That's on Them 

Doug Nolan

GameStop collapsed 80% this week, with Express and AMC Entertainment down 48%, Vaxart 36%, and Siebert Financial 31%. 

Riches have been made and lost. 

Wealth was redistributed – and count me skeptical that the flow was from professional speculators to retail traders.

February 1 – Bloomberg (Matthew Boesler): 

“Federal Reserve Bank of Minneapolis President Neel Kashkari… became the latest central bank official to push back against the idea that the trading frenzy in GameStop Corp. and other hot stocks calls for a monetary policy response. 

‘GameStop has gotten a lot of attention. 

If one group of speculators wants to have a battle of wills with another group of speculators over an individual stock, God bless them,’ Kashkari said… ‘That’s for them to do, and if they make money, fine. 

And if they lose money, that’s on them… I’m not at all thinking about modifying my views on monetary policy because of speculators in these individual stocks.’”

Mr. Kashkari is not some nerdy academic economist unschooled in the nuisances of contemporary securities markets. 

Prior to his stint at the Treasury Department (hired by former Goldman CEO Hank Paulson), he was a Goldman Sachs investment banker. 

Kashkari left government work in 2009 for greener pastures at Pimco, where he worked as a managing director for about three years (including head of global equities).

I ponder the degree Kashkari and other Fed officials are concerned by the millions now actively speculating in U.S. equities and options markets. 

“If they lose money, that’s on them.” 

Seems like a reasonable perspective. 

We all need to take personal responsibility for our actions. 

But it’s just not that simple.

Destructive forces are at work – forces that have worked long and hard. 

Is it okay that for years now incentives have promoted speculation? 

And, at this point, it has all become deeply structural. 

The Fed is there to safeguard against financial crisis. 

Stocks will always recover and go higher, while recession ensures Trillions of QE and fiscal stimulus (the elixir for booming liquidity and corporate profits!). 

The biggest worry is not being fully “invested.” 

The upshot: Tens of millions of Americans are now actively speculating on ever-rising stock prices. 

In a system skewed for the “haves” and against the “have-nots,” we’re forced to participate in a speculative Bubble for fear of being the chumps left behind. 

A massive infrastructure has evolved to ensure it is both easy and perfectly rational to throw “money” at inflating markets. 

Most of all, the Fed continues to devalue savings while backstopping the securities and derivatives markets, creating a deleterious incentive structure promoting speculation and market Bubbles. 

Especially after last year’s unprecedented monetary inflation, this mechanism exacerbates inequality while placing tens of millions of unwitting market speculators at major risk.

“If they lose money, that’s on them.” 

That may be okay for a group of market players. 

It’s fine for the professional speculator community. 

But it is definitely not okay when market speculation has grown to become a major societal issue, especially with our social fabric already frayed and frail. 

I believed at the time it was immoral for Bernanke to have slashed savings rates to zero and forced savers into the securities markets. 

More than a decade of inflationism – along with the Fed monkeying with the markets - has so distorted incentives and risk perceptions that it is impossible for the public to accurately assess market risk. 

When they lose serious money, it will be on the Fed. 

The thought of the anger, animosity and vengeance that will be unleashed when the Bubble bursts is deeply troubling. 

The backlash will be momentous. 

A sweeping regulatory crackdown is inevitable. 

It will take years – or, more likely, decades – for trust to return. 

Wall Street and the Fed will be the main villains, while already fragile confidence in our government will be badly shaken. 

Capitalism will be in jeopardy.

It remains a challenge to communicate the deleterious effects of inflationism and unsound money. 

We’re in a period of monetary hyperinflation, yet there are no wheelbarrows or spiraling prices for bread and foodstuffs. 

Savings of lifetimes have not been wiped out. 

The contemporary system of digitalized “money” and Credit, where central banks inject monetary inflation directly into the securities markets, has unique inflationary manifestations. 

It’s virtually miraculous superficially, with surging prices for stocks, bonds, real estate, private businesses and asset prices more generally. 

Wealth seemingly expands by the week. 

Yet Monetary Disorder is taking an increasingly heavy toll on financial, economic, social and political stability. 

Insecurities, inequities, animosities, distrust and anger fester.

I began posting the CBB in 1999 after I had become convinced of fundamental and momentous changes in finance. 

“Money” and Credit were expanding unchecked outside the traditional mechanism of bank lending and deposit growth. 

The proliferation of aggressive non-bank financial operators – from the GSEs, to the Wall Street firms, securitizations, derivatives, the leveraged speculating community and the like – was creating a mechanism for unprecedented Credit expansion outside traditional bank reserve and capital requirement constraints. 

History informs us of the perils associated with unchecked monetary inflation. 

It was obvious during the nineties that this new financial structure and attendant unfettered Credit growth were highly unstable – fueling asset inflation, speculation and serial Bubbles. 

I waited anxiously for the Fed to recognize this new system’s instability and danger. 

It became increasingly worrying when the Fed used mortgage Credit for system reflation following the bursting of the “tech” Bubble. 

