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Transcript UNC 010524

UNC Jan 5 Transcript

It&rsquo;s the most dangerous time for investors since the 1930s&hellip; and new threats to your wealth appear every week.
That&rsquo;s why we created Rickards Uncensored &mdash; a weekly Zoom broadcast that takes you deeper into Jim Rickards&rsquo; research and analysis than is possible in any other format.
Each Friday, Jim, his team and special invited guests will share their absolute latest thoughts on what&rsquo;s happening in the world &mdash; helping you navigate today&rsquo;s troubled markets.
You&rsquo;ll hear from seasoned traders&hellip; retirement specialists&hellip; commodities experts&hellip; government officials&hellip; financial heavyweights&hellip; even Jim himself.
Members of this elite team predicted the 2008 housing bubble&hellip; the gold price spikes in 2010 and 2019&hellip;&nbsp; American Airlines&rsquo; bankruptcy in 2011&hellip; Donald Trump&rsquo;s election victory in 2016&hellip; the pandemic-fueled market crash in 2020&hellip; the bond collapse in 2021&hellip; and more.
So you can count on them to tell you the unvarnished truth &mdash; regardless of how controversial it may be&hellip;
They&rsquo;ll also answer viewers&rsquo; questions, ensuring you get the answers you need.
You won&rsquo;t find a better source of information on what&rsquo;s next for the global economy&hellip; and what you should do right now. Get it all in a LIVE broadcast every Friday morning.&nbsp;

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Rickards Uncensored Call (with Byron King 1/5/2024)

Commentaries

In addition to what might be regarded as &ldquo;normal&rdquo; extreme events (hurricanes, tornadoes, earthquakes), we&rsquo;ve also written about &ldquo;ultra&rdquo; extreme events such as nuclear war. In every case, there are some crisis survival strategies that can be utilized.
If you&rsquo;re near ground zero in a nuclear strike, you&rsquo;re either killed immediately or will die soon after. But if you&rsquo;re at some distance from the detonation, the immediate problem is fallout and the intermediate problem is the collapse of civil infrastructure. There actually are survival strategies that can be applied in both cases, and we have written about those. After all, humanity survived the Black Death and Genghis Khan, so there&rsquo;s no need to feel helpless.
In this issue of Crisis Survival Insider, we look at another extreme event that should be put in the &ldquo;ultra&rdquo; category and is perhaps more likely than a nuclear war. That event would be a complete collapse of the electric power grid. It&rsquo;s not the end of the world but it is the end of the world with electricity. We&rsquo;re not looking at a blackout that might last a few days. We&rsquo;re considering one that might last months or longer before power can be restored. What can you do to prepare for that eventuality?
<h2 class="subhead">If The Power Goes (You Can Cope!)</h2>
A good place to start is to read Ted Koppel&rsquo;s book <a href="https://www.amazon.com/Lights-Out-Cyberattack-Unprepared-Surviving/dp/0553419986/ref=sr_1_1">Lights Out</a>, about how a cyberattack could take out the entire U.S. power grid. Koppel&rsquo;s scenario is one of many that could play out. The grid could also be disabled by natural disasters, terrorism or simple incompetence. Still, Koppel does a good job of explaining the aftermath of such an event and how most Americans take electricity for granted and are completely unprepared for such an event.
In fact, there is a lot you can do to prepare. One source of comfort is the simple realization that it was not that long ago that the United States had no electricity. Benjamin Franklin and other 18th century scientists were able to isolate electricity as a natural force and relate it to well-known phenomena such as lightning. In the 19th century, scientists found ways to generate electricity and store it in batteries. Still, those experiments and technical advances were on a relatively small scale.
It was not until the early 20th century that electricity for everyday use became widespread in U.S. cities and some towns. It was well into the 1930s before electricity reached most rural areas under FDRs rural electrification program. If your great-grandparents and earlier generations were able to cope without electricity, so can you!
<h2 class="subhead">Surviving A Power Grid Shutdown</h2>
The following is a description of instruments, tools and techniques that are readily available, extremely useful and that require no electricity. We have intentionally excluded items that rely on batteries or solar power (which also requires batteries). Those are fine and if you have them, use them. But batteries run down and very few homes have the solar modules and industrial scale batteries needed to operate off the grid. With that in mind, here's your shopping list for surviving a complete shut-down of the power grid:
Have a watch or mechanical clock. A good quality Swiss-made automatic watch (which means self-winding) will serve you well. Of course, it tells the time. But watches have what are called &ldquo;complications,&rdquo; which are added features devised by master watchmakers. Some complications will let you read the time in two times zones. Other dive-rated watches (called &ldquo;divers&rdquo;) are water resistant to 300 meters (about 1,000 feet). Some watches can compute altitude (by letting air in the case that reacts with a mini barometer).
Did you know that you can use any watch as a compass? Simply align the hour hand with the direction of the sun. North will be the point halfway between the hour hand and 12:00 moving clockwise starting at 12:00. You can easily fill-in the rest of the compass once you have North. (Use 1:00 during Daylight Savings Time. The process is different in the southern hemisphere; you align the 12:00 numeral with the sun and then move to the hour hand). Of course, it&rsquo;s a good idea to have a pocket compass handy anyway!
You can also determine your latitude using a watch (set to solar time in your location) if you separately know the exact time in Greenwich, England (the Prime Meridian or Greenwich Mean Time). This requires two watches (or a watch and a clock). Longitude can be determined by matching the position of the sun at noon or the stars at night to a chart. (Adjustments need to be made if your altitude is materially above sea level). One model of the Breitling Navitimer watch actually has a circular slide rule printed on the watch face that is operated by turning the bezel. I have one and it works fine. Who needs a pocket calculator!
It&rsquo;s great that watches are so versatile but there&rsquo;s no reason not to have all of the instruments that watches can mimic. By all means, have a thermometer and barometer. Good quality instruments can make you a serviceable weather forecaster in no time. When the barometer reading is dropping, a storm is on the way. When it&rsquo;s rising, there are fair skies ahead. A thermometer used in conjunction with the barometer will tell you if a coming storm is rain or ice and snow.
Another useful tool is a hand-cranked radio. This has a battery, but the battery is charged by winding a crank so there&rsquo;s no need for a separate power source to use it indefinitely. AM/FM bands are standard, but make sure it has a short-wave (SW) band also. Short-wave radio signals can be picked up over greater distances so you may be able to receive news from distant points that are outside your area of no electricity.
For transportation, the best bet is a bicycle. It should have a basket or saddlebag so you can carry food home from whatever local farmer&rsquo;s market you can access. Don&rsquo;t buy a top-of-the-line racing bike with skinny tires. Buy something more robust with off-road capability. That can mean fatter tires and upright handlebars, but you&rsquo;ll still need at least six gears or more to get up and down hills without too much difficulty.
Keep a full tool chest and a workshop or garage full of larger implements. Saws and axes will be good for firewood. Hammers, wrenches and screwdrivers can be used for repairs. Duct tape and WD-40 or other lubricant are good for everything. Shovels are needed for removing snow or perhaps digging a well if the water table is not too deep.
My favorite survival technique is a large well-curated library. It will not only be a great source of education and relaxation, but your texts will be full of practical information that will help with survival independent of any educational value. Start with the Bible and the Boy Scout Handbook, then build your collection from there.
For food, you can stock up on canned goods and non-perishable items like 25-pound sacks of rice. Freeze-dried non-perishable &ldquo;survival&rdquo; food kits that can provide hundreds of meals that last for years are readily available. For cooking, you can have a wood-burning stove or barbecue (with a good supply of charcoal or propane tanks).
Put in large supplies of medicines such as aspirin, Tylenol, bandages, antiseptics, ace bandages and more. Aloe plants are easy to keep and are an excellent treatment for burns and bites.
For fresh protein, you can hunt game birds. Good idea to take a two-day course in how to gut them and prepare them for eating. Building a pond stocked with fish is another source of protein. I did that once only to discover the Great Blue Herons and Bald Eagles ate my fish. I called it the world&rsquo;s most expensive bird feeder. The fishpond idea works better if you don&rsquo;t have predator birds in your vicinity. A good fishing stream or river nearby is another good source of fresh fish.
As always, the most critical item on the list is water. For this you can drill an artesian well with a hand pump or fetch water from a stream or pond. Be careful to boil before drinking or use purification tablets. Doing both should be a safe approach.
The main point is that none of this is impossible or even particularly difficult. It just means living like all Americans lived until around 1870. Cyberterrorism aimed at our power grid may take us back to the future sooner than we expect.

