NFTRH 931 excerpt
Excerpted from this week’s edition of Notes From the Rabbit Hole:
Macro & Data
I had a meeting with a young man from Taiwan on Friday morning. He is a representative of MacroMicro (based in Taiwan) who wanted to know my views on the premium service and pitch me on new tiers of service in the offing. He offered me a trial, but I barely use the trove of info in my “Max” subscription, so I want to work on rectifying that first.
It’s been a tough couple years, personally, with a health issue and apartment living. But now I am starting to settle in nicely (pending just a few more details). This means I have a real office again where I can be comfortable, do some videos, a podcast or two if I ever get motivated in that regard, and widen the scope of analytical sources NFTRH can draw from.
Especially if the world (ex-US) truly is setting up to out-perform the US per the 2003-2007 cycle blueprint. MacroMicro is heavily geared for a global view. Which I like. ACWX/SPY, which in my opinion is just waiting for Trump’s dollar-debasement, is poised to carry the day.
On this chart the ramp up in US stocks into the 2000 top was the dot.com and associated internet bubbles. What do you suppose the current bubble may be driven by? Much like the internet, AI is here to stay and it is transformative, but this chart – given the hyper money supply – calls “bubble”.
So it’s little wonder why “if” the market is going to get a another bull phase we are only looking to/through the mid-term elections. Looking at a chart like this makes me think that sure, we may be able to profit well in the gold mining sector in 2027, but that I’d also anticipate adding more routine shorting/bear positioning to the analytical mix as well.
One crash out of a bubble can be a career maker. I just wish I were better at catching them. But I will try. I keep in mind how lucky I was to catch silver, buying puts the day before the big crack. That will never happen again, but I dream of waiting for such signs of froth, shorting/buying puts somewhere near a euphoria-driven top, and then hanging on for dear life. Okay, back to reality.
The chart above becomes more dangerous when you consider the M2 level today’s bubble is leveraging compared to the 2000 level. This truly is “inflate or die” and again in that regard, Trump is simply being honest, battering ram style, while in my imagination if not reality, Bessent and his dead-eye blandness pulls the wool over our eyes.
Trump wants a weak dollar because Trump wants the “debasement trade” that so many people were talking about recently until Uncle Buck shut them up for a minute after Jackson Hole.
Gold and the Macro
If stocks are leveraged to money supply, itself leveraged to debt creation, what is gold leveraged to? Nothing. It’s a joke. Derided and ridiculed by a large percentage of financial professionals. It pays no income. Warren Buffett thinks it’s stupid.
No, the go-go assets are where it’s at. Crypto got new life as the Trump family made its billions and drew attention back to the space. Now the touts are back on the job presenting it as something more than speculation. Like, a store of value (throws up in mouth).
Bitcoin’s value (IMO): bilking old people and those who pleasure themselves in front of their computers out of their savings, allowing nefarious transactions on the dark web and leaving digital footprints everywhere it goes. Yeah, I wanna git me summa dat.
As you can see, with the exception of the 20 year stretch from 1980 to 2000 it’s been a race to the bottom for the notes of debt of major economies in relation to gold’s retained purchasing power. Remember, gold is not cool/sexy/promotional like Bitcoin. Gold is not a holder of liabilities and obligations like official currencies.
Gold is a scale. It weighs the macro and if the excessively unhealthy end of the scale gets heavier gold’s assigned price is marked up. Simple. A few charts down you will see that markup in action.
The 20 year stretch noted above was kicked off by Reaganomics and the “trickle-down effect” that was actually the beginning of the era of debt-for-GDP.
This chart shows once again that Reaganomics and all the ‘nomics that followed were just the manufacture of currency compromising debt in service to economic growth. Economy grows, debt grows more. Period.
And for that 20 years who would have been the wiser? The Continuum flashed disinflation after Reaganomics began in 1980. During the Continuum, nobody was overly concerned about inflation. Certainly not the Bond Vigilantes.
Yet, per the chart above on the big trend they were leveraging that bond market good will to create economic growth. It was inflation under cover, covert. Perfect if you’re a politician promoting agenda, which they all did. Both aisles. They ate the nations’ seed corn because the bond market allowed them to.
So maybe it is no coincidence that soon after the Continuum above was busted to the upside (into a new age of inflationary bond market signaling) gold got in gear and finally caught up to the debt-rigged game.
The Case For Gold
Do we even need to question it? Many do. I do not.
In my mind, people who think that the heretofore system of debt for growth is just fine tend to hate gold. Why? Well look at it. It’s like the kid in the front row of class telling on the other kids who are passing notes, cheating on tests and shooting spitballs around the room. Those scumbags sure don’t like our honest little Goody 2-Shoes.
I once wrote an article using that gold tattle tale imagery. But I can’t find it. It must have been on the old website on which I accidentally blew up the database. But I did find this in my search. It’s an article from 2010 as published by Financial Sense. It shows how long I’d been pounding the message of the Continuum and thus how profound I found it to be when the Continuum failed to continue in 2022.
I am blown away reading this 16 year old stuff. It’s like, THAT’S how I’ve spent so much of my life?? Well, somebody’s got to do it.
It’s a much more difficult task to “monetize confidence” nowadays. I feel as though Bessent needed to be meticulous in planning this operation to play out “just right” (ref. Goldilocks). Then in barged Trump.
So that makes it even more difficult to try to figure out what’s directly ahead, Goldilocks or the “debasement trade” back on. But on a slightly bigger picture, USD is fuck baked, along with all that other nasty paper that is worth less than worthless. Worthless implies what it says, no worth. Less than worthless implies compounding $Trillions in associated and increasing debt, with no end in sight.
So as the Continuum and its implied confidence was broken in secular fashion, so too appears gold’s revaluation in secular fashion. It’s no coincidence that gold made that big catch-up move to the debt-for-GDP Ponzi scheme at the same time the Continuum busted upward and lost its secular trend of disinflationary signaling.
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