The dimensions of the Bubble Problem became clear to me when the Bernanke Fed responded to the bursting mortgage finance Bubble with bailouts and $1 TN of QE. I warned of the unfolding global government finance Bubble in 2009. 

I essentially gave up hope when the Fed’s 2011 “exit strategy” was scrapped in favor of another doubling of the Fed’s balance sheet to $4.5 TN. 

I thought I had witnessed “crazy” – that is, until 2020.

Over time, the entire world joined in to forge a unique global dynamic: in a historic first, global “money” and Credit expanded without limits to either quantity or quality. 

And with the world awash in liquidity (much dollar-denominated), China accumulated an international reserve horde surpassing $4.0 TN. Mushrooming reserves and trade surpluses ensured China became the greatest enthusiast for unbridled finance. 

The Chinese and EM investment booms pulled manufacturing jobs away from the U.S., while booming financial markets financed the American economy’s transformation to services, finance and asset-based wealth creation. 

Unfettered finance also fueled the technology revolution, as global manufacturing coupled with endless tech products and services created a powerful check on consumer price inflation. 

Misreading the forces behind disinflationary consumer price pressures, monetary policies were kept loose. 

Asset inflation and Bubble Dynamics were perpetually accommodated.

In early CBBs, I found value in a “financial sphere” and “economic sphere” analytical framework. 

I was worried that unchecked finance was ensuring myriad distortions and inflation in the “financial sphere” were having increasingly detrimental effects on “economic sphere” structural development. 

The more prolonged the Bubble in the “financial sphere,” the deeper the structural impairment to the real economy and the greater the toll on society. 

I’m a strong proponent of Capitalism. 

I believe in free markets. 

But Capitalism and markets will not function effectively in a period of unsound money. 

Indeed, unchecked “money” and Credit and an inflating “financial sphere” are anathema to Capitalistic systems. 

I have “Austrian” and “libertarian” leanings. But I’ve always viewed the Austrian School’s theory of laissez-faire “free banking” as so hopelessly detached from modern realities as to hinder the broader debate. 

Similarly, I’ve long held that talk of adopting a gold standard was a waste of time. 

As beneficial as they were during previous periods, there was zero chance of a return. 

The pressing need was for recognition and rectification of the more dangerous shortcomings in the current system of unfettered “money” and Credit growth. 

Measures that would restrain monetary inflation and the “financial sphere” Bubble, more generally, were the only mechanism available to protect Capitalism, free markets, the soundness of the “economic sphere” and social stability. 

It’s been one major disappointment after another. 

From my analytical framework, the precisely wrong measures were – are being - taken. 

Unchecked “money” and Credit has proliferated to the point where the Fed’s balance sheet doubled in 73 weeks to $7.4 TN, with M2 “money” supply expanding $4.6 TN, or 31% (to $19.5 TN). 

The Federal government ran a historic $3.1 TN deficit last year – and Washington is gearing up for a repeat. 

The now customary solution to predictable economic hardship and inequality is, of course, additional monetary inflation. 

And I am reminded of a recurring delusion from great inflations throughout history: the notion that “just one more year” – “one final bout” of money printing will get us over the hump before the return to restraint and moderation. 

Not surprisingly, the damage wrought by monetary inflation also grows exponentially. 

Inequality, the securities market Bubble and stock market mania, social strife and political instability. 

At this point, the “economic sphere” is but a sideshow.

I am reminded of the sage words from the late German economist Dr. Kurt Richebacher: “The only cure for a Bubble is to not let it inflate.” 

Over the years, I’ve often fielded the question, “Doug, if you were a policymaker, what would you do?” 

There are today no easy answers – no solutions that come without tremendous hardship. 

I know the sooner Bubbles are addressed, the better. 

But policymakers long ago missed their timing. 

The first law of holes: If you find yourself in a hole, stop digging. 

Yet governments and central banks will not slow their feverish excavation efforts until market forces dictate a change of course. 

The entire global system is in the throes of late-phase “Terminal Phase” excess for a multi-decade Bubble. 

There has been unprecedented structural impairment. 

And the risk of bursting Bubbles is at this point so extreme that officials see no alternative other than to stick with massive and unrelenting monetary inflation. 

The S&P500 rallied 4.6% this week, the largest gain since November. 

The Russell 2000 surged 7.7%, increasing y-t-d gains to 13.1%. 

Most major U.S. equities indices traded to record highs. 

After spiking to 38 the previous week, the VIX (equities volatility) Index collapsed to end this week at 21. 

Why the bipolar market behavior? 

U.S. and global stock markets came close to an accident – and this week they recoiled forcefully. 

The pattern is familiar. 

Those having purchased near-term put options and other derivatives watched the value of their hedges get absolutely crushed. 

Meanwhile, the sellers of call options – that had been reducing their hedges as the market declined – were again forced to aggressively buy underlying stocks and instruments to hedge against a rapidly rising market. 

Brave traders betting on a market top have, once again, been whipsawed out of their short positions. 

