Monday, August 01, 2016

Gold & Silver Are Money
"Before the Renaissance, world money existed as precious metal coins or bullion. Caesars and kings hoarded gold and silver, dispensed it to their troops, fought over it, and stole it from each other. Land has been another form of wealth since antiquity. Still, land is not money because, unlike gold and silver, it cannot easily be exchanged, and has no uniform grade .. Regardless of which party wins the U.S. presidential election in November, the U.S. is set for a round of helicopter money (fiscal stimulus monetized by the Fed) in 2017. If Hillary Clinton wins, that probably means a pick-up in Senate votes for Democrats and a bipartisan infrastructure spending bill. If Donald Trump wins, he has already promised massive infrastructure spending, starting with 'The Wall.' .. Either way, we’re looking at more spending, bigger deficits, more money printing and, eventually more inflation. The market’s anticipation of this outcome, starting in mid-November, will be a powerful tailwind for silver."
- Jim Rickards*
LINK HERE to the essay

1 comment:

Anonymous said...

Don Coxe: Negative Rates to Take Gold to Heights Never Before Seen in History of Mankind
Published on Aug 1, 2016

As a historian, Don Coxe is cautious in saying there is something new under the sun. He didn't think he would live long enough to see the creation of an entirely new asset class, which is negative and seemingly endless in scope. Negative yields were first created by the self-financing Swiss to get the euro-zone moving again. Don likens them to the multiplying of bad germs, and finds it likely that there will be painful corrections in the economy, the stock market, or both.

Negative yields are a big challenge to the mathematics of wealth accumulation. This fastest-growing asset class not only won't pay you, but it won't pay you back. It challenges the capital asset pricing model, which is the basis of all actuarial valuations and pension plans. Paying dividends to stock holders and interest to their bankers and bond holders had been the process since the birth of capitalism. It's a new crisis for social security and pension funds around the world.

Stock markets are going to new recovery highs, without any good economic news to justify them. No one is predicting economic growth above 2.5% at most. There is nothing embedded in this to justify the price-earnings ratio aside from the dividends which are being financed by issuing extremely low-yield bonds. If the only formula for giving rewards to investors is to borrow to pay dividends and to buy back stock, then a major stock market sell-off will happen at some point.

All of this is good for gold and silver because of the rising value of financial assets, and the sheer scale of government debts. Gold and silver are among the top performing asset classes in the world. As we see the gold bull market unfolding, we should invest in mining companies, which bring more of a predictable return. When going into mining stocks, one should have a view that things will get better for the price of bullion. Year-to-date the mining companies are up roughly 95%, and gold is up 26.7%, which certainly fits the bill for a bull market.