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If The Lights Go Out

Updates

Imagine owning the only source of drinking water in a desert.
Now imagine that desert was Dubai in the 1990s before it became a world-class city growing like crazy.
It&rsquo;s an enviable position and exactly the position Taiwan Semiconductor Manufacturing Company (TSM) finds itself in today.
TSM, the unsung hero powering your iPhone and probably half the gadgets in your house, just dropped a bombshell that's got Wall Street salivating.
The world's largest contract chipmaker reported a jaw-dropping 32% year-over-year increase in Q2 revenue, raking in a cool $20.67 billion.
With a firm lock on the white-hot market for chip manufacturing, it's no surprise that TSM is cleaning up.
However, TSM&rsquo;s success could have been predicted by anyone keeping an eye on technology news&hellip;
<h2 class="subhead nbp">The AI Gold Rush</h2>
It's no secret that we're in the middle of an AI gold rush.
TSM is not just selling pickaxes; they're manufacturing the entire mining operation.
The surge in demand for artificial intelligence applications has TSM's factories working overtime.
They're the go-to chip manufacturer for AI giants like Nvidia, Apple, AMD, Qualcomm, Google, and more.
In fact, TSM produces a mind-boggling 92% of the world's most sophisticated chips.
To put this into perspective, the oil cartel OPEC has just a 40% market share in the global supply of crude oil.
<h2 class="subhead nbp">Just Getting Started</h2>
What has investors most excited is how TSM is pushing the boundaries of what's possible in chip manufacturing:
<ol>
<li>2nm Chip Production: TSM is gearing up for trial production of 2nm chips next week, more than 3 months ahead of schedule. In the slow-moving world of chip manufacturing, they&rsquo;re running circles around the competition. </li>
<li>Expansion Plans: The company is readying six fabs in Taiwan for 2nm process in 2025 and beyond. They're also bringing this cutting-edge tech to their Arizona plant. This will allow them to take advantage of US government subsidies provided by the CHIPS Act and diversify their operations beyond their Taiwan base. </li>
<li>Investment in Innovation: TSM is doubling down on extreme ultraviolet (EUV) lithography machines, with plans to acquire 60 of these $205 million behemoths from ASML by next year.</li>
</ol>
<h2 class="subhead nbp">The Paradigm Press Crystal Ball</h2>
Our team first recommended TSM in our <a href="https://my.paradigmpressgroup.com/media/million-dollar-ai-portfolio">Million-Dollar AI Portfolio </a>back in September of 2023.
At the time, the stock was trading at just $85.45.
Since then, the stock has skyrocketed 117%, not to mention the $1.57 (1.8%) in dividends they&rsquo;ve distributed.
But here's the kicker &ndash; this might just be the beginning. With AI demand showing no signs of slowing down and TSM's technology edge widening, we could be looking at the next tech titan in the making.
<h2 class="subhead nbp">The Road Ahead</h2>
Of course, no journey to the top is without its bumps. TSM faces challenges:
<ol>
<li>Geopolitical Tensions: The ongoing China-Taiwan situation keeps investors on their toes. As I mentioned earlier, TSM is highly concentrated in Taiwan. If China chooses to escalate its military position on Taiwan, it would be a hit to TSM&rsquo;s stock. </li>
<li>Competition: Intel and Samsung are nipping at TSM's heels, particularly in the race for 2nm chip production. Right now they&rsquo;re much smaller, but TSM&rsquo;s dominance has their customers nervous, meaning that TSM&rsquo;s competitors will likely chip away (pun intended) at their lead as soon as they get their own 2nm production up and running. However, if TSM's track record is anything to go by, they're not just prepared for these challenges; they're probably already working on solutions to stay one step ahead of the competition.</li>
</ol>
<ol start="3">
<li>Capacity Constraints: TSM will likely struggle to keep up with the insatiable appetite for AI chips. Some reports have indicated that Apple has already called dibs on all of TSM&rsquo;s 2nm capacity. Of course, this sort of deal doesn&rsquo;t come cheap. If the rumors are true, Apple probably paid TSM a nice premium for this advantage, meaning that TSM&rsquo;s shareholders are likely to benefit.</li>
</ol>
<h2 class="subhead nbp">The Bottom Line</h2>
TSM isn't just riding the AI wave; they're literally creating it.
Their dominance in chip manufacturing, combined with their relentless innovation, positions them at the forefront of the AI revolution.
For investors, TSM represents an investment at the center of AI hardware.
As the manufacturer of choice for all of the big tech companies, TSM stands uniquely positioned to benefit.
While companies like OpenAI and Nvidia have been stealing the AI headlines, sometimes the biggest winners are the least flashy companies powering the revolution behind the scenes.
TSM is that giant, and it's showing no signs of slowing down.