And there’s all the trend-following and performance-chasing activities. 

Fear of Missing Out (FOMO). 

It’s a potent late-cycle brew of speculative trading sure to stoke volatility.

The synchronized nature of global market speculation is extraordinary. 

Major equities indices were up 9.6% this week in India, 7.0% in Italy, 5.9% in Spain, 4.9% in South Korea, 4.8% in France, 4.6% in Germany, 4.5% in Brazil, 4.0% in Japan, 3.6% in Turkey, 3.5% in Russia and 2.7% in Mexico. 

Bank stock indices surged 13.1% in Italy, 7.8% in Europe, 6.5% in Japan and 8.7% in the U.S. 

Italian and European markets were bolstered by news of Mario Draghi’s appointment to cobble together a coalition government in Italy. 

U.S. sentiment was boosted by generally encouraging economic news, though Friday’s January payroll data were a mild disappointment. 

New Covid cases and hospitalizations have dropped, while the vaccination rollout has gathered steam. 

News that the Democrats have decided to move forward quickly with Biden’s $1.9 TN stimulus proposal through budget reconciliation supported the bullish narrative.

But perhaps the most impactful market development was out of China. 

Liquidity conditions eased significantly, with China’s overnight funding rate collapsing to 1.88% from the previous Friday’s 3.33%. 

Global anxiety that Beijing might finally be determined to rein in Bubble excess was quickly supplanted by exultation that Chinese officials wouldn’t dare risk removing the punchbowl. 

Curiously, the Shanghai Composite gained only 0.4%, recovering but a fraction of the previous week’s drop. 

Perhaps Chinese equities discern this week’s loosened liquidity conditions were only a temporary phenomenon - with further tightening measures to follow over the coming weeks and months.

I get the dynamics behind heightened global equities market volatility. 

I find the Treasury market more intriguing. 

Ten-year Treasury yields jumped 10 bps this week to 1.17% - the high since March. 

Long-bond yields surged 14 bps to 1.97%, with yields up a notable 33 bps y-t-d to pre-pandemic highs. 

Notably, the 10-year Treasury inflation “breakeven” rate jumped 10 bps to 2.20% - right at the highs going back to 2014. 

The Bloomberg Commodities Index rose 3% this week, increasing 2021 gains to 5.7% (up 40% from April lows to near two-year highs). 

WTI Crude surged 8.9% to a one-year high $56.85 

Inflationary pressures are building, and a colossal supply of Treasuries is in the pipeline. 

Bond market nervousness is justified. 

But I also appreciate the Treasury market must see the fragile stock market Bubble as tranquilizing. 

All bets are off if equities go into melt-up mode. 

It has the feel of global markets having entered a period of acute instability. 

Equities have turned wildly volatile, while bonds are increasingly vulnerable. 

Currencies are unstable as well, as traders try to discern if there’s more to go in the dollar squeeze or if the bear market rally is about to give way. 

And how crazy could things get in the physical commodities if squeeze dynamics really take hold? 

It’s also worth mentioning the semiconductor shortage that has begun to hamper manufacturing for autos and other products. 

It’s one more manifestation of destabilizing monetary inflation. 

There is now the clear prospect for massive near-term fiscal stimulus, while the Fed is determined to keep its foot pressed firmly on the accelerator. 

It’s a combustible mix. 

It’s not a market backdrop I would be comfortable trading, although millions clearly don’t share this view. 

Joe Biden and the ‘great rebalancing’ of the US economy

The share of national income paid to workers may finally rise

Rana Foroohar

    © Matt Kenyon

“It’s time to reward hard work in America — not wealth.” That statement from US president Joe Biden is perhaps the most concise expression of the new administration’s economic policy plans. 

Mr Biden wants to increase the national minimum wage, raise taxes on corporations, and start to tip the balance of power between labour and capital.

The labour share of national income — the amount of gross domestic product paid out to workers, in wages and benefits — has been declining in the US and many other developed countries since the 1980s. 

The fall since 2000 has been particularly precipitous, leading to stagnant pay, growing inequality and a loss of consumer purchasing power.

But, in many ways, this is a difficult moment for the Biden administration to turn the tide. With unemployment still high due to the pandemic, there is no natural upward pressure on wages. And some economists argue that intervening to raise minimum wages now would discourage hiring.

In addition, many companies that survive the pandemic will be looking to cut costs by replacing workers with technology. Indeed, automation is one of the key factors behind the multi-decade decline in labour’s share of GDP, according to a 2019 study by the McKinsey Global Institute. 

However, there are three big reasons why we may still be at a key inflection point in the US labour-capital divide.

First, the Biden administration has just invoked the Defense Production Act to force the private sector to speed up vaccine production and distribution. This will immediately create more demand for jobs — a trend that could continue beyond the pandemic, as there are bipartisan calls to strengthen domestic supply chains for other pharmaceutical products, and for food. 

Second, there is a trend towards increased unionisation, particularly in high-growth industries such as technology. While the impact of a few hundred Google workers in California forming a union should not be overblown — they are still a fraction of the 100,000 workforce there — it was an important cultural marker. 

