The Modern Day Gold Rush Is Here!

August 19, 2020 

* Currencies & Metals both rally VS the dollar on Tuesday

* Warren Buffett dips his toe in the Gold Market… 

Good day… And a Wonderful Wednesday to you!  Another beautiful day here in the Midwest yesterday, and today is supposed to be even better! So I’ve got that going for me today, eh?  I start today with a loss of thoughts, words, and whatever it takes to write a daily letter… It’s all just a big blank screen for me this morning… So, I hope I have think of something quickly, before you dear reader decide to hit “delete”….  Steely Dan greets me this morning with their song; Deacon Blues… I love this song, and pretty much anything Donald Fagin and the late Walter Becker did….  

Well, the currencies and metals rallied VS the dollar another day on Tuesday. This marks two consecutive days of gains for Gold, that brought it back over the $2,000 figure…  On Monday this week I wrote, about taking One step forward, and two steps back, and so it is with Gold that I await the boys in the band to come play their instruments once again, for it’s time for a step back. Wouldn’t it be nice we could wake up when the morning is new, and not have to worry about price manipulators?  This way when fundamentals said Gold should be sold, that would be when we would see it drop in price, but at least we would have fair warning!  

There was an event that took place late last week that I’ve been remiss in not mentioning, not that I haven’t wanted to, but other things go in the way… The event I’m talking about was the fact that Warren Buffett, who has referred to Gold, and a barbaric relic, bought a large load of Gold futures….  

Now, this is the first time Buffett’s Berkshire group have dipped their toes into the metals market…. Oh, about 30 years ago, they bought a HUGE position in Silver….   But sold it after not holding it very long….  I just thought that it was significant that the “Oracle of Omaha” that has dissed the idea of diversification, and owning Gold, has tried to under the cover of darkness, dip his toe into the the Gold market…. 

Doesn’t that just take the cake?  And doesn’t it just tell you in so many words that diversification of an investment portfolio, using currencies and metals makes abundant sense?  I’m just saying….

I had a few dear readers send me notes yesterday, and question my call that a new weak dollar trend began in July….  I can assure I didn’t nilly willy make that call yesterday…. The sentiment toward the U.S. dollar with all the currency printing going on has made currency traders double think about owning dollars… Is inflation around the corner?  That’s what usually follows all this currency printing, and let me remind you that rising inflation is the Fed Head’s collective wish, which is one of the reasons they keep interests rates on the verge of going negative…. 

The other reason and it’s one that outweighs all other reasons for interest rates being near zero, and that is that for every piece of currency that’s printed, that’s one more dollar of debt, and with all debt it has to be financed with the sales of Treasuries….  A few years ago, I used to follow the TIC data which gave us the numbers on how much foreigner’s bought of the Treasuries that were issued the previous month. But then the TIC data went away, and it’s very difficult to find these days, and there’s no wonder why, because China has basically not shown up at the Treasury auctions….  That means the primary casino banks have to step up and buy what’s not sold in the auction…. But these days, those rules have changed, and instead of the primary casino banks buying up what’s not sold, the Fed steps in a buys….  The Fed will not admit to this, but basically, they are monetizing the debt…. 

And I think that is a big fly in the ointment of the currency traders that want to own dollars….

And all the while Gold & Silver are bought as alternatives to owning dollars, for Gold & its cheaper brother, Silver, have never gone to zero folks…. Therefore as I’ve always said, Gold is a store of wealth….  In my daily journey through Twitter & Parler, I found a quote on Gold that I think says it all so with no further beating around the bush…  This is from Grant Williams of Things That Make You Go Hmmm…. Fame, so let’s listen to what Grant has to say….

“Gold has stood the test of time, provide a stable store of wealth to mankind for millennia. And as we look to an increasingly uncertain future, with fiat currencies across the globe under siege from rising debt levels, it remains the only money guaranteed to survive.” – Grant Williams

Nothing new here for you dear reader, but just like I found with kids through the years, you can preach to them every day about something, but when some other adult says it, the light goes on and the kid gets it….  So, I thought for those of you not on board with owning physical Gold, that hearing it from Grant Williams might do the trick!

I know that I’ve said this many times in the past, but just to regurgitate it once more…. While Gold gets all the headlines, Silver silently outperforms its big brother percentage wise….  In the last bull market for the metals, Silver outperformed Gold on a percentage basis 7 of the 10 years….   So, if $2,000 Gold seems a bit pricey for you…. There’s always $28 Silver…. 

Well, in the foreign Data Cupboards today, we have some CPI data that’ll print in both the Eurozone and Canada…  But there’s nothing there that’s going to stick out like a man with a hatchet in his forehead, so we’ll just move along for these are not the droids we’re looking for!