With the simple mantra of &ldquo;Choose Yourself,&rdquo; James has built a massive following &mdash; helping people find new and unusual opportunities to generate inward success.
Now he wants you to achieve the next step: True financial freedom and independence.
He&rsquo;s tapping into the skills he developed as a hedge fund manager and venture capitalist to reveal every secret he&rsquo;s ever learned about building wealth.
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You&rsquo;ll learn tips for navigating Wall Street&hellip; personal finance strategies.. and tricks to boost retirement income. The team will also tell you specific ways to get ahead of hot investment trends like AI, cryptocurrencies, biotech, cybersecurity and driverless cars.
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TSM Drops A $20.67 Billion Bombshell 

AWN Election 2024

The first presidential debate of the 2024 election season is now in the books. The result is undisputed and indelible. Trump won and Biden lost badly. It was so one-sided that if it were a boxing match, the referee would have called the fight and awarded Trump a technical knock-out.
That&rsquo;s clear. The question is why. Each of the candidates went through the usual talking points. Trump talked about the dangers of the open border, the disaster of the War in Ukraine and the impact of Biden&rsquo;s inflation. Biden talked about the dangers of Russia winning in Ukraine and moving to attack Poland and other NATO members. Biden talked about presidential scholars who rate Trump as the worst president in U.S. history, his student loan forgiveness and support for black colleges.
None of this matters. We know the respective views of the two candidates. We&rsquo;ve heard about them thousands of times. We all have our opinions. That&rsquo;s fine; that&rsquo;s what democracy is all about. But the policies and views were the least relevant part of the debate.
<h2 class="subhead">The Contrast Is Stark</h2>
What was most relevant was the appearance and carriage of each candidate. Trump had his usual orange tan and red necktie tied too long. But he seemed fit, energetic and mentally sharp. He may be 78 years old, but aging is not a uniform process. Trump was Trump but gave no reason to believe he could not carry out the duties of the presidency for another four years. (He even mentioned the &lsquo;green new scam&rsquo;, a phrase I originally coined. Thank you, President Trump!).
Biden was a funereal zombie. It was easy to tell he was heavily medicated because the usual &ldquo;slit look&rdquo; in his eyes was gone (for one night) and his eyes were bugging out because of the medication he was pumped up with. He was over rehearsed after spending eight days with sixteen advisors in a Hollywood produced set in Camp David. The problem with rehearsing your lines and not being able to speak extemporaneously is that if you get one fact wrong or even slightly confused you go off track and can&rsquo;t get back on.
Biden did that time and again. He mumbled, he slurred his words, he tailed off into nothing and lost his train of thought. He stared off into space with a vacant stare.&nbsp; He looked weak and acted weak.
He also droned on about his pet lies. He referred to Belarus as a Russian target after Ukraine. In fact, Belarus is one of Russia&rsquo;s closest allies and is helping Russia to fight the war in Ukraine. Biden said, &ldquo;My son died in Iraq.&rdquo; Not true. Beau Biden served in Iraq, but then returned home and later died of a form of cancer that had nothing to do with the war there. Biden resorted to name calling and used rote phrases like &ldquo;malarky,&rdquo; a cute Irish term of disparagement that most Americans have probably never heard from anyone other than Biden.
Trump had some zingers. He called Biden &ldquo;the Manchurian Candidate&rdquo; which is a succinct way to point out that Biden and his crime family are on the Communist Chinese payroll. Trump was nimble when he connected the open border crisis and flood of illegal aliens to diminished job prospects for blacks and Hispanics. The illegals are taking jobs that might otherwise be available for disadvantaged Americans. Both issues &ndash; immigration and jobs &ndash; are hot button issues and Trump&rsquo;s ability to connect them and score two points at once showed quick thinking and command of the stage.
<h2 class="subhead">Watching Biden Said It All</h2>
Here&rsquo;s the most important takeaway. It&rsquo;s something you won&rsquo;t hear elsewhere and which almost none of the commentators and talking heads understand. Television is a powerful medium with little understood effects on human cognition. Canadian philosopher and communications theorist Marshall McLuhan said &ldquo;The medium is the message&rdquo; over sixty years ago. What he meant was that content is almost irrelevant; what matters is the process by which humans comprehend what they&rsquo;re seeing.
Mountains of research compiled over decades demonstrate that when people watch television, they barely listen to what&rsquo;s being said. Instead they process what they are seeing. It&rsquo;s a visual medium that McLuhan described as &ldquo;cold&rdquo; because it takes a lot of engagement to decipher what is being shown. Viewers don&rsquo;t listen, they watch.
With that as the proper frame, Biden turned in the worst debate performance ever and one of the most vapid, impaired and scary presentations of any politician ever. The only thing scarier than watching Biden with sound was watching Biden without sound. The visage was empty and frightening.
Biden is done. It remains to be seen if the Democrats will stumble to Election Day with a mentally and physically failing phantom or will move quickly to substitute a new candidate. That&rsquo;s up to Democrats.
Americans have seen Biden for who he is. Trump got a major boost and now has powerful momentum toward a victory in November.
Stay tuned.

Jim Rickards&rsquo; Strategic Intelligence is designed to help you prepare and profit from the coming collapse of the dollar.
It&rsquo;s masterminded by Jim Rickards, New York Times bestselling author of the The Road to Ruin, Currency Wars, The Death of Money, The New Case for Gold and more.
He&rsquo;s spent over 40 years in investment banking, international economics, political and national intelligence advisory roles. As adviser on international economics and financial threats to the Department of Defense and the U.S. intelligence community, he served as a facilitator of the first-ever financial war games conducted by the Pentagon.
To safely guide your investments, Jim has developed a revolutionary way of looking at the financial system and stock markets. He calls it &ldquo;complexity theory,&rdquo; which has been used by government intelligence agencies but never applied to the financial world.
Jim will use this theory to help you build safe investment positions in stocks, bonds, cash, art, land, precious metals and other hard assets.&nbsp;
You can get Jim&rsquo;s research every month &mdash; with weekly email updates &mdash; in Jim Rickards' Strategic Intelligence.

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Jim Rickards' Strategic Intelligence