Labour activists are now having similar discussions with other Silicon Valley companies. Amazon workers in Alabama will vote on unionisation in February. 

At the same time, global labour organisations, such as the International Trade Union Confederation, are pushing the US and EU to include provisions for workers’ rights in any new regulation of Big Tech.

Mr Biden is already using his powers as president to insist that private companies awarded federal contracts use better-paid labour — something unions are lauding.

And the power of organised labour is likely to expand. Some policymakers believe it could play a role in helping individuals — not just workers, but also consumers — recapture the value of their personal data, by forming “data unions”. These unions would act as independent overseers of data pools, realising their commercial value for members. 

While snippets of data from individuals are not worth much, data pools are — and a more equitable sharing of the intangible wealth held in such data could change the balance of power between corporations and individuals. 

Third, global demographic trends that have disadvantaged workers are finally reversing — and, for labour in the US, this may prove the biggest tailwind of all. 

As Charles Goodhart and Manoj Pradhan explore in their book The Great Demographic Reversal, the balance of power between labour and capital is all about supply and demand. 

Over the past four decades, the full entry of baby boomers into the workforce, including a growing proportion of women, plus the rise of China and other emerging markets, has created the largest positive labour supply shock ever seen. Given this, a weakening of labour relative to capital was inevitable.

Now, all of those trends that so depressed wages for 40 years are largely tapped out. Birth rates in most countries are falling. Geopolitical and economic shifts have led some nations, such as China, to create more independent supply chains. Baby boomers are ageing. All of this means that the deflationary headwinds to labour are at last decreasing.

What’s more, an ageing population will make the healthcare industry a huge net job creator. While roles in remote diagnosis — so-called “telemedicine” — can be outsourced to lower-wage countries such as India, most healthcare positions are close-contact jobs that cannot be sent abroad. 

No wonder six of the 10 jobs that the US Bureau of Labor Statistics expects to grow fastest in the next decade are in nursing, therapy and care services.

These jobs are part of what the new Biden administration has dubbed “the caring economy” — a key economic campaign plank. The president has proposed bolstering not only healthcare for the elderly, but also childcare for families — another task that cannot be offshored. He suggested that the spending might be paid for by closing loopholes in real estate transactions.

Of course, rising labour costs would hit corporate profits. But, in rich countries — where consumer spending is the majority of the economy — business also stands to benefit. 

There is much to be gained, then, from a rebalancing of power between labour and capital.

Supply chain costs are mounting in all sorts of ways

Expect to see more inflation in producer prices in the months ahead.

Claire Jones 


We’d like to draw your attention to two articles that have recently graced 

Here’s the first, from the FT’s German industry correspondent Joe Miller, which appeared online earlier today:

German carmakers are considering building up semiconductor stockpiles to prevent a repeat of the crippling chip shortages that brought assembly lines to a standstill and stalled the production of hundreds of thousands of vehicles worldwide.

The move could prompt an overhaul of the industry’s finely tuned “just-in-time” supply chain, which has been used for decades and relies on daily deliveries to preserve cash. The system also allows for last-minute bidding wars between parts makers.

The second, from Patrick McGee in San Francisco, published yesterday:

Peloton pledged it would spend $100m on air freight and expedited ocean freight to improve its “longer than acceptable wait times” over the next six months. 

“While this investment will dampen our near-term profitability, improving our member experience is our first priority,” Peloton told shareholders.

That follows news that the exercise bike maker has bought Precor, one of the world’s biggest fitness equipment makers, for $420m. 

Precor has a plant in North Carolina, easing the burden of shipping the product to customers in the US.

We can see why in the throes of a pandemic automakers, many of whom had to respond to chip shortages by halting production, want to build up inventories. 

It also makes sense that makers of expensive fitness products which time may yet prove to be a fad are keen to get as many bikes to customers as possible while people are still spending most of their time at home.

But it’ll cost them.

Transporting goods by container was one of the most dramatic shapers of globalisation because it let businesses and consumers in North America and Europe benefit from far cheaper labour and production costs in other parts of the world. 

The development of the world’s major shipping routes, from East Asia to Europe, and from East Asia to the US, in turn enabled the rise in just in time. 

Reversing that won’t come cheap.

Producer prices are already surging as this chart, compiled from a survey of purchasing managers across the eurozone, shows:

A big reason for this surge is the sharp recovery in global trade, which has generated logjams due to delays associated with sending goods to manufacturers and customers. 

It has also led to higher shipping costs:

Freight rates would, of course, be far less of a factor if manufacturing was moved closer to home. 

But any saving from transportation is not going to compensate for costs from reshoring and the price of building up inventories (at least in the short-term). 

If automakers do act and more companies follow Peloton’s lead and reshore, then we’re going to see a lot of inflation emerge in the supply chain.

Parts shortages and transport logjams might also be far less of an issue once lockdowns ease and people can spend more of their income on services and less on consumer durables. 

