black_son_of_gray wrote: ↑Sat Dec 01, 2018 4:21 pmBrent Johnson calls this the "Dollar Milkshake Theory"
Just released on Real Vision, but recorded in May 2018:black_son_of_gray wrote: ↑Sat Dec 01, 2018 4:21 pmThe Everything Bubble still hasn't popped because there is still air being blown into it. The US stock market is still receiving economic stimulus - it's just coming from other countries. Brent Johnson calls this the "Dollar Milkshake Theory": as other central banks stimulate their economies, the US sucks up their milkshake. We drink it up! (Full explanation here - Most relevant part starts about ~13 min mark)
....
As the US raises rates, it sucks in capital from around the world, pushing US asset prices higher, which allows the Fed to keep raising, which makes a benign circle within the United States, and a terrifying circle outside the United States, which ends very very badly, but not yet. -Quoted from first minute here.
https://m.youtube.com/watch?v=vDr3lRZ01Zo
Johnson was also on MacroVoices back in December.
https://www.macrovoices.com/
Erik Townsend agrees with Johnson on what Townsend calls the “dollar-gold pairs trade.”
Grant Williams was also on MacroVoices recently and, as in the video linked by @bsog above, disagrees. He says the dollar just cannot get that strong without it being “stamped out.” A dollar that strong would bring the world to a crashing halt.
The most recent interview on MacroVoices was with Alex Gurevich, who, like Grant Williams, says he does not care if gold is at $1200 or $1400 in the short term. Gurevich gives an eventual price target of $3000-4000 for gold. Williams says, as usual, that he does not care about the money price of gold, which is also what Tony Deden would say. And I think that is the right way of looking at it. We shouldn’t be thinking as our baseline unit of account a green piece of paper with dreams written on them that is just a promise from someone/something that we know is a liar who does not keep their promises.
Johnson mentioned in @bsog’s video that there is a huge fractional reserve setup in gold on COMEX, just as there is $90 trillion of worldwide dollar-denominated debt for $4 trillion monetary base. Which should not only give you pause about paper gold....but even bank desposits, money market accounts, short term treasury funds, and perhaps everything except physical banknotes themselves.
As Johnson says in the Real Vision video, it would only take 1% of the world’s financial assets to move into gold, and the price would double. And looking at what the ratios are of gold reserves/gold prices to global debt, the current price of gold is historically low.
These ratios are explained at length by Daniel Oliver of Myrmikan Capital, who I discovered after he was mentioned by David Collum in his most recent Year in Review:
http://www.myrmikan.com/port/
It is also worth wondering to what degree people will be able to believe central banks anymore, as they lose their credibility. Farmland sounds like a good bet, where it’s value as crisis hedge does not make it already fully priced or overpriced. A victory garden, solar panels, assault rifles, yes, all of those things too. It’s not mutually exclusive. But I can’t buy $20,000 worth of peanut butter. The 5,000+ year history of gold and silver as money is extremely comforting.
In his most recent memo, Howard Marks was sh*tting his pants regarding populism:
https://www.oaktreecapital.com/docs/def ... eality.pdf
As was Seth Klarman:
https://www.mauldineconomics.com/frontl ... source=ska
All this with a Cold War 2.0 with China looming.
It will be interesting to see what the hoi polloi would think about QE 4 5 6 7 8 9 going to support the luxury condo prices. Add 300 million firearms, a screaming desperate and ethnically heterogeneous population that is almost completely ignorant, and 2 political parties ready to stoke the flames of racial animus and garbage identity politics, things should get.....fun. Maybe they will just roll over as the Fed keyboards unlimited fun tickets, allowing Lloyd Blankfein to do the Lord’s work. Or maybe not.
And while I have scorn for the AOC gimme-gimme types, it was Wall Street and the Republican/Democrat mafia-style government and their democratization of exploded Wall Street bets that brought us to this point. Ray Dalio, get out of my face with this “beautiful deleveraging” nonsense. You talk of “radical honesty.” Stop trying to make the horrifying sound like something innocuous.
And while I cannot necessarily say I am “hoping” for a big upward move in the money price of gold, given all the....you know, chaos, suffering, and death, I would likely become more attractive to the opposite sex as my rival suitors are no longer able to finance their romantic overtures with credit card debt. “Come into my bomb shelter, baby.”
A gentleman at work was in the process of buying his 10th rental property. I said he was getting diminishing returns and should buy gold instead. He asked wtf was he supposed to do with it. I said, “Well, you could also buy a silo instead, and fill it with grain.” We both laughed maniacally.
If you really hate precious metals that much, I am here to say, Warren Buffett and Jack Bogle have brainwashed you into wrongthink, and they have done you a disservice in that regard. Like most in league with Wall Street, they did not stand to profit when someone bought gold and buried it in their backyard. And yet in the last 20 years, burying pet rocks in your backyard outperformed the S&P 500.
Grant Williams and Brent Johnson said they had a 35-40% allocation to physical precious metals. Doug Casey inferred it was something higher for him. Tony Deden’s fund was at 35% according to his last disclosure. Mister Imperceptible is at 46% pet rocks, with 15% in mining equities. No need to pussyfoot around this.
What to do with remaining funds?
I also discovered Christopher Cole thru MacroVoices. Fascinating stuff:
https://www.artemiscm.com/
I’m less inclined to buy volatility derivatives, but the idea that the vol trade will be the dominant one of the next 10 years may lead me to an attempt at a market neutral call and put strategy, with a nice cash buffer. Stocks and bonds are so overvalued/manipulated that I cannot buy them without feeling like a sucker. But you cannot just short the market. Hussman has been getting pulverized for 10 years doing that. David Einhorn has been getting his ass handed to him. We have to be more flexible than that.
Mark Spitznagel on defense, long-term compounding, the failure of Modern Portfolio Theory, and the need to “jiu-jitsu the Fed”:
https://m.youtube.com/watch?v=PnqnGYQyzHg&t=1s
Spitznagel back on Bloomberg a few days ago. He was asked whether “progressive liberalism would undo capitalism.” Wall Street is afraid of the mess they have created:
https://m.youtube.com/watch?v=xiBjBkXBHLw
What the HBPP taught me was the value of uncorrelated returns. But Harry Browne died in 2006, and would be very dubious now about a 50% allocation to government paper. He probably would be aghast at the level of government intervention. Ben Graham cannot help us now.
Intrinsic Value and Volatility
Source: Artemis Capital Management
Page 10
This past summer the ever-wise Jim Grant of Grant’s Interest Rate Observer asked for my thoughts on the low volatility regime. In the middle of my explanation on the short volatility trade, out of nowhere, Jim says, “What does any of this have to do with intrinsic value?” I was floored... I honestly didn’t know how to answer his question. The truth... the short volatility trade is about the absence of value. In a bull market, when investors can’t find value in traditional assets, they must manufacture yield through financial engineering. In a mania the system begins to devour its own tail.
“Regardless of how it is measured volatility reflects the difference between the world as we imagine it to be and the world that actually exists....We will only prosper if we relentlessly search for nothing but the truth, otherwise the truth will find us through volatility.”
-Christopher Cole
https://m.youtube.com/watch?v=RGUSRGYz7_g
My Kimber K6S, Glock30, and Mossberg 590 are close at hand. Looking to “diversify my holdings” with a rifle soon. We live in interesting times.
Have a great evening!