We posted this article over the weekend… and they call us the crazies? Let’s look at this from a very broad standpoint because if anything displays where we are as a world, financial and otherwise is captured right here!
So, a bond offering with “the worst ever” covenants is three times oversubscribed causing a repricing with less discount and lower yield than originally offered? Is this important? Is it company or industry specific? Or, is it an illustration of something far larger and systemic? I would argue the problem is definitely systemic and certainly a symptom of “mob madness”.
Forget about company or industry specific because as it stands now, over $9 trillion worth of debt all over the world sits with negative yields! We won’t go over the topic of negative interest rates again (as we have several times in the past), because even a 6 year old understands it makes no sense and is untenable from a systemic standpoint. Suffice it to say, a snake can never eat its own tail and live to talk about it.
Over the years, I believe I’ve written on this topic three or four times but now it is even more relevant. “What” would you sell your gold for? The question is not “why” because the answer to this could be far ranging and differs by individual. You might want or even need to sell gold for any number of reasons such as living expenses, to pay off a debt(s), for medical reasons, or any number of other circumstances.
Before getting to the topic of “what”, as you can imagine, we get all sorts of questions that don’t really make sense once you break the question down. For instance, I can’t tell you how many times people have asked “but if the system goes down, how can I sell my gold if no one has money to buy it from me? Who will buy it”? When this becomes the case and markets are either in disaster mode or even closed (and gold is priced at much higher levels in dollar or any other currency terms), unless you are selling your metal for something you absolutely need…what would be the purpose of your sale? To lock in your “profit”? Really?
Think this one through from the eyes of a Venezuelan? Gold has skyrocketed (as has everything else) in Bolivar terms, would it make sense for a Venezuelan to sell his metal and accept Bolivars in return? What happens the next day or day after that when the Bolivar devalues even more? What happens when the Bolivar goes to zero? The reality is this, gold IS money itself whereas Bolivars are simply a currency. Currencies are a medium of exchange, NOT a store of value. History is full of similar examples.
I wrote “Crash Alert!” on Dec. 12, a little over a month ago. Please re read this so we don’t have to go over the nuts and bolts here. Since then, we watched equity markets all over the world take a dive into year end where most finished in bear market territory. As the new year started, we have seen equity markets bounce to relieve the vast oversold conditions. I believe the “dead cat” bounce phase has now run its course and the selling will resume shortly and into an outright panic mode.
Over the last month we have learned more regarding the real economies, very little of it good. The most important areas of weakness are trade and real estate volume/price weakness worldwide. Both of these are in confirmed downtrends and both are lynchpins to the financial system. Trade, because it provides “cash flow”, and real estate not only because it is a global asset of “wealth” but more importantly because real estate is COLLATERAL. This last point is very important because “collateral” to the banking (financial) system is now smaller than it was 6+ months ago when it was already too thin. Remember, higher rates had already directly affected bonds (collateral), now real estate is an obvious symptom of weakness and collateral shrinkage.
A late Christmas present for those desiring the rule of law!
Interesting that the most looked up word via Webster’s this year was “justice”. Please watch the second video if you desire the rule of law and would like a late Christmas present! We will know very shortly whether true or not but it looks like “treason” or maybe even “pedophilia” will be Webster’s word of the year for 2019?