As Valentina Romei points out here, there is little data to suggest that, for all the talk of it, much reshoring has actually happened yet.

Even if it does happen, we are somewhat sceptical that this pressure on producer prices will feed through into broader inflation. 

The reason being that, once economies reopen, government will also remove a lot of the support that has been propping up businesses. 

Once that support is removed, we’d expect to see a rise in unemployment. 

As unemployment rises, demand falls, keeping a lid on the degree to which this higher costs can be passed on to consumers.


By Egon von Greyerz

Most investors are more interested in getting richer than preserving wealth. 

This is why they will never exit the stock market. 

As the Dow up 39x in the last 50 years this has been the right strategy. 

Only since 2009, the Dow is up 5x! 

So clearly a Win-Win position!

But as Jeremy Grantham recently said, stocks are in an “epic bubble”. 

Still most investors ignore this since greed dominates their emotions. 

If stocks are up 3,800% since 1971, there is no reason why it shouldn’t continue.


During the last 50 years we have seen 5 vicious corrections in the Dow of between 41% and 55%.

But even with these corrections, the Dow is today 39x higher than in 1971.

There is another relatively small but important investment asset which represents only 0.5% of global financial assets. That asset is up 53x since 1971.

But it hasn’t been an easy journey for this asset either. There were 3 major corrections in half a century between 33% and 70%.

I am of course talking about gold.

If dividends are excluded gold has outperformed the Dow. 

With dividends reinvested, the Dow has outperformed gold by 3x. 

Leasing or lending the gold would have reduced the difference somewhat.

But the principal reason to hold gold is that it is nobody else’s liability and therefore physical gold should never be leased as it defeats the purpose of holding it for wealth preservation.

We must also remember that a stock index doesn’t tell the truth. 

Unsuccessful or failed companies are continuously taken out of the index and the most successful companies added. 

Therefore an index gives a much rosier picture than what really happened.


All of the above is history. Even though gold has yielded an excellent return, it is what happens to the Dow/Gold ratio in the future that determines if investors should stay with stocks or hold gold.

The chart below of the Dow-Gold ratio gives us the answer.

Gold bottomed at $250 in 1999 as the ratio peaked at 45. 

The ratio subsequently fell to 5 in 2011 and corrected from there to 22.5 in 2018.

Since 2018, the Dow/Gold downtrend has resumed. 

The indicator at the bottom of the chart is the quarterly MACD which is a very important indication of the long term trend. 

The MACD turned down in 2019 for the first time since the 1999 top. 

This is a very strong sign that Dow/Gold has now resumed the long term downtrend.

If we then look at the long term picture of the Dow/Gold ratio, it gives us a very good idea of where we are heading.

The initial target is a ratio of 1 to 1 as in 1980 when the Dow was 850 and gold $850.

That would involve a 94% fall from here.

But the ratio is very likely to reach the long term downtrend line of 0.5 to 1. 

This would be a 97% fall from now.

So the Dow falling by at least 97% against gold by 2025 seems very likely.

Since these kind of moves very often overshoot, we could easily see a Dow/Gold ratio of 0.2 to 1 which would mean a 99% fall of the ratio from today.

For confirmation of major overshoots of the green Confidence Band, see extremes in 1929, 1966, 1980 and 1999,

What this would mean in the nominal price for gold or the Dow is totally irrelevant.


Stock market investors should now have sleepless nights that they are about to lose up to 99% of their wealth within the next 5 years.

I repeat, holding stocks could totally wipe out all your financial wealth in real terms by 2025.

The repercussions would obviously be devastating not just for private investors but for pension funds, institutions, as well as for the global world economy.

It would lead to a highly destructive deflationary depression after a short lived hyperinflationary period as central banks apply the only trick they know – UNLIMITED MONEY PRINTING.

But this time the world will finally discover that printed money has ZERO value.

And so will the holders of US dollars as the US currency finishes its (just over) 100 year move to its intrinsic value of ZERO.


As Jeremy Grantham said, we are now seeing an epic stock market bubble that is about to crash in the next few months.

But sadly we are not just going to see a stock market crash but the end of at least a 300 year era and maybe a 2000 year cycle.

With the world fast approaching economic paralysis and physical lockdown, it is difficult to see how this can end well. 

Instead, what is now in front of us can only end badly and most probably VERY BADLY.

As I have stated since September 2019, the current problems started at that point with major pressures in the global financial system. 

Accelerated money printing ensued.

And by February 2020, global central banks were extremely pleased that the pandemic allowed them to attribute an excuse for the panic situation they were in.

So Covid is not the reason for the world’s catastrophic situation. 

No, Covid was just the most horrible catalyst that will guarantee that the global bubble era will have a devastating end.

Covid allowed central banks to create a Niagara Falls of printed money and debt, gushing down chaotically over the world.

And this without having to explain to the world that the financial system was already broke before Covid. 

The extraordinary money creation that is now taking place will be criticised by very few.


So what should investors do?

It is pretty obvious to some of us.