Biden Is Done

In the mid-1990s, it seemed like everyone in my circle was obsessed with the internet.
Between working at the IT department of HBO and having friends who were software engineers, it seemed like the internet was the only thing that mattered.
Outside in the real world, most Americans were more interested in the OJ Simpson trial and the Atlanta Summer Olympics than the internet.
In fact, the majority of Americans never even used the internet, and about half had never even used a computer.
While my colleagues and I were busy building the future, many Americans were totally clueless.
We are seeing the exact same thing play out right now in AI.
Despite all the talk and focus we give to AI here at Altucher&rsquo;s Investment Network, only about 23% of Americans have even used ChatGPT.
And while this number will inevitably grow over time, until now AI usage has been mostly limited to tech-savvy early adopters.
All of that is set to change this Fall.
<h3>The AI Supercycle Begins This Fall</h3>
Yesterday at the annual Worldwide Developers Conference (WWDC), Apple finally unveiled their hotly anticipated new AI features for iPhone and Mac.
The features, which Apple has coined &ldquo;Apple Intelligence&rdquo;, include a new set of tools that use AI to improve the productivity and creativity of Apple&rsquo;s customers.
Some of these features include some pretty straightforward capabilities that AI users have already been using for months&hellip; like the ability to use AI to write/respond to emails or generate images.
The major difference here is that Apple&rsquo;s tools are baked directly into Apple&rsquo;s products.
This means that people who otherwise wouldn&rsquo;t use AI will be prompted to use AI when replying to text messages or emails.&nbsp;
For most people who aren&rsquo;t tech-savvy &ndash; which are most people &ndash; making AI features easier to learn, access, and use will make all the difference.
The more exciting component of Apple Intelligence is a set of features that makes performing tasks easier with Apple devices.
Apple execs described a new feature for Siri called App Intents.
App Intents allow app developers to create features that can be used by interacting with Siri.
For example, in the near future I expect that Tesla owners will be able to use Siri to make sure their car seats are heated before they get into their car on cold days.
Another new Siri feature will make it easy to interact with AI tools like ChatGPT.&nbsp;
In the demonstration, Apple showed how Siri will seamlessly engage ChatGPT if the user asks a question that Siri doesn&rsquo;t know the answer to, like a recipe.
Although ChatGPT is the first AI model that Siri will integrate with, Apple plans to allow its customers to select different AI tools if they&rsquo;d like in the future.
These new features represent some of the most exciting developments in the AI space because they will finally deliver on the promise of digital assistants.
While Apple started this journey 13 years ago when they launched Siri with the iPhone 4s, Siri hasn&rsquo;t evolved all that much over the past decade.
With these new features, Apple will allow its customers to perform tasks through voice&hellip; without needing to pick up their phones or open their laptops.
Although these tasks will start with user voice instructions, over time, they&rsquo;ll likely evolve to happen automatically without any user involvement.
A phone conversation with a spouse about picking up groceries for dinner might automatically trigger Siri to order groceries and find recipes without the user needing to lift a finger.
This is ultimately the dream of AI&hellip; the ability for technology to accomplish things on its own so we can all have more time to do what we love.
With Apple&rsquo;s new features &ndash; set to release this fall &ndash; billions of users will begin to experience the benefits of AI for the first time.&nbsp;
As one of the most influential tech companies in the world, Apple&rsquo;s investment in AI will throw gasoline on the AI arms race.&nbsp;
Apple&rsquo;s ability to create technology that feels like magic will inevitably push the whole industry forward, meaning it won&rsquo;t be long before Android users get similar or even better features.
In general, competition between rival companies results in better products and the development of new technology.
With Apple now putting their weight behind AI technology, the race to develop more intelligent AI products is hotter than ever.

Apple Throws Gasoline on the AI Arms Race

On June 13, the G7 Leaders&rsquo; Summit begins in Apulia, Italy, According to the White House statement, &ldquo;The President and G7 leaders will discuss a range of the most pressing global issues, including the G7's unwavering support for Ukraine&rdquo;.
Here&rsquo;s what that statement really means.
In April, Congress passed (and Joe Biden signed) four key pieces of legislation related to national security. Three of the bills provided assistance to Ukraine, Israel, and Taiwan. They received the most attention.
The one that got the least attention was the bill that included something called the REPO Act. This act authorizes the president to steal any Russian assets, including U.S. Treasury securities, that come under U.S. jurisdiction.
The impact of the REPO Act is limited by the fact that only about $10 billion of Russian sovereign assets are actually under U.S. jurisdiction. Yet, the act contemplates this theft will be a down payment on a much larger theft to be conducted by NATO allies in Europe.
<h2 class="subhead">The Greatest Theft in History</h2>
The U.S. goal is to use the G7 summit as a platform for getting the other G7 members to go along with this theft of Russian assets under their jurisdiction. If Europe joins the U.S. in stealing Russian assets, Russia will retaliate by seizing billions of dollars of direct foreign investment in Russia owned by major European companies such as Siemens, Total, BP, and others.
The value of the European assets subject to seizure by Russia is greater than the value of the U.S. Treasuries owned by Russia. In fact, just days after Biden signed legislation to authorize the theft of Russian assets, a Russian court ordered $440 million to be seized from JPMorgan.
The consequences of this theft in the international monetary system would be momentous and highly adverse for the United States. There are many variations on this plan of theft that are being considered.
One plan would steal the interest only (about $6 billion) and leave the principal frozen but not confiscated. Another plan would organize a loan to Ukraine collateralized by the Russian assets. When Ukraine defaults on the loan, which they will certainly do, the lenders could seize the collateral. Another hare-brained scheme would impose a 100% tax on the assets and then collect the tax by seizing the assets. All of these variations amount to the same theft. They are wolves in sheep&rsquo;s clothing.
One immediate impact would be the decline of trust in the U.S. Treasury market and an aversion to holding U.S. Treasury securities in sovereign reserves. Major holders of U.S. Treasuries such as China, Japan, Taiwan, Saudi Arabia, Brazil and others would gradually reallocate reserves away from Treasuries toward assets that cannot be frozen or seized such as gold bullion.
<h2 class="subhead">A Golden Opportunity</h2>
This theft of Russian assets will also give a boost to efforts by the BRICS+ members to create an alternative gold-linked trade currency (and ultimately reserve currency) for use in international transactions. This effort will take several more years to complete, but U.S. abandonment of the rule of law will accelerate that effort.
In an ironic twist, the mere talk about stealing Russian assets has caused the price of gold to increase by $600 per ounce in a matter of months. Russia has approximately 3,000 metric tonnes of gold in its reserves, which cannot be touched by Western sanctions or the REPO Act. The rally in gold prices has increased Russia&rsquo;s reserve position by $50 billion without Russia lifting a finger. This is further evidence (as if any were needed) of Russian brilliance and U.S. stupidity in playing the global financial game.
If the U.S. and its NATO allies work together to steal 100% of the Russian assets located in the West, it will be the greatest theft in the history of the world. The G7 summit could be a disaster for the global monetary system. But it could provide opportunities as well.
For more details on how gold (and gold miners) will be impacted as June 13 nears, stay tuned. This story is just beginning.

awn-hero-img-06-07-24 G7 summit or meeting concept. Row from flags of members of G7 group of seven and list of countries, 3d illustration

