the two sets of parents wrote letters denouncing the other pair. Grant’s correspondence is almost entire free of hatred or bitter feelings of any sort. In any case, as soon as he could, he quietly freed his slave. The late 1850s was a poisonous time, where countless homes in border states like Missouri (half slave, have free) were the scenes of bitter argument at a time the nation was slowly coming apart.

Soon after his slave was freed, Grant’s family lost everything they had in Missouri and he had to swallow his pride and do something he said he would never do: go back and ask his father for any job. It was as a retail cashier in that Galena Illinois tannery (leather goods) when news that Civil War began reached the soon-to-be 40-year-old Grant, who looked over 50 and wore the expression of continual failure and loser etched deep on his face, and working for his younger brother.

He marched –or rather slouched– off to war and after a slow start (the regular Army had forgotten him) into a storied career of being the most successful commander in US military history. He never lost a battle; most people don’t realize that George Washington lost most of his. Grant finally found his calling: people who knew him marveled that he looked at least ten years younger at the end of the war than right before it.

Compare this photo, taken of a 49-year-old new president, and contrast it those during last years of failure a decade earlier. His photo then showed a lost man prematurely aged. He had indeed aged backwards during the war. But knowing humiliation intimately for so long, he never forgot what it felt like, and never like to humiliate anyone else.

President Ulysses S. Grant, 1870

Photo by Mathew Brady

After restoring the Union by war in 1865, a decade later he rescued it again as a lame duck president who got as many sides together as was possible in early 1877 to avoid another insurrection.

To me it is a story that cannot be told often enough, and Baier does a great job in telling it. Bret Baier is one of the very rare honest and objective newsmen around (as opposed to the commentators who now no longer pretend to be any other than advocates). And reading about Grant, you wonder if there would be any man so influential and widely respected for honesty to keep the US from falling apart if a new crisis happened today.

You read his words from the last days of his terms, when he was able to speak about what would bring on the next civil war ‘in the near future’ you know what he meant: a new civil war was closer in late 1876 than nearly anyone today realizes:

“If we are to have another contest in the near future of our national existence, I predict that the dividing line will not be Mason’s and Dixon’s, but between patriotism and intelligence on one side, and superstition, ambition, and ignorance on the other. Now in this centennial year of our national existence, I believe it a good time to begin the work of strengthening the foundation of the house commenced by our patriotic forefathers one hundred years ago, at Concord and Lexington.”

I wish everyone a “Happier New Year.”

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An update to The Weber Global Opportunities Report is now available on the website.

​ Update From Yesterday’s Issue

​​As we were going to press, Jerome Powell announced that he was cutting back on bond buying and said that there would be 3 rate hikes next year.

Judging from today’s early market action, the market does not believe that “the punch will not be pulled from the party”. Thus, there was no real change in asset direction. In sum, no one believes that he will really tighten.

From a reader, who asked a very important about this yesterday:

“Dear Chris, what are your thoughts on house prices after Fed tapering and rate hikes in 2022 and possibly, more rate hikes in 2023?”

CW: First of all, I’ll believe ‘tapering’ when I see it. I’ve been hearing this word for months, but the Fed’s balance sheet is still 20% higher than it was one year ago.

And as for rate hikes, I’ll also believe them when I see them. If the 30 year yield, which the Fed doesn’t control except to buy them in huge amounts (and if they continue to do, then how can they be ‘tapering’.

A person quite close to me bought a house on one of those islands in Biscayne Bay in Miami/Miami Beach. She was lucky to have bought in late 2020, just before the herd rushed in from NY and environs. Realtors told her today that the house could sell at almost double the price she paid. Nearly double in just over a year? That’s crazy.

Now, not everyplace is on a lovely island in Miami. That city has the hottest of all possible property markets. Rentals there are not to be had at any but crazy prices.

But how long can this go on? There are a lot of places where real estate has been on fire. Brit Hill says that in Utah the building boom now exceeds what there was before the 2008 crash, which barely touched Utah at all. There’s just so much more debt involved than before.

So this question is hard. Certainly, if the Fed is serious about stopping their bond buying (or ‘tapering’ it off enough) the whole house of cards could collapse in a giant deflation. But do they want to be responsible for this? For them, it’s either Inflate or Die.

My answer depends on location. If your area has seen a huge new surge in new housing supply, that area could be more vulnerable than those which have seen no new building. But other, unique things could come into play. Maybe that new building can be supported with new industries and jobs that can manage to be immune from any general real estate crash, the way Salt Lake City was in 2008.

I don’t feel comfortable in giving a blanket answer that is divorced from a deep look at the specific location.

And again, I’ll believe any tapering when I finally see it. Some locations have soared so much that they risk falling even if tapering is small. And maybe even a small decline in Fed bond buying on the open market (a minor tapering) will be enough to cause prices of homes to fall. There are cases where even a slight decline in the rate of increase is all it takes for trouble to start, and by trouble, I mean the withdrawal symptoms that alcoholics and inflated economies go through to get better again.

So focus on the location you are referring to, and then keep trying to see if the Fed is actually tapering, and if so, to what extent. And then keep on eye on the interest rates of the 30 year bond to see if that starts to rise, as it surely will if the Fed stops or cuts back on buying it.

The market smells that this might be all talk. The headlines said: “The Fed today announced it was tapering the amount of bonds bought each month from $15 billion a month to $30 billion.”

That means they say the will buy $360 billion fewer bonds than they would otherwise be buying. But what would they otherwise be buying? Who knows? But we are supposed to believe that whatever amount they add to Fed Credit next year, that amount will be $360 billion less than what it would otherwise be? That’s a bit confusing, but then I’m not always very bright.

UPDATE ON PRECIOUS METALS: I am very optimistic about the course of this group. I’m going out on another limb and say that we’ll look back and say that mid-December saw the lows. Maybe there is something wrong with me, but I couldn’t be more bullish on the sector.

Are the NASDAQ ETF People Scraping The Barrel?

From Brit Hill:

I just saw my first ever add for Invesco’s QQQ on Youtube yesterday.

What does this mean? Maybe they have so much money that they can advertise anywhere. But most youtube watchers are between 15 and 35:

https://www.omnicoreagency.com/youtube-statistics/

​These are the people who only believe that stocks can go up.

So the Invesco people may be thinking that this has now become their last untouched group. Older investors have seen the recent falls in the big Nasdaq players. So maybe they think to advertise to the generic masses on youtube. Rich people are saturated, let’s go after the smaller ones now…

Sincerely,

The Weber Global Opportunities Report