Firstly sell your stocks.

Bonds might hold up for a bit longer but the bond market will have the most spectacular crash in the next couple of years as central banks lose control of credit markets and interest rates.

Buy insurance and wealth preservation in the form of physical precious metals (GOLD and SILVER) and some mining stocks.

Remember that if you hold any stocks within the financial system you are exposed to counterparty risk.

Precious metals will clearly not solve all our problems as the world economy implodes. 

But it is better to hold the only money that has survived in history.

In virtually every period of crisis in history gold and silver has been a surety.

As I have often made clear, the most important protection and asset in difficult times is a circle of family, close friends and other people who you can rely on and who can count on you. 

Helping others will be critical in the coming years.

Silver: Most Bullish 'Bubble Burst' Ever - Physical Silver Coin Prices Are Still $37-43 Per Ounce

Geoffrey Caveney


- The media narrative this week is that the silver price had a retail rally peaking on Monday, and then the bubble burst.

- First, clearing up media misconceptions about Reddit and silver last week and this week.

- About silver: An objective review of the price chart shows that the silver price trend remains quite healthy and bullish even after the short spike up and down.

- A review of leading online silver coin dealers also shows that the actual price of physical silver is at least $37/ounce and often higher, up to almost $43/ounce.

- Investors and traders should keep these actual physical silver coin prices in mind as you consider the true value of silver in the market today. A spot price below $30/ounce can be very misleading when the actual physical silver prices are $10/ounce or even $15/ounce above the financial market spot price.

The media narrative this week is that the silver price (SLV) (PSLV) had a retail rally peaking on Monday, and then the bubble burst.

The financial news media now seems to have conflated the silver market these past two weeks with GameStop (GME) and other popular retail stocks promoted by traders on the now famous Reddit forum "WallStreetBets."

Media Misconceptions About Reddit and Silver

First of all, out of respect to the actual WallStreetBets Reddit traders, I feel the need to clear up the media misconception that "Reddit was pushing up the silver price." 

To put it plain and simple, this was literally never true: Not last week, not over the weekend, not in the Monday, Feb. 1, silver spike, and not now. 

It's a shame that the "Reddit silver squeeze" headline was so widely reported across all the major financial news media who should have known better. 

Anyone who actually looked at the front page of the WallStreetBets Reddit at any time over the past two weeks would have realized that the Reddit silver story was simply not true.

Here's the real story: One person posted an idea about a silver short squeeze on the WallStreetBets Reddit page on Wednesday, Jan. 27. That's all. 

It did not take off or catch fire or go viral or become popular on the WallStreetBets Reddit page. 

WallStreetBets remained overwhelmingly devoted to the GameStop stock and GameStop alone over these past two weeks. 

Most traders there even viewed other retail stocks like AMC as a distraction and a diversion from GameStop. They certainly weren't pushing or promoting silver at all.

However, the financial news media reported the one isolated post about a silver short squeeze, and the whole "Reddit silver short squeeze" media narrative blew up last week and this week, based on the first report of that one isolated post that did not even become very popular on Reddit.

The media narrative was and is factually inaccurate and wrong, plain and simple. It was not fair to the Reddit WallStreetBets traders, it was not fair to GameStop stock buyers and holders, and it was not fair to the actual silver investors and traders either.

Sure, many of the retail silver buyers last week and this week were probably inspired by the GameStop short squeeze to try the same idea in the silver market. 

The media attention surely encouraged more retail silver buyers as well. But they weren't the same group of Reddit traders and their followers who bought GameStop. I don't think the actual silver buyers were on Reddit much at all.

I hope this brief summary clears up some of the misconceptions about Reddit and silver that were unfortunately widely reported in the financial news media over the past two weeks.

Silver: Trend Is Still Healthy and Bullish

Now let's take a look at the actual price chart of the most popular market silver price fund (SLV). 

First we will look at just the last two weeks, when the "bubble" and the "crash" or bubble burst supposedly happened, if you believe the day-to-day headlines about silver in the financial news media. 

Here's the actual chart of this supposedly wild action for the past two weeks:

And that's it! 

From around 23.50, up to touching 28 at the peak, back down to around 24.50, and then a little higher from there. (Note: these price values of the SLV fund are about a couple dollars lower than the market spot price of an ounce of silver itself.)

So this was not some massive bubble after all, nor was it a massive crash or bubble burst when it came down. 

It was just a short spike up and down.

To make real sense of the price action and the sustained trend in the silver price, we need to look at a longer-term chart. 

And in fact an objective review of such a chart will show that the silver price trend remains quite healthy and bullish even after the short spike up and down. For a good perspective on this, here is the 12-month chart of SLV:

The main indicator of the long-term trend is the red line, the 200-day moving average. 

It's sloping upward, a healthy and bullish sign. 

The blue line is the 50-day moving average, and it's steadily above the red line, another healthy and bullish sign. Finally, after all the up and down action of the past two weeks, the SLV share price itself remains in a perfectly healthy position above both the 200-day and 50-day moving averages.

