Friday, 18 February 2022 — Albert Park

By Brian Chu Editor, The Daily Reckoning Australia

[6 min read]

• Market woes and the Russia–Ukraine tensions — who’s on first?
• Opportunity in buying gold stocks

Dear Reader,

There’s tension hanging over the world right now.

This week, our world witnessed the most powerful nation on Earth, and its sycophantic media, talk up a war between Russia and Ukraine.

They even gave a date for it, two days ago.

The strange thing is that the two countries have told the world that it’s not happening.

Russia conducted military exercises on the border and have announced that some of their troops are leaving. Ukraine announced that they learnt that there would be a war on the day the US government and the media called it.

Except Ukraine must have gone to sleep the night before and forgot to set the alarm, so it missed the action.

To top it off, both nations are now trolling the US and their bullhorns, asking them to produce a comprehensive list of their predictions of the upcoming war.

They made an ass of the Biden administration, the intelligence agencies, and the media.

As we woke up this morning, there are stories floating that Ukrainian rebels fired shots inside Ukraine.

Maybe there really is a war happening?

I mean, both sides involved have said that there is no war. Hey, maybe the unnamed military insiders in the US know better than Russia and Ukraine!

Because these days, it is not the participants in a fight who know whether they will fight.

And the fear factor rises up a notch…

Market woes and the Russia–Ukraine tensions — who’s on first?

Last month, the financial markets suffered what appeared to be a cardiac arrest. Cryptocurrencies and the NASDAQ Index led the fall (which was quite a plunge), while the broader equity markets tumbled.

Gold tried to stage a rally in the midst of it but also took a beating.

The markets appear to have found some footing this month, although volatility remained.

The Russia and Ukraine fiasco-not-fiasco did take the stock markets for a roller coaster ride. Big drop one day, solid bounce the next.

This event has helped put the rising inflation levels in the US and around the world on the left side of the stage, as if to avoid the spotlight.

Those of us who are on the ball know how much trouble we face on the economic front. The hyped-up tension between Russia and Ukraine is actually the real sideshow.

Don’t discount the hyped-up tension rising further first before it fizzles away.

However, the markets are taking the bait now.

Neither has gold, it appears.

While gold surged in the recent week, it appears that the movement coincides more with Russia and Ukraine rather than because of fears that inflation is now running rampant.

Gold is within an inch of US$1,900 an ounce this morning. Market commentators attribute this to rising alarm on the latest events on the Russia–Ukrainian border. Expect gold investors to take this as the cue when making their trades.

I wrote last week that the price of gold is driven by central banks and their associates to further their goals. It seems like they’re up to their same tricks again, this time using Russia and Ukraine as their cover story to divert attention from their failing system.

Ignore economic inflation and rising uncertainty about the stability of the financial markets. It’s Russia and Ukraine, stupid!

So you now know how not to fall for this trick.

What can you make of this insight?

Opportunity in buying gold stocks

In this current market, almost every asset class is trading at eye-watering levels. It reflects a combination of investor exuberance and the insanity of our fiat currency system.

However, gold stocks are now trading at a deeper discount relative to the gold price. Last year saw them grind down and hence, they are offering better value.

I recently analysed the relative price of the ASX Gold Index [ASX:XGD] and gold in Australian dollar terms from 2013 till today and found something interesting. Check out the figure below:

This graph actually surprised me. I’d been thinking gold stocks were undervalued last year and hence poised for a significant rally. It was disappointing to not see a sustained rally materialise.

What this graph is telling me is that gold stocks are becoming more attractive now.

It gets better from here in light of the prevailing economic and geopolitical developments.

Consider getting into gold stocks right now. The tide seems to be in its favour.

Now which ones should you buy? Let me help you with that!

You will be glad to know that we have a special offer for you coming up on my gold stock investment service, so keep your eye out for that.

Have a great weekend!

Regards,

Brian Chu,
Editor, The Daily Reckoning Australia

By Bill Bonner Editor,The Daily Reckoning Australia

The American Elite Establishment has launched three major initiatives so far this century. All were based on lies, mistakes, and corruption. All were failures.

‘Weapons of mass destruction’ led off. There were none. But the US squandered US$8 trillion and thousands of lives looking for them.

Then came Ben Bernanke’s whopper: ‘If we don’t do this [pass a US$700 billion boondoggle bill] we may not even have an economy on Monday.’ As reported yesterday, it led to US$44 trillion in additional debt since 2008.