So, basically, if the Dollar Index would suddenly rise today for no apparent reason, we’ll know the Plunge Protection Team is behind the wheel of the truck that carries a load of long dollar buys to the market…  The drivers of this truck will run right over you, if you are in their way, so always beware that we could see 1-day “corrections”…. wink, wink… 

In the U.S. Data Cupboard, it’s about a dry as the Sahara…. But we will see the Fed’s meeting minutes from their last meeting this afternoon… And therefore I don’t believe we’ll see any major moves in both the currencies & metals today, until we get what the Fed Heads had to say behind closed doors 6 weeks ago…  If anything I would expect that the Fed Heads will have discussed allowing inflation to run a bit….  And that could be the springboard to more dollar selling…

To recap… The currencies and metals both had good days rallying VS the dollar on Tuesday. One wonders what we’ll see today, given what we know about the powers that be and their bag-0-tricks….  The euro has climbed above the 1.19 figure, and all other currencies fall in behind the offset currency to the dollar.  Other than that news, Chuck was at a loss as to what to talk about today… 

For What It’s Worth….  In my never ending attempt to show you dear readers that the U.S. economy is in shambles and not coming back soon I have today’s FWIW article that came to me via longtime reader Bob. It’s about the amount of auto loans that U.S. consumers now hold…. And it can be found here:

Or, here’s your snippet: “America is literally driving itself into debt. US households now carry a stunning $1.34 trillion in automotive debt. What is troubling about this is the amount of driving taking place has plunged courtesy of Covid-19 and much of our economy is built around driving. People take the morning and evening commute, and this was seen as simply normal – but now with many working from home, that may not be the case. Also, the notion of buying cars (a depreciating asset) every few years is just a bad financial move. The buying would not be so bad but the level of debt being taken on to finance a car purchase is. Not too long ago a three- or four-year term on an auto loan was standard. Now we have loans of six to seven years! You also have billions of dollars going to subprime borrowers and in this climate, a large number of Americans are financially on the edge. Where do we go from here when it comes to auto debt?

The state of auto loan financing

It is astonishing how much debt is used to finance car purchases. When you look at companies like Tesla, a large portion of purchases come with financing. And you also have this for every other traditional car maker like Ford, Chevy, Honda, Toyota, and many other makers. At the end of the day, many Americans are only able to purchase a car by going into significant debt.

The numbers are clear:

There is $1.34 trillion in auto loans outstanding and part of this is now in subprime auto loans. If we go back to 2011 we had $710 billion in auto loans. In nine years auto debt has grown by 88%. That is astonishing given that household incomes have been largely stagnant over that period.

And if you look at some of the ads, you can see how easy it is to finance a purchase:

$0 down payment, $0 security deposit, $0 first month’s payment. And this is for a lease! So you don’t even get to keep the car after the lease is over. People are now fully conditioned to think that it is normal to go into deep debt to purchase a car. They are also programmed to think that you should be buying or leasing a new car every three to five years. Why? Cars can last a lot longer with basic maintenance but our debt-based system has conditioned people to always be buying and thinking utilizing heavy debt to purchase a depreciating asset is totally fine.”

Chuck again….   7, 8 year loans on autos that won’t be worth a dime when that time comes around, just doesn’t seem to be a smart financial move to me… But then…. I think differently about finances than most people… I use logic!

You know… I get it…. Cars have ALWAYS been the sort of status symbol for Americans…  But in this day of economic shutdown, 30 Million people looking for jobs, New York City basically becoming a ghost town,  and a lack of savings by Americans, does it really makes sense to have a bright shiny new Beemer sitting inside your garage, as you work from home?  

Now… if it were a goat…. (A GTO) of yesteryear, that would be a different story… Nah… just kidding… .But that was always my dream car…  a few years ago, I attended a classic car show in Jupiter, Fla. and there was a GTO, you have no idea how difficult it was for me not to walk up to the guy and say, “I’ll buy this from you, how much will it cost?”  

Market   prices 8/19/20: American Style: A$ .7263, kiwi .6641, C$ .7605, euro 1.1933, sterling 1.3120, Swiss $1.1034, European Style: rand 17.1888, krone 8.8359, SEK 8.6395, forint 292.97,   zloty 3.6817,   koruna 21.8775, RUB 73.27, yen 105.33, sing 1.3639, HKD 7.7498, INR 74.73, China 6.9232, peso 22.10, BRL 5.4883,  Dollar Index 92.33,  Oil $42.56,   10-year .64%, Silver $27.44, Platinum $978.00, Palladium $2,225.00, and Gold… $2,006.00

That’s it for today…  And I have nothing going on tomorrow, so I’ll be back tomorrow for our Tub Thumpin’ Thursday!  I’ve told you all before about the pictures that I have on the board that faces me at my writing desk. One picture always makes me smile…  Many years ago, the local journal newspaper sent out a photographer on a snow day… And they captured a picture of me playing in the snow with Dawn 7, and Andrew 5, and then put in the paper!  I was pretty thin back in those days, and had hair!  I think of how life was back in those days… We barely had two nickels to rub together, but we had lots of fun… OK, now back to 2020, the year we would all like to see end tomorrow…  My good friend Rick will get a kick out this song…. Crowded House takes us to the finish line today with their song: Don’t Dream It’s Over….   I guess they’re telling me to not dream 2020 is over just yet! HAHAHAHA!  I hope you have a Wonderful Wednesday, and please Be Good To Yourself! 

Chuck Butler