As the “markets” streak to new all-time highs day after day I can’t help but be reminded of 1999 when the same thing was happening day after day. Everyone was POSITIVE it WAS different THIS time. Even Warren Buffett was chided for being “left behind” and not understanding the new paradigm.

All was FANTASTIC- until it was exposed for what it was- the greatest bubble of all time- until now that is. Even 1999 looks tame compared to the ridiculous valuations that we see today. Debts and margin are far higher, corporate debts are at levels never seen before, and possibly, the most important point is that the central banks and governments have likely spent all of their ammo pretending that all was “fixed” after the last meltdown. Nothing was “fixed”. The “markets” seized up because of over-indebtedness in 2008. Since then, we have more than doubled (officially) that debt. My opinion is that there is a LOT of debt being held outside of the official balance sheets that we are not allowed to see.

Because of these actions, the usual remedies for what ails us right now (less “money printing” and higher rates) are out of the question unless we want to see an immediate collapse in asset prices and a peek at what the economy is REALLY like.

It appears to me that all that is left to find out is how long it will take for the world to recognize that the Fed is not going to taper, they are not going to stop providing unlimited liquidity and that inflation is likely just getting started. The illusion must be kept at all costs as the Fed has bought 55% of all treasuries issued since February of 2020 and have probably provided funds for next to nothing for their buddies at the banks to buy most of the rest. This is called “Monetizing the debt” and has been a precursor to a debt and currency collapse every time it has been undertaken in history.

Of course, we are not alone. All central banks are “printing and buying” and that only exacerbates our problems here. Natural gas prices in Europe, lack of coal supply in China and governments demanding supplies at “any cost” does not bode well for future inflation as most of what we buy is imported. Not only are production costs rising meaningfully but the cost of shipping and moving goods is going up exponentially. As a matter of fact, Goldman Sachs has reported that Chinese Producer prices are rising at their fastest pace in 30 years. Higher costs to produce = higher costs to consume.

While our “leaders” bemoan higher costs- particularly for energy- those same “leaders” are talking about shutting down more American pipelines and looking to install people like Saule Omarova as Comptroller of the Currency. Her brightest idea is to put fossil fuel companies out of business altogether. Basically, they want to let prices skyrocket and destroy tens of thousands of decent paying jobs.

A quote from Ms. Omarova: “Here, what I am thinking about is primarily the coal industry and oil and gas industry. A lot of the smaller players in that industry are probably going to go bankrupt in short order, at least we want them to go bankrupt if we want climate change”. She would create a “National Investment Authority” which would then determine who gets bailed out and who dies. Does that sound like free market capitalism to ANYONE? That is flat out fascism or communism.   Either way, the state is in control rather than the free markets which served us well until the past 30 years or so.

I have asked many times “What is the value of a promise that cannot be kept?” Process these numbers:

US Citizens           333,000,000

Taxpayers            126,000,000   (207 Million people are riding In the wagon rather than pulling it.)

 

Admitted National Debt (Likely the tip of a DEEP Iceberg) $29,000,000,000,000.00

Admitted Current Fiscal Deficit is nearly $3 TRILLION. Using GAAP likely closer to 7 TRILLION.

You could tax everyone at 100% and not come close to paying this off.

The sad part is that many companies, cities and states are also in different stages of disarray. Many personal balance sheets are also a calamity away from imploding also.

Looking at these numbers and looking at the “solutions” being put forward not only by our “leaders” but indeed most “leaders” around the world, I believe that the attribute of gold and silver that will be most keenly desired in the near future is the feature that it is an asset rather than a liability and does not count on ANY counterparty to repay.

In addition, while the politicians are doing their best to destroy our current energy infrastructure it appears that prices will be MUCH higher for fossil fuels in the short term and longer-term uranium and silver should be bid up nicely. The reason for uranium is that it is the ONLY fuel available today that can lead the world to a green future without ongoing power interruptions. As for silver, it is used in most electronics and is a major component in solar cells. It has also been used as money many times throughout history.

Knowing this, I believe it is imperative that investors have at least some exposure to this area. If for no other reason than to “not fight the Fed”. To most, that means party like its 1999 until the punchbowl is pulled. To me, it means watch what they (Central Banks and the major banks that own them) are doing and do the same.

Of course, they are buying bonds of all types to keep rates artificially low. They are buying up companies and junk bonds, they are also depressing the price of gold and silver as they BUY in record amounts for the last 4 years. Don’t you wish YOU could manipulate prices lower as YOU buy? While we can’t do that we certainly can follow their lead an take advantage of these assets that are on unprecedented SALE- by design.

I also think of the great Wayne Gretzky. He wasn’t the biggest or fastest player in the NHL but many would argue that he was the greatest of all time. The reason he gave was that you always go to where the puck is going to be- not where it is. Investments are similar. If you can project where certain assets are and where they actually should be and you can get ahead of a trend you will likely have a major advantage going forward. The downside- 90% of the people will think you are nuts because the “crowd” doesn’t see it that way.

Markets go up- until they don’t.

The crowd is always right- until they are proven wrong (over and over again). But it all seems plausible as the bubble is expanding- as it is now. I wonder what the pin will be this time?

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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