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The G7 Provides Opportunity

Travel season has kicked off, and we&rsquo;re already off to a busy start!
Last Friday, nearly 3 million people were screened at TSA checkpoints &mdash; a record high since the TSA was founded in 2001.
And the day before that was the third-highest on record, making this Memorial Day weekend the busiest few days for airlines by far.
Of course, all of these trips will naturally pad the profits for travel-related companies, leading to big trading opportunities.
Let's take a look at some of the investments you can make this summer to profit from a surge in travel spending.
<h2 class="subhead nbp">The Travel Boom Continues This Summer</h2>
Typically when airlines are in the headlines, it's for all the wrong reasons. Flight delays, turbulence, and unruly passengers are just a few of the many challenges airlines face.
Despite these very real concerns, there&rsquo;s no denying that airlines have been incredibly busy lately.
As I mentioned earlier, last weekend&rsquo;s holiday travel was the busiest on record for airlines. But this is part of a much larger trend&hellip;
According to TSA data, five of the 10 busiest American airport travel days have occurred in the past two weeks. And nine of the top 10 days took place just in the past year!
This strong appetite for travel has shown no signs of letting up, setting the stage for another blockbuster summer season.
Two key factors are driving this sustained boom in travel stocks.
First, robust retail demand persists despite concerns about the economy. Consumers are prioritizing experiences over material goods, fueling leisure travel.
But it's not just vacationers hitting the road and skies. We're also witnessing a resurgence in business travel as companies embrace more flexibility in work arrangements.
This dual tailwind of retail and corporate demand is a powerful combination for travel companies.
Equally significant is the shifting trend in when people are traveling.
Rather than the traditional Monday morning and Friday evening rush, we're seeing travel spread more evenly throughout the week.
The lines between "weekday" and "weekend" are blurring as remote work becomes entrenched. This interesting shift in dynamics is a massive productivity boost for airlines.
With demand more balanced across all days, carriers can optimize routes and fill more seats on more flights. It's a game-changer that should drive higher profitability.
This summer, I'll be watching airline stocks very closely for potential trading opportunities.
Airlines like Delta Air Lines (DAL) should benefit from the flexibility to operate more efficiently.
I don't typically like to hold these stocks for long-term investments. That's because too many variables can hurt even the most well-run airline.
Worker shortages and strikes, bad weather, regulations, and competition tend to drive stock prices lower every few years.
But during high-profit seasons, airlines can trade sharply higher, giving nimble investors some excellent profits.
Of course, airlines aren&rsquo;t the only companies that benefit from this travel boom.
Hotel chains like Marriott International Inc. (MAR) will capitalize on growing leisure and business demand.
And cruise operators such as Royal Caribbean Cruises Ltd. (RCL) are well-positioned as consumers spend on experiences.
(Please note that while these are all great stocks to buy before travel season picks up in earnest, these aren&rsquo;t official &ldquo;buy&rdquo; recommendations.)
So get ready for another summer of busy airports, packed hotels, and booked cruises.
The travel boom is here to stay, leading to some big trading opportunities across the travel sector.

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Expect to see a lot of household names as well as lesser-known dividend-payers in hot markets like&nbsp; alternative energy and cloud computing.&nbsp;
He&rsquo;ll also share strategies to reduce your taxes, earn extra paychecks, invest in commodities like gold and silver, even ways to pick up more cash outside of the stock market.
With Zach&rsquo;s help, you can build a diversified set of income streams so you never have to worry about money again.

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Lifetime Income Report — A former hedge fund manager’s “Three Pillars of Income Investing” are your key to safe, sustainable and growing cash payouts.

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Welcome to Travel Season! Here's How to Profit

The Wannsee Conference was a meeting of government officials held in a large villa located near a lake in a western suburb of Berlin. The attendees included representatives of various government agencies involved with military affairs, the Ministry of Justice, transportation, logistics, foreign affairs, and the office of the Chancellor. They were trying to solve certain operational problems caused by bottlenecks in existing processes.
By gathering officials from many agencies with different perspectives, it was believed that they could cooperate to resolve the issues without finger pointing. It was an example of what today is called an &ldquo;all of government&rdquo; approach. The conference was a success, the bottlenecks were resolved, and operations went much more smoothly from the time of the meeting.
I left a few details out of the foregoing paragraph. Here they are: The meeting took place on January 20, 1942. The German Chancellor at the time was Adolf Hitler, referred to as the F&uuml;hrer. The attendees included SS Obergruppenf&uuml;hrer Reinhard Heydrich, who reported directly to Heinrich Himmler. The recording secretary of the meeting was Adolf Eichmann, who was also a transportation director.
The problem they were trying to solve was how to kill Jews more efficiently. The solutions included the expansion of the Auschwitz II death camp, which received freight trains of Jews from 1942 to 1944. Over 1.1 million were murdered there, mostly in gas chambers. The trains ran on time. The all of government approach worked.
<h2 class="subhead">Biden&rsquo;s &ldquo;All of Government&rdquo; Directive</h2>
The leading practitioners of the &ldquo;all of government&rdquo; approach today are members of the Biden administration. When they take steps to destroy the United States through open borders, fentanyl importation, allowing terrorist infiltrations, targeting political enemies, and trying to put election opponents in jail, they do not stop at the use of a single government department or agency that might have primary jurisdiction. They create an interagency task force involving five of six agencies that share information, contribute ideas, and coordinate activities intended to destroy their enemies.
