Since this is all speculation (without firm evidence), allow me to present my own on Gold. Foreign CBs are selling USTs to raise USD to fund higher oil prices. The Fed is trying to restrict this by establishing new "Swap" facilities using mouse-clicked Dollars. Inflation risks are probably overstated because instead we have price spikes due to supply constraints, which isn't inflation. But the fear in the market means that USTs, and as a result USDs are under pressure. The Fed/Treasury/ESF are, therefore, heavily suppressing PMs to ease pressure on their product. Gold was ALWAYS a safe haven during wars AND times of inflation, so why different now? See above - you can't have it both ways?
In terms of rates, yes nominal rates might be over 4% for the 10Yr BUT with CPI at 3.8% that means that REAL rates are around ZERO. You are, of course, aware of the difference between real and nominal rates as are the "Markets". Yet this distinction is being ignored. And in my experience, when fundamentals and real supply/demand factors are completely out of sync with price trends - there's an agenda, The "markets" are being fed the "talking points" that "rates are high so that's negative for PMs" and like the good little lapdogs to the Fed that the main players in the "markets" actually are, they will, as always, run with the official narrative.
We are in a period of extremely high suppression of PM prices to defend UST/USD as the US gets ever closer to a disaster in the financial system Fortunately, in the words of Ayn Rand "You can ignore reality but you cannot ignore the consequences of ignoring reality". Those consequences have a habit of coming back to bite you in the ass. I'm heavily weighted towards physical PMs and Mining stocks.
Thanks Prof for this very illuminating discussion of oil, stocks , bonds, and gold. Its very interesting to me that the WSJ and just about everybody else got these relations entirely wrong.
I worked in the oil patch during the shocks in the 70s and 80s. Everybody thought we were going to run out of oil. So, as a young chemical engineer, I was part of the effort to develop alternative sources of fuels from coal, shale and biomass. It is a very long story, but just about every technology we evaluated was very capital intensive; so investment could only be justified by higher oil prices. I remember sitting in one meeting where the discussion was how much above inflation w oil prices will go in 5, 10, 20 years. ( (Inflation plus 1,2,or 3 %?) The DOE and most corporate economists were on the same page. Just about every projection had oil at $100 by 1999. So the work continued until the economic models failed.
A lesson Big Oil learned was they could not predict the price of oil (they openly said this). Projects were approved only if they were viable at low oil , about $15 per barrel in the early 90s as I recall. And then fracking become very successful so both oil and gas are still relatively inexpensive. People today really do not appreciate how cheap gasoline and diesel are today and how successful Big Oil has been in finding and developing new reserves . But at $150 per barrel I could probably build you a plant that converts coal into gasoline .
Since this is all speculation (without firm evidence), allow me to present my own on Gold. Foreign CBs are selling USTs to raise USD to fund higher oil prices. The Fed is trying to restrict this by establishing new "Swap" facilities using mouse-clicked Dollars. Inflation risks are probably overstated because instead we have price spikes due to supply constraints, which isn't inflation. But the fear in the market means that USTs, and as a result USDs are under pressure. The Fed/Treasury/ESF are, therefore, heavily suppressing PMs to ease pressure on their product. Gold was ALWAYS a safe haven during wars AND times of inflation, so why different now? See above - you can't have it both ways?
In terms of rates, yes nominal rates might be over 4% for the 10Yr BUT with CPI at 3.8% that means that REAL rates are around ZERO. You are, of course, aware of the difference between real and nominal rates as are the "Markets". Yet this distinction is being ignored. And in my experience, when fundamentals and real supply/demand factors are completely out of sync with price trends - there's an agenda, The "markets" are being fed the "talking points" that "rates are high so that's negative for PMs" and like the good little lapdogs to the Fed that the main players in the "markets" actually are, they will, as always, run with the official narrative.
We are in a period of extremely high suppression of PM prices to defend UST/USD as the US gets ever closer to a disaster in the financial system Fortunately, in the words of Ayn Rand "You can ignore reality but you cannot ignore the consequences of ignoring reality". Those consequences have a habit of coming back to bite you in the ass. I'm heavily weighted towards physical PMs and Mining stocks.
Bravo!
“Facts do not cease to exist because they are ignored.”
~ Aldous Huxley
Thanks Prof for this very illuminating discussion of oil, stocks , bonds, and gold. Its very interesting to me that the WSJ and just about everybody else got these relations entirely wrong.
I worked in the oil patch during the shocks in the 70s and 80s. Everybody thought we were going to run out of oil. So, as a young chemical engineer, I was part of the effort to develop alternative sources of fuels from coal, shale and biomass. It is a very long story, but just about every technology we evaluated was very capital intensive; so investment could only be justified by higher oil prices. I remember sitting in one meeting where the discussion was how much above inflation w oil prices will go in 5, 10, 20 years. ( (Inflation plus 1,2,or 3 %?) The DOE and most corporate economists were on the same page. Just about every projection had oil at $100 by 1999. So the work continued until the economic models failed.
A lesson Big Oil learned was they could not predict the price of oil (they openly said this). Projects were approved only if they were viable at low oil , about $15 per barrel in the early 90s as I recall. And then fracking become very successful so both oil and gas are still relatively inexpensive. People today really do not appreciate how cheap gasoline and diesel are today and how successful Big Oil has been in finding and developing new reserves . But at $150 per barrel I could probably build you a plant that converts coal into gasoline .
The strength of the country is apparent in the numbers and the response to negative occurrences .
The not so well defined effect of risk being taken off the table by the demise of a terrorist country isn’t wrapped into the calculation-
The unwinding of OPEC -
The ineffective Russian military-
A sputtering China
A economic resurgence by Japan
-
Common effect is economic freedom from governmental control or interference
Probably a calculable effect but not necessarily studied well because of the glacially incompetent running most of government
Tech, Healthcare, and Wall Street …. remind me, would these be the same three sectors weaponised by the Central Banks, the CIA and the Globalists.
In the 70’s we were dependent on oil, today we are dependent on fumes.