This is not at all what a bubble and burst looks like.

Actual Physical Silver Price:

$37 to $43 per Ounce

You have probably read about the difference between the financial market price of silver (the current "spot price" and the futures prices) and the higher actual price of physical silver, such as the popular silver coins like the American Silver Eagle.

Last weekend, many major silver coin sellers and dealers actually ran out of their supply of physical silver coins, a reflection of the strong retail demand in this market.

In this section I want to illustrate the actual meaning of the "higher physical price of silver" in a way that readers can see and understand. To do this, I present below a review of leading online silver coin dealers, which will show that the actual price of physical silver is at least $37/ounce and often higher.

To find these physical silver coin prices, I simply did a basic Google search of "buy silver coins" and looked at the websites of the top online silver coin dealers that show up at the top of the first page of search results.

Disclaimer: The following screenshots of American Silver Eagle coin prices, as of midday Friday, February 5, are for illustrative purposes only. I am not making any recommendation or endorsement of any particular coin dealer. Neither is my intent to make a price comparison between the dealers below. The exact price of each item can depend on multiple factors, some of which may or may not be reflected in each particular screenshot below. Rather, the point is to show the overall range of prices for these American Silver Eagle coins from a variety of several prominent dealers in this market.

In each case below, I have strived to find the lowest price for any American Silver Eagle 1 ounce coin that each dealer has in stock and offers for sale.

Example #1: The dealer shows a silver spot price of $27.24/ounce, but the 1 ounce American Silver Eagle coins are priced "as low as $37.24" or "as low as $38.74":


Example #2: The dealer shows a silver spot price of $27.24/ounce, but the 1 ounce American Silver Eagle coins are priced "as low as $37.99" or "as low as $38.00":


Example #3: The dealer shows a silver spot price (ask) of $27.06/ounce, but the 1 ounce American Silver Eagle coins are priced "as low as $38.25" or "as low as $38.85":


Example #4: The 1 ounce American Silver Eagle coins are priced from $39.17 up to $42.89, depending on the volume of coins purchased and the method of payment:


(Please note: The other dealers may also have similar price variations based on the volume of coins purchased and the method of payment. I am showing this example here as an illustrative example only.)

Here we see how the price for a 1 ounce physical silver coin, the most basic and popular American Silver Eagle - not a special rare or antique coin with any extra markup value above and beyond its 1 ounce silver content - can be as high as almost $43, if purchased in a quantity below 20 ounces and by credit card or PayPal.

Investors and traders should keep these actual physical silver coin prices in mind, as you consider the true value of silver in the market today. 

A spot price below $30/ounce can be very misleading, when the actual physical silver prices are $10/ounce or even $15/ounce above the financial market spot price.

IMF warns on financial stability threat from vaccine shortages

Lack of access to jabs in emerging markets could have global consequences, fund says

Laura Noonan and Colby Smith in New York

‘Inequitable distribution of vaccines risks exacerbating financial vulnerabilities,’ the IMF said in its global financial stability update © Bloomberg

The IMF has warned that emerging markets’ limited access to Covid-19 vaccines poses a risk to global financial stability, saying shortages could exert a drag on economic recoveries in low-income countries. 

“Inequitable distribution of vaccines risks exacerbating financial vulnerabilities, especially for frontier market economies,” the IMF wrote in its latest global financial stability update.

Emerging market assets have been boosted by record inflows in the first weeks of the year. 

But Tobias Adrian, head of the IMF’s capital markets division, said there was a risk that “virus infections get worse in emerging markets as vaccines are not rolled out as quickly”.

“What is priced in is that vaccines are not rolled out, but the possible shock is broader infections in a resurgence of the virus, with adverse macro impacts,” he said.

Emerging markets would also be vulnerable if there were a “shift in global risk appetite”, Mr Adrian said. “Investors are very ‘risk on’. Is there going to be a ‘risk off’ episode?”

Emerging market stocks have rallied almost 8 per cent so far in 2021 in dollar terms, adding to a 19 per cent surge in the final three months of 2020, according to an MSCI index tracking the asset class.

The gains come amid a red-hot start to 2021 across global asset markets, with vast government and central bank stimulus programmes combining with a surge in retail trading to boost the price of riskier assets like stocks.

The market was upset earlier in the year when some Federal Reverse officials signalled a possible wind down of the central bank’s massive $120bn-per-month asset purchase programme beginning before the end of 2021. Jay Powell, Fed chairman, has since moved to calm near-term concerns of a repeat of the “taper tantrum” that rocked emerging markets in 2013.

Mr Adrian said the risk to financial stability from potential emerging market shocks “depends on how broadly negative surprises are spread across countries”.

“What we are seeing are pockets of vulnerability . . . so we would expect that there will be certain countries and banking systems that will face difficulties, but as a whole the global economy and the (global) financial sector looks fairly resilient.” 

He said countries with big exchange imbalances could find themselves particularly vulnerable, including some in south Asia and the Middle East.