For example, they might begin by using bank regulators to conduct a routine bank audit that targets loan applications by Donald Trump&rsquo;s companies. They find a document that gives a certain valuation for a particular property being used as collateral for a loan. That document is passed to a state official such as New York State Attorney General Letitia James, who obtains a phony appraisal suggesting the value of the property is less that what is shown on the loan application. Tax officials are enlisted to produce tax returns that show even different valuations.
From there, a fraud case in concocted and brought before a Trump-hating judge in the Bronx. The result is a liability of over $550 million against Trump&rsquo;s businesses, even though the loan was paid on time and in full and the lending bank testified they would make the loan again and performed their own due diligence on the valuation issue. No matter. Bank regulators, tax officials, the Attorney General&rsquo;s office and a corrupt judge worked together to try to bankrupt Trump. That&rsquo;s the power of the all of government method. You coordinate across agencies to destroy your political enemies.
There are many other examples. Prosecutors in the RICO criminal case in Georgia that accuses Trump of interfering with the 2020 election spent enormous amounts of time in Washington and at the White House meeting with Biden administration officials to plan their case. The prosecutor in the New York hush money case was transferred from the Department of Justice to the Manhattan DA&rsquo;s office expressly to handle the trial. (No one thought the Manhattan DA, Alvin Bragg, was actually smart enough to conduct a trial of charges this convoluted).
Sometimes all of government is expanded to include agents outside the government. A good example is the pre-dawn arrest of political advisor Roger Stone at his home in Fort Lauderdale, Florida on January 25, 2019. The FBI attacked his house with armored vehicles, automatic weapons and flash bombs. It was all for show.
In fact, Stone appeared at the door unarmed and in his pajamas. Still, the FBI tipped off CNN so they could film the entire episode with special night vision cameras. Stone was convicted on made-up charges and then pardoned by President Trump. The coordination between a corrupt FBI and the left-wing CNN shows how the all of government approach can be leveraged through corporate media and social media.
<h2 class="subhead">The IRS Joins the Team</h2>
The latest agency to be enlisted in Biden&rsquo;s all of government war on political enemies is the IRS. Of course, the IRS has a long history of being involved with political targeting of enemies and the leaking of confidential taxpayer information. The latest expansion of their powers feeds directly into the all of government technique.
The IRS is now being weaponized to coordinate with the Department of Justice, the Department of Homeland Security, and other agencies to attack Biden&rsquo;s opponents. Under new authorities, armed IRS special agents may be assigned to temporary duty with Drug Enforcement Task Forces, the FBI, the intelligence community, and the Financial Crimes Task Force among others. This is the true all of government approach.
We&rsquo;ve watched the weaponization of the U.S. dollar in the form of sanctions on Russia and others in connection with the war in Ukraine. That has backfired and is leading to a de-dollarization movement that may end in a much weaker dollar and much higher inflation down the road.
We&rsquo;ve also seen the weaponization of the U.S. justice system that has led to relentless and unfounded prosecutions of presidential candidate Donald Trump from the Russia Hoax, two phony impeachments, a half-billion dollar liability for a harmless valuation dispute on a loan application (the loan was repaid on time and in full), a made-up RICO case in Georgia where the prosecutor may be disqualified for misconduct, a &ldquo;hush money&rdquo; case in New York where even left-leaning experts can&rsquo;t tell you what the crime is, a classified documents case in Florida which may be dismissed due to prosecution tampering with the evidence, and finally a January 6th case in Washington, which is on hold pending a Supreme Court ruling on presidential immunity.
This kind of weaponization (taking legitimate government functions and turning them into tools to destroy political enemies) began with the Obama administration and its hyper-political Attorney General Eric Holder and has now infected all branches of government under the Biden administration.
<h2 class="subhead">A Knock on Your Door</h2>
As a result, the latest update of the IRS Internal Review Manual expands the scope of IRS investigation and audit activity to include anyone who impedes the government&rsquo;s &ldquo;ability to govern&rdquo; or who poses a &ldquo;threat to public safety or national security.&rdquo;
Such phrases sound benign when applied to foreign terrorists or criminal masterminds. Then you realize they can just as easily be applied to political opponents, Trump supporters, podcasters, opinion writers, political organizers or everyday Americans who stand in the way of Biden&rsquo;s neo-fascist ambitions.
The IRS can use threats of audits and investigations to intimidate social media platforms like Google, Facebook, and Instagram into shutting down MAGA Republicans and others who oppose Biden policies.
The IRS manual changes also authorize the agency to &ldquo;disclose in writing, return information &hellip; which may constitute evidence of a violation of federal criminal laws to the extent necessary to apprise the head of the appropriate federal agency charged with responsibility for enforcing such laws.&rdquo; In other words, the IRS can leak taxpayer information to the Justice Department, Department of Homeland Security or other agencies with enforcement power in order to sic those agencies on targeted victims.
This happens in a context where simple political opposition has been criminalized, giving the IRS carte blanche to choose their victims. If you are outspoken against the Biden administration, keep your tax records handy and get ready for a knock on the door.
There&rsquo;s only one way to end this all of government targeting of Biden&rsquo;s enemies. That&rsquo;s to end his government once and for all in the next election.

