Introducing an article from Dan Denning on financial matters.

Introducing an article from Dan Denning – Twitter: @RumRebellionAus

First of all, my thoughts on this article from Twitter: @RumRebellionAus

Written – Mon, 11 Jan 2021 at 11:21

I would like to say that I have become increasingly aware of the lack of accountability in the financial market, political arena, and the business and political world in general. It seems that society is set up for “Dog eat Dog” and the survival of the fittest, with the agenda to make money at all costs and too bad who gets duped in the process. All I can say is Buyers beware! 

You might want to consider if you are tied up in crypto currency and Bitcoins to get out while you have real money to convert to and use.

‘The writing is on the wall’- the bubble will burst one day, and it may be sooner rather than later!

All currency is on thin ice at present. The banking system in Australia is already geared up so that it can take your funds from bank accounts over $250,000. [if there is a financial national crisis]

Property it seems is the only thing with real value. It is tangible, it can be used, worked, developed, lived in, bought and sold as a reasonably safe investment and it appreciates subject to demand. It is no wonder the operators and instigators of ‘The Great Reset’ want to take it off us.

Some might find the following email message from Twitter: @RumRebellionAus interesting.

Forwarded ……….

The market cap is now greater than the entire GDP of Saudi Arabia.

Tesla and bitcoin are two sides of the same coin. They are competing for the job of ‘poster boy’ for this crack-up boom phase of the market. They are not alone, of course. The Dow Jones Industrials are over 31,000. The S&P made a new all-time high last week as well. A rising liquidity tide — and a fear of inflation — is lifting all the stock market boats.

But now I need to remind you of what Japanese Admiral Isoroku Yamamoto said after the Empire of Japan bombed the US naval base at Pearl Harbor on 7 December 1941. He reportedly said, ‘I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve’. The American aircraft carriers were at sea during the bombing and thus survived it. That would come back to haunt Japan at the Battle of Midway.

Did the sleeping giant of the American bond market finally wake up last week? And are the ‘bond vigilantes’ who operate in it now filled with a terrible resolve to push interest rates higher? And might rising US rates — the yield on the 10-year note has doubled from July of last year to Friday’s close — be the pin that pricks the bubble in everything?

Those are a lot of unanswered questions. But the price action in the bond market last week was telling. Real 10-year yields, adjusted for inflation, are still negative. But nominal yields are on the rise. And inflation expectations are on the rise too. This is what I call a ‘pre-incident indicator’ that inflation may be the biggest threat in financial markets in 2021.

This is something   …   discussed last year while I was locked away on the 25th floor of a Melbourne high rise. We surmised that the fiscal and monetary response to COVID-19 would unleash a wall of money on financial markets. It would be inflationary. Were we right?

In 2020, the inflation was almost entirely confined to financial markets. And it made sense in a way. Certain digital businesses like Amazon actually did MORE business during worldwide lockdowns. The move to work from home, learn from home, eat at home, exercise at home and trade stocks at home was wildly bullish for a handful of firms in the position to profit. And now?

US President-elect Joe Biden is all set to immediately spend trillions more (in money the Americans don’t have. …  That’s on top of the $27 trillion the US government already owes. And it doesn’t include a new batch of $2,000 stimulus cheques Washington wants to send out post-haste, to keep the barbarians outside the Capitol gates.

The upshot of all this is that inflation is set to move out of financial markets and into the real economy. When you start sending stimulus cheques once a quarter, why not once a month? Or once a week? Why not do it via a central bank digital currency, delivered via an app on your phone (as the Communists in China have been trialling for the last six months)?

Students of economics will recognise this for what it is: a mashup of helicopter money and voodoo economics. It’s money printing and deficit spending, completely untethered from any monetary anchor keeping the currency sound. It’s no wonder bitcoin is on a tear. Which brings me back to the point I made at the beginning of today’s letter.

Bitcoin, like stocks to a lesser degree, is a lifeboat. It appears to be a way out of the legacy financial system. More importantly, it appears to be the best of a new kind of digital asset class. As money, it’s not controlled by a committee or a government. Its supply can’t increase beyond its programmed limits. And it’s now being more widely adopted by more traditional financial institutions and investors, which explains the massive squeeze up so far in 2021.

Has bitcoin replaced gold as the soundest form of money? This is a question  ….   (to which) the short answer, …  is ‘maybe’.

Gold’s been around for a long time. It has a long track record as a store of value AND a medium of exchange. Bitcoin is the kid on the block, 21st century money for a 21st century world. But how it holds its value in a crisis has yet to be seen. It’s too early to say.

We may find out soon enough. The ‘crisis’ is hard to define now. But there’s no doubt it’s upon us. Negative real interest rates have driven up financial asset prices to unfathomable heights. It’s enough to give a bear vertigo and an impending sense of doom.

But there’s also a crisis at the very heart of the US’ political institutions. The Democrat-controlled Congress  … commence impeachment proceedings against outgoing President Donald Trump. The goal, it appears, is to disqualify Trump from running for office again in 2024. But the process threatens to inflame political tensions which are already running high.

Which is the sleeping giant then? Is it the bond market? Or is it Trump himself? Will he go gently into that goodnight at noon on 21 January? It’s only … days away. But a lot can happen in …(a few) days. Buckle up.

And remember, whatever you think is going to happen will probably happen a lot faster than you think. … That is, make sure you have a strategy for taking profits or cutting losses if the price action starts moving the other way. When it does, it will be swift and terrible.

In the meantime, here’s one other thing I try to remember at times like this: you control nothing but your own actions and reactions. Everything else — government policy, the opinions of others, the climate, the sun, the stars and the moon — they are beyond your control. Don’t worry about them.

Worry about what you CAN do. And then make sure you do it. It’s the best way to look after yourself and your family when so many other things seem to be flying apart at the seams. And it’s the only thing you can control anyway.


Dan Denning, 

Editor, The Rum Rebellion

PS: Gold has done well with the decline in real rates. When real rates are negative, there is no comparative disadvantage to holding gold (and paying to store it) over government bonds. But (the) move up in the 10-year note coincided with a big move down in Gold and Silver!

That’s Interesting!

… Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Calculating Your Future Returns: The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in this report are forecasts and may not be a reliable indicator of future results. Any potential gains in this letter do not include taxes, brokerage commissions, or associated fees. Please seek independent financial advice regarding your particular situation. Investments in foreign companies involve risk and may not be suitable for all investors. Specifically, changes in the rates of exchange between currencies may cause a divergence between your nominal gain and your currency-converted gain, making it possible to lose money once your total return is adjusted for currency.
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All advice is general advice and has not considered anyone’s circumstances.

Article by Yvonne Gentle

Posted on January 19, 2021 in Uncategorized

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