Other crucial financial stability risks identified by the IMF include virus mutations and the “premature withdrawal of policy support”, Mr Adrian said.

The IMF also expressed concern that continued low interest rates could weigh on global banks’ profits and discourage them from lending.

Mr Adrian said indications so far suggest it was “more an issue of willingness” since banks report “that their capital position is fine . . . (but) they don’t like what they see in terms of borrowers’ riskiness”.

The Origins of the Public and Private

Thoughts in and around geopolitics.

By: George Friedman

Last week, I wrote a piece about the virtues of private life and its centrality to the good life. 

I want to go deeper into the role of the private and public in Western civilization, and to show how complex and contentious the issue is. 

The place all such discussions must begin is the two cities that were the origins of Western civilization, Athens and Jerusalem. 

They were very different cities addressing similar issues in very different ways, but together, they were the foundation of Christianity, which until the recent Western enlightenment was the intellectual and spiritual heart of the West and therefore embodied the tensions between the two cities. 

Christianity is built on the Hebrew Bible, but also on ancient Greece. 

One of the strengths of Christianity derives not only from these origins but also from the way it constantly balances their differences. 

This can be seen clearly in the question of the home and private life.

The ancient Greek word for the household was “oikonomos.” Say it out loud and you’ll notice that it gave us the word “economy.” 

The home was the place not only for sleeping and eating but also for pursuing a broader sense of the private, from family to the contemplation of meaning. 

The other sphere of life was the political, which included participating in ruling the city and serving it – in peace and especially in war.

The Greeks saw the public sphere as morally and personally superior to private life. 

The Greek word for a private person was “idiotes,” meaning much the same as our “idiot.” 

This did not mean that private life was pursued only by idiots, but rather that by denying the superiority of public life, the private person failed to elevate himself toward the moral excellency of serving a city. 

The private was devoted to the economic, and the economic was devoted to private things, and therefore this life was seen as less than human. 

Humanity for the Greeks could be found only in the public space, in political life and dialogue.

It follows that the home itself was a necessary but distracting sphere. 

For Judaism, it was the heart of being human, because it was the center of the family. 

God had commanded that man be fruitful and multiply, and that process required a home, not only for the pleasures of reproduction but also for the profoundly religious act of giving birth and nurturing the child. 

This was the greatest mitzvah, a deed conducted in keeping with a commandment.

Jewish life revolved around the home, and the most important religious rituals were carried out in the home, from the circumcision of a son to the Sabbath meal, Kabbalat Shabbat, the welcoming of the Sabbath. 

It followed that the economic life was seen as not incompatible with the good life but an essential part of it. 

The man had to leave the house to earn the bread and assure the safety of his family. 

The Talmud says that a man should love his wife as much as he loves himself and honor her more than he honors himself.

For the Greeks, the celebration of the gods was done in public, in the company of men. 

In Judaism, the greatest celebration takes place in the home, and the first blessing made on the Sabbath candles is the sole right of the woman. 

She presides over the sacred home and the sacred act of bearing and nurturing children In ancient Greece, a woman’s role was as marginalized as the home

You will note that the discussion of the private quickly turns into a discussion of the home, and the discussion of the home turns into the relationship between men and women. 

The Greeks prized the politician and the warrior far above the woman, who remained at home. 

The Jews prized the family above the politician and the warrior. 

The Greeks celebrated honor; the Jews celebrated familial love. 

The Greeks searched for honor beyond the economic; the Jews conflated honor and the economic. 

Obviously, both must live in the public and the private, but for the Greeks, the time in the private was stolen from greatness. 

For the Jew, the public was stolen from the home life.

The Christian project was to reconcile the Greek and the Hebrew, philosophy and revelation, the public and private, the time outside of the family and the time with it. 

The monastic life of Catholics is in many ways a Greek life. 

The life that Max Weber speaks of in “The Protestant Ethic and the Spirit of Capitalism” is in its way a Jewish life. 

But then Christianity is based on a Jewish mother and father’s love for a son and, after his crucifixion, the absorption of the alternative, Greece.

In modern life, the complexity of men and women intensifies. 

The demand is that they be honored in public life, an adoption of the Jewish obligation to honor women and the economic, while the Greeks rejected both. 

The power of Jewish women is seen as less than it should be, based as it is on the family, reproduction and nurturing. 

In all of this, the enlightenment sought to cut its ties with its ancient roots but has managed to do so only with the inevitable confusion of something new and testing itself.

It is worth noting the degree to which America’s founders, rather than overthrowing Athens and Jerusalem, sought to create a life in which the private is the main sphere of existence, but the public the indispensable. 

As an American and a Jew, I recognize the need to serve, but I still cherish and feel protected by the private, and the profoundly complex intellectual history that brought us here.

The relationship between the private and public defines the manner in which Greek cities and modern nation-states behave. 

The location and physical structure may define much about a people. 

But there is a dimension that gave Athens Plato, and Jerusalem Ezekial. 

The way in which each stood against their political orders teaches us as much about geopolitics as rivers and mountains.