Biden’s IRS Is Watching You

I continually remind gold investors, whether in bullion or mining shares, not to get too euphoric when gold rallies and not to get too depressed when the dollar price retreats. Gold is still the best form of money and proves valuable to investors over time. This is true whether inflation or deflation prevails.
The key for investors is to stay focused on the long-term attributes of gold and not get caught-up in day-to-day price moves. The dollar price of gold is volatile. There&rsquo;s no reason why your investment outlook needs to be volatile too.
That said, it&rsquo;s worth looking at the long-term prospects for the dollar price of gold. If we&rsquo;re not going to sweat the short-run, we should care about the long-run.
<h2 class="subhead">My Updated Gold Forecast</h2>
I have updated my forecast that gold will move past $25,000 per ounce by 2026 or sooner. That&rsquo;s not a guess; it&rsquo;s the result of rigorous analysis. There&rsquo;s never a guarantee that a particular outcome will prevail, but this gold price forecast is based on the best available tools and models that have proved accurate in many other contexts.
By the way, this updated forecast has nothing to do with the recent&nbsp;gold&nbsp;performance. It has to do with the money supply. The quantity of official&nbsp;gold&nbsp;has been constant since 1980. All we're really saying is that if money supply goes up and the quantity of&nbsp;gold&nbsp;is fixed, then you need a higher implied price of&nbsp;gold&nbsp;to support the money supply at a 40% level. The higher market price of&nbsp;gold&nbsp;closes the gap a little but not by much. The truth is that the money supply is running away from the price of&nbsp;gold,&nbsp;so the gap is getting wider.
This is a good time to review two distinct models to explain exactly how I reach that price level forecast.
<h2 class="subhead">The Monetary Model</h2>
This model analysis begins with a simple question: What is the implied non-deflationary price of gold under a new gold standard? It&rsquo;s a simple question with a somewhat complicated answer and a tangled history.
No central banker in the world wants a gold standard. Why would they? Right now, they control the machinery of central bank command currencies (also called fiat money). They have no interest in a form of money they can&rsquo;t control. It took about 60 years from 1914 to 1974 to drive gold out of the monetary system. No central banker wants to let it back in.
Still, what if they have no choice? What if confidence in command currencies collapses due to some combination of excessive money creation, competition from Bitcoin, extreme levels of dollar debt, a new financial crisis, war or natural disaster?
In that case, central bankers may return to gold not because they want to, but because they must in order to restore order to the global monetary system.
That scenario begs the question: What is the new dollar price of gold in a system in which dollars are freely exchangeable for gold at a fixed price?
If the dollar price is too high, investors will sell gold for dollars and spend freely. Central banks will have to increase the money supply to maintain equilibrium. That&rsquo;s an inflationary result.
If the dollar price is too low, investors will line up to redeem dollars for gold and then hoard the gold. Central banks will have to reduce the money supply to maintain equilibrium. That reduces velocity and is deflationary.
Something like the latter case happened in the UK in 1925 when the Exchequer returned to a gold standard at an unrealistically low price. The result was that the UK entered the Great Depression several years ahead of other developed economies.
Something like the former case happened in the U.S. in 1933, when FDR devalued the dollar against gold. Citizens were not allowed to own gold, so there was no mass redemption of gold. But other commodity prices rose sharply.
That was the point of the devaluation. Resulting inflation helped lift the U.S. out of deflation and gave the economy a boost from 1933 &ndash; 1936 in the midst of the Great Depression. (The Fed caused another severe recession in 1937 &ndash; 1938 with their customary incompetence).
The policy goal obviously is to get the price &ldquo;just right&rdquo; and then maintain it with open market operations using gold and dollars. The U.S. is in an ideal position to do this by selling gold from U.S. Treasury reserves, about 8,100 metric tonnes, or buying gold in the open market using freshly printed Fed money. The goal would be to maintain the dollar price of gold in a narrow range around the fixed price.
What price is just right? This question is easy to answer, subject to a few assumptions.
U.S. M1 money supply is $17.9 trillion. (I use M1, which is a good proxy&nbsp;for&nbsp;everyday money).
What is M1? This is the supply that is the most liquid and money that is the easiest to turn into cash. It contains actual cash (bills and coins), bank reserves (what is actually kept in the vaults), and demand deposits (money in your checking account that can be turned into cash easily).&nbsp;
The total amount of official gold the U.S. has is 8,133 metric tonnes. That equals 261.5 million troy ounces.
One needs to make an assumption about the percentage of gold backing for the money supply needed to maintain confidence. I assume 40% coverage with&nbsp;gold. (This was the legal requirement&nbsp;for&nbsp;the Fed from 1913 to 1946. Later it was 25%, then zero today).
Applying the 40% ratio to the $17.9 trillion money supply means that $7.2 trillion of gold is required.
Applying the $7.2 trillion valuation to 261.5 million troy ounces yields a price of $27,533 per Troy ounce of gold. That&rsquo;s the implied non-deflationary equilibrium price of gold in a new global gold standard.
Of course, money supplies fluctuate; lately they&rsquo;ve been going up sharply, especially in the U.S. Other measures of money such as M0 or M2 would yield different results. Exchange rate fluctuations can change dollar equivalents for foreign money supply.
There&rsquo;s room for debate about whether a 40% backing ratio is too high or too low. Still, our assumptions are moderate based on monetary economics and history. A dollar price of gold of over $25,000 per ounce in a new gold standard is not a stretch. Obviously, you get around $12,500 per ounce if you assume 20% coverage.
<h2 class="subhead">The Fundamental Model</h2>
This model is also straightforward. It relies on factors we learned about in our first week of Intro to Economics &ndash; supply and demand.
The most significant development on the supply side is the decrease of new mining output. As the chart shows below, mine production of gold in the U.S. has been decreasing steadily since 2017.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2EYHZUKGRwkPTxcnY5XLGc/f5fd16f9d7aa250a08e6e5924cdd1afc/awn-img1-05-08-24.png" alt="image 1" width="540px" />
These figures reveal a 28% decrease over 7 years, at the same time gold prices were rising and miners were motivated to expand output.
This is not to argue that the world has reached &ldquo;peak gold,&rdquo; (output could expand in future for a variety of reasons). Still, my contacts in the mining community consistently report that gold is becoming more difficult to source and the quality of newly discovered ore is low-to-medium at best. Flat output, all things equal, tends to put a floor under prices and to support higher prices based on other factors.
The demand side is driven largely by central banks, ETFs, hedge funds and individual purchases. Traditional institutional investors are not large investors in gold. Much of the demand from hedge funds is conducted in derivatives such as gold futures contracts and over-the-counter forwards and options. Derivatives generally do not involve physical delivery of gold but expanding open interest and buying pressure do tend to support the price.
Central bank demand for gold has surged from less than 100 metric tonnes in 2010 to 1,100 metric tonnes in 2022, a 1,000% increase in 12 years. Central bank gold demand remained strong in 2023 with 800 metric tonnes acquired through September 30, 2023. That puts central bank gold demand on track for a new record in 2023. There&rsquo;s no sign of that demand slowing in 2024.
Overall, the picture is one of flat supply and increasing demand, mostly in the form of official purchases by central banks. It&rsquo;s difficult to make price forecasts from supply and demand data alone without taking into account certain catalysts such as declining note yields, or a growing inflation narrative; actual inflation is another matter.
On balance, growing demand and flat supply tend to cause price increases. These price increases are consistent with the price gains derived from the monetary model described above.
<h2 class="subhead">A Math Lesson</h2>
Finally, a bit of elementary math is helpful in understanding how the dollar price of gold can move past $25,000 per ounce in the next two years. For this purpose, we&rsquo;ll assume a baseline price of $2,000 per ounce (although gold has been in the $2,300 range lately with no signs of falling back to the $2,000 level). But for our purposes, we&rsquo;ll keep it simple.
A move from $2,000 per ounce to $3,000 per ounce is a heavy lift. That&rsquo;s a 50% increase and could easily take a year or more. Beyond that, a further increase from $3,000 per ounce to $4,000 per ounce is a 33% increase: another large rally. A further gain from $4,000 per ounce to $5,000 per ounce is a further gain of 25%.
But notice the pattern. Each gain is $1,000 per ounce, but the percentage increase drops from 50% to 33% to 25%. That&rsquo;s because the starting point is higher while the $1,000 gain is constant. Each $1,000 jump represents a smaller (and easier) percentage gain than the one before.
This pattern continues. Moving from $9,000 per ounce to $10,000 per ounce is only an 11% gain. Moving from $14,000 per ounce to $15,000 per ounce is only a 7% gain. Gold can move 1% in a single trading day, sometimes 2% or more.
At progressively higher prices, we see the same $1,000 gain (it&rsquo;s real money to you), but the percentage increase is smaller, and the hurdle is therefore lower. As an extreme example, a move from $99,000 per ounce to $100,000 per ounce is about a 1% move. All in a day&rsquo;s work. Those $1,000 per ounce pops get even easier as we approach our calculated price of $27, 533.
<h2 class="subhead">Got Gold?</h2>
One intriguing aspect of this analysis is that the monetary model and the fundamental model produce strikingly similar results, although the models rely on different factors and different dynamics. This does not prove either forecast is correct, but it adds to the probability that they are both correct. Basic supply and demand also support the forecast of higher prices, albeit with less specificity.
The lesson for you as an investor is to buy gold now. (I recommend getting your physical gold from our friends at <a href="https://hardassetsalliance.com/rickards/?aff=AWN">Hard Assets Alliance</a>. They are helpful with any questions about purchasing gold you may have, and the process is simple).
As prices continue to rally, you&rsquo;ll get more gold for your money at the outset and high percentage returns as gold rallies from a lower base. Toward the end of the long march past $25,000 per ounce, you&rsquo;ll have bigger dollar gains because you started with more gold. Others will jump on the bandwagon, but you&rsquo;ll already have a comfortable seat.

