How do you keep the party going after the last call? It is simple. You extend the last call. Extending the last call is precisely what is occurring in economies around the world today as we enter the final phase of what will be the most significant boom-bust cycle the world has ever experienced.
U.S. consumer prices climbed by 6.8% in November (#Inflation), marking the fastest pace in 40 years. The official report for November showed an increase of 0.8% versus October (9.6% annualized) and 6.8% over the past twelve months.
More and more Canadians aren’t buying the Bay Street fantasy in Canada, no matter how heavily it is promoted. And yet, the stock market (with a few exceptions as of late) continues to largely shrug off inflation concerns while keeping gold and silver prices in check.
The lack of response by gold and silver and the lack of a falling stock market may be happening partly because central planners, including the banks and the politicians, are very conscious that it must continue to appear as though the party is still ongoing.
Take stock buybacks as an example.
Collectively, it bears pointing out (strongly concentrated at the top) that companies in the S&P 500 Index bought back a record amount of their company shares valued at $234.5 in Q3 2021, according to preliminary estimates by S&P Dow Jones Indices. It also bears mentioning that this has now blown away the previous record of $223 billion in Q4 2018. But I firmly believe we will see more of this as they report Q4 data. Buybacks in Q4 could set a new record of $236 billion-plus. What does it all mean?
It means very little in the way of positives. However, it comes on the heels of a proposed tax of 1% on share buybacks in the “Build Back Better” bill that passed the U.S. House on November 19 and is now hung up in the U.S. Senate, where the tax hasn’t generated the wave of opposition that other measures in the bill have.
Do you understand this point? Politicians and central planners want to give the impression the world’s largest economy is continuing to grow, and they use the stock market highs to do so in headlines. So smart! Get the companies to understand they will be penalized a further 1% for buying their shares which prompts said companies, such as Microsoft, Dell, and others, to buy back their shares, leaving the public with the impression that the economy is running full steam ahead right? I mean, why else would stock prices continue to go higher. And the best part is that we are watching insider executives sell their stock at the same time their companies are buying back.
Mixed signals? Yes. Should you be watching more closely? Yes. The narrative is mixed on purpose, instead of focusing on the wonderous colossal all-time worst call of “transitory” inflation by our central bank here in Canada and even worse by Powell in the U.S.
Many well-known investors have been busy sounding the alarm. From Robert Kiyosaki (Rich Dad) to the non-vocal actions of Elon Musk, Jeff Bezos, and Warren Buffet, each selling shares of their own company or in the case of Buffet halting buying of stock by Berkshire Hathaway, there is a dirty underbelly of deceit and abuse of the public’s trust with this shell game being played with our future wealth.
Our central bankers here in Canada, as well as our Federal Liberals (“Justinflation”), are underestimating inflation risks as both the pseudo-U.S. and Canadian economic recovery from last year’s pandemic shock accelerates price increases for everything from energy and food to consumer items and forces us to become once again reliant on debt, credit and our plastic cards.
And where is this getting us? Yes, the top 10% of earners are faring better as a result. The rest of us are not on an equally quantified apples-to-apples basis as we are experiencing the loss of purchasing power, which means your wealth strategy must now be capable of generating at a bare minimum 8%-10% plus per year to stay on even ground.
There is evidence that many people have tried to do better, that is for sure. I mean, the “soup du-jour” in terms of investment frenzies has been relatively focused on cryptocurrencies, pot stocks and real estate the last few years.
The pot stock craze has come and gone. The cryptocurrency space is a tortuous mess of undesirables. Cryptocurrencies are hard to manage, and, in many cases, cryptocurrencies and crypto exchanges have significant liquidity restrictions. Cryptos also have major volatility. Last week Bitcoin had a single-day loss of 17%, and in 2017 Bitcoin also had a single-day loss of 25%.
But “hold on,” you say. What about real estate? If you haven’t already participated, you’re out. If you don’t already own, you’re done. If you are venturing into the real estate market as an investment, you better have deep pockets, my friends. Because you are investing in a marketplace with the biggest gap between real estate prices and incomes in the G7. It means we are also amongst the top 2 most overvalued real estate markets in the G20. Ouch! But if it serves you to know, I participated in that real estate market and was drawn to it for many reasons. But I am out; done, finished. And I now await the opportunity of a lifetime. But while I wait, I continue to accumulate.
I watch, listen, read, and accrue other assets. Gold, silver, art, fine wines, spirits, cars are all on the table as we shift to a new realization of tangible wealth that redefines the notion of diversification.
Central banks around the world know it. They know fiat money is slowly dying, and the value of the almighty U.S dollar is no longer what it once was, not because it isn’t so on paper, but fiat is backed by nothing more than your and my confidence. That confidence is waning. The Central Bankers know it and have been campaigning to add as much physical gold as possible.
These are a mere three examples in recent weeks, but the list goes on. Physical gold purchases have become very fashionable in other countries. The U.S has purchased 91+ tonnes of the precious yellow metal in the past nine months (+79%), while in China and India, gold buying has swelled by 54% and 24% individually.
Central bank purchases of gold are not errors in judgment. These purchases have made central banks around the world net buyers of gold since approximately 2009 and, in part, have aided in depleting the world’s gold reserves by thousands of tonnes of product that is no longer available to anyone.
If you have not learned by now, then let me be clear. Most companies will do anything to manipulate their share price. And most companies will also have select “insiders” who will be first out as individuals or groups, thereby maximizing the value of their investments. There is a fragile line between legal and illegal. That line gets crossed all the time, and large companies get slaps on the wrist for insider trading and market abuses, such as in the gold market by JP Morgan for collusion on pricing with other institutions and more recently “spoofing” in an attempt to keep the gold price in check.
But to me, that attempt to keep the price in check means they expect it to go much higher. But sooner or later, a slingshot reaches its maximum point of efficiency. The price of gold and silver are both like slingshots waiting to be released, taking each metal to fresh new height historical highs.
When this happens, many believe that gold and silver, which can be held for insurance, profit, protection of wealth, and all of the above, will skyrocket in value bringing about the next most significant wave of investor gain in a century-plus.
Good luck to you as you determine your best course of action. I am biased. I have no problem admitting it. I own gold and silver, and I am damn lucky to.
Yours to the penny,
Darren V. Long