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Gold: $27,533

If you remember learning to ride a bike, or have ever watched someone learn to ride a bike, you&rsquo;ll be familiar with what that process looks like.
Starting out is tough. Maybe the new bike rider can ride for a second or two before falling over.
As the learning progresses, a sense of balance is learned.
Gradually, the rider can ride for longer periods of time before toppling over.
Learning to ride a bike, like lots of other forms of progress, can be ugly.
When all is said and done, it looks completely natural. It's hard to imagine Lance Armstrong struggling to balance a bicycle. However, once upon a time, he was just getting his footing.
As the market changes and companies change, the process can look a bit like the early stages of riding a bike.
One step forwards, two steps backwards.
Progress typically happens gradually.
The trouble comes in when investors expect the progress to happen in an unrealistic time frame.
Unfortunately, we are seeing a bit of this in the market today.
<h3>It&rsquo;s Time to Be Patient</h3>
Advanced Micro Devices, Inc. (AMD), one of the world&rsquo;s leading chipmakers for PCs and servers, is down about 8.5% after releasing first quarter earnings this morning.
Now, the company didn&rsquo;t do anything wrong.
Sales were up 2% from last year, a bit more than analysts expected.
AMD&rsquo;s data center business, which is a big component of AMD&rsquo;s AI business, is up 80% from a year ago.
These data center servers are selling so well that the company told Wall Street that it expects to make $4bn in AI servers this year, 14% more than it was previously anticipating.
Although AMD&rsquo;s data center business is growing rapidly, investors were hoping for more.
Which brings us to today&rsquo;s tumble.
Quite frankly, it seems that investors were hoping for AMD to produce some kind of miracle.
The company has its work cut out for them.
Despite AMD&rsquo;s substantial progress in capitalizing on AI, AMD&rsquo;s server sales are still just 5% as much as Nvidia's.
On the flip side, this also means that AMD has a lot more room to grow by stealing market share from Nvidia.
While AMD wasn&rsquo;t able to produce any miracles this quarter, the company continues to put up solid numbers in the absolutely massive AI market.
As I&rsquo;ve said before, AI has the potential to create even more wealth than the internet.
But, this process takes time.&nbsp;
Long term patience will pay off big. My investors who held on when Bitcoin dropped from $10,000 to $5,000 are now sitting on $55,000 in gains.&nbsp;
AI is no different (in fact, probably bigger).
While the market impatiently wants AMD&rsquo;s AI supercomputers to take over the world and enslave humanity as soon as possible, the reality is we&rsquo;ll have to wait.
AI is a long term play that's not going away anytime soon.&nbsp;
If you&rsquo;re new to the market, today could be a good opportunity to buy the dip in shares of AMD while they are on sale. Despite the bumps in the road, I&rsquo;m just as bullish as ever on AMD (I might even buy a bit later today).

AMD Goes on Sale

Miscellaneous

Today&rsquo;s GDP number came in weaker-than-expected at 1.6% annualized, the weakest quarterly gain in almost two years.
Wall Street did NOT like the news. At the open, the Dow fell by 681 points or 1.7%; the S&amp;P 500 was down 1.5% and the Nasdaq Composite slid by 1.9%, as investors projected a longer wait for the first rate cut from the Federal Reserve.
We&rsquo;ve written for months that there would be no interest rate cut by the Fed at their June meeting. Wall Street was putting the odds of a rate cut at around 70% and the stock market was rallying in anticipating the cut. They were wrong, we were right.
Today, every top Wall Street analyst is proclaiming there will be no rate cut in June, maybe not in July either. Thanks, guys and gals. You&rsquo;re only about three months behind the curve, and your forecast came after the market had already corrected and internalized the new view. That&rsquo;s worthless forecasting, but it&rsquo;s what Wall Street does best.
Now there is a chance that we won&rsquo;t get any rate cuts this year. There&rsquo;s nothing new in this face plant. Wall Street has been wrong about rate cuts for almost two years, and they&rsquo;re wrong now. Recall, the Federal Reserve started raising rates in March 2022 from a base of 0.00%. By the late summer of 2022, Wall Street was already talking about the &ldquo;pivot.&rdquo;
This was jargon for a rate cut. No one expected it that soon, but early 2023 was Wall Street&rsquo;s target date for the pivot. That never happened. Wall Street extended the pivot date of mid-2023. Then late-2023. Then early-2024. Wrong, wrong, and wrong. Moving the pivot date from June 2024 to later this year is just the latest blunder.
<h2 class="subhead">Stagflation, Anyone?</h2>
The Fed wants to see inflation start coming down in a persistent manner, but the market wants to see economic growth and corporate profits increasing. So. if neither are headed in the right direction, then that&rsquo;s going to be bad news for markets. With inflation actually rising in the latest report and economic growth slowing down with today&rsquo;s GDP report, this is exactly what is happening.
Behind Powell&rsquo;s carefully laid plans and the markets&rsquo; Goldilocks-type assumptions lies a huge fallacy. The assumption is that interest rates and inflation have a reciprocal relationship. Timing aside, markets and the Fed both assume that current high interest rates will tame inflation, and that will pave the way for rate cuts, stronger growth, and higher stock prices. But there&rsquo;s no evidence for this.
The Great Depression (1929-1933) was a period of low interest rates and unprecedented deflation. The Great Inflation (1977-1981) was a period of high interest rates and record-high inflation. History teaches that there is no inverse correlation between interest rates and inflation.
In the 1930s, rates chased inflation down. In the 1970s, rates chased inflation up. In both episodes, the Fed did not lead the way, they followed. The Fed was not in charge. Markets and individual psychology were in charge. The Fed (and markets) are reactive and not proactive. This is no way to run a railroad.
We could be looking at the worst of all possible worlds. We are now seeing slowing growth and higher inflation at the same time. Stagflation, anyone?
<h2 class="subhead">The Fed Has No Idea What They Are Doing</h2>
The latest FOMC meeting back in March was followed by a press conference with Fed Chair Jay Powell. With regard to the policy rate, Powell repeated much of what he said last January and in his more recent testimony before Congress.
Powell said: &ldquo;The economy has made considerable progress toward our dual mandate&rdquo; to promote low unemployment and maintain price stability. But in almost the same breath he said, &ldquo;Inflation is still too high.&rdquo; He then added, &ldquo;Inflation &hellip; remains above our longer-run goal of 2 percent.&rdquo;
On the &ldquo;positive&rdquo; side, Powell said, &ldquo;Economic activity has been expanding at a solid pace.&rdquo; And he noted, &ldquo;We did mark-up our growth forecast&rdquo; in reference to the SEP dots. So, what happen to that &ldquo;mark-up&rdquo; for forecasting growth? That&rsquo;s why the dots are worthless and Powell knows it.
So, we&rsquo;re back to the conundrum that has faced the Fed since they stopped raising rates last July: The Fed is reluctant to cut rates because it might fuel inflation. At the same time, the Fed is reluctant to keep rates too high because it might cause recession (which may be already here)
Powell said this explicitly: &ldquo;The risks are really two-sided here. &hellip; If we ease too early, we could see inflation come back. &hellip; If we ease too late, we could&rdquo; impact the economy negatively.
I&rsquo;ve been saying for months that a recession is imminent. Today&rsquo;s GDP numbers reflect that the economic engine is slowing down.
It&rsquo;s all nonsense; a narrative designed to lull investors into complacency and into buying more stocks. The truth is the Fed has no idea what they&rsquo;re doing, the Fed doesn&rsquo;t matter that much anyway, and Wall Street is in the tagalong business, not real forecasting.
Wall Street is following the Fed. And the Fed is using bad models that are consistently getting their forecasts wrong. It&rsquo;s the blind leading the blind.

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No Way To Run An Economy

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Rickards Uncensored Call (with Byron King 1/5/2024)

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