Then came the campaign to stop COVID. Pfizer made a fortune from its experimental new drug. The Guardian:

‘Pfizer made nearly $37bn (£27bn) in sales from its Covid-19 vaccine last year — making it one of the most lucrative products in history — and has forecast another bumper year.’

But it didn’t stop the virus. And ‘the science’ now tells us what we suspected all along — that natural immunity is better than a vaccine, and we would have been better off letting the young and the healthy get the virus and get over it, rather than shooting everybody up with drugs and turning vaccines into a political issue. Meanwhile, shutdowns and mandates cost trillions of dollars more, along with stunted lives, drug overdoses, depression, suicides, and broken marriages.

Where did the feds get the money to throw down these ratholes? First, it was real money from taxing citizens and borrowing their savings. Then, when that wasn’t enough, the Fed filled the gap with fake money, ‘printing’ US$8 trillion of new money since 1999.

Wholesale lunacy

And now…rising prices! Who could have seen that coming?

Even as to inflation, they were wrong. First, they thought the problem was ‘too little inflation’. Then, they said they wouldn’t have to ‘normalise’ until 2024. Then, they said inflation was ‘transitory’. And now they say they are going to raise rates — as much as one full percentage point! — next month.

Here’s the latest from US News & World Report:

‘Wholesale inflation rose 1% in January, twice as much as forecast as producers saw the prices they pay showing no sign of a slowdown, the Bureau of Labor Statistics reported on Tuesday.

‘Economists had expected an increase of 0.5% for the month. On a yearly basis, prices rose 9.7%, the same as in December.’

And now…onto the next losing proposition!

Yes, the feds might have been wrong about almost everything so far this century…but there are still a lot more things they can be wrong about.

The nation’s chief executive signalled one of them in his Super Bowl comments.

‘The whole idea that a league that is made up of so many athletes of color as well as so diverse, that there's not enough African American qualified coaches to manage these NFL teams, it just seems to me that it’s a standard that they'd want to live up to. It’s not a requirement of law, but it's a requirement I think of just some generic decency.’

We have no idea what ‘generic decency’ is. Old-fashioned decency is good enough for us. But why would it be more decent to have a black head coach than a white one? Equality?

Even a casual observer can see that NFL coaches tend to be white, whereas the players tend to be black. In the name of equality, Biden chose to focus on the apparent disproportion of white coaches, suggesting that it was somehow indecent. But if it was indecent to have too many white coaches, why was it not indecent to have too many black players?

Depending on inequality

‘Equality’ doesn’t exist in nature. No two snowflakes are exactly alike. Nor are two people. And thank God. Imagine if we were all tipped into a grey porridge of perpetual mediocrity! Distinctions are what we want…not equality. One is smart, another dull. One is fast, another slow. One comes from a good family; another is a gutter rat.

Progress and civilisation depend on inequality. We choose one baker over another because we judge his cakes superior...unequal to those of his competitor. We put our money with a money manager whom we believe will give us returns above those of the others on offer. And we don’t want an NFL team that is just as good as the others. We want one that wins.

One of the propositions adjacent to ‘equality’ is ‘racism’. It purports to explain unequal results in American society. If blacks are generally poorer than whites, it is because the latter holds the former back. It must be a comfort to some people to think so; it excuses them from responsibility for their own lifestyle choices. And it must be a source of pleasant indignation to others; it gives the white elite another big stick to beat the ‘deplorables’ over the head with. But is it true?

Capitalism is (theoretically) colour-blind. Investors want more money; they don’t care who brings it to them. Businesses, too, want sales and profits above all else. But now, in this Enlightened Age, businesses are supposed to care about other things — about the planet, for example…and having a ‘diverse’, racially-balanced workforce.

But Biden’s ‘equality’ and (sotto voce) ‘anti-racist’ suggestion would require us to believe something extraordinary. Apparently, NFL owners are able to put aside their inherent racism when they hire players. And pay them huge amounts of money. The highest-paid player, for example, is Patrick Mahomes, who gets US$45 million per year as quarterback for the Kansas City Chiefs. And there are 19 other players in the NFL who earn more than US$20 million per season.

But then, when they hire their coaches, for some inexplicable reason, the ‘white privilege’ kicks in…and they hire a white man!

It could be a very strange and sophisticated form of racism. And team owners who want to heed Biden’s call, and follow ESG (Environmental, Social, and Governance) guidelines, may do perfectly well. (Maybe coaches don’t really matter very much.) But if we were betting on the Super Bowl…we’d put our money on the old fashioned, decent capitalists. We’d bet on the team that hires the coaches and players who are most likely to move the ball across the goal line.

Regards,

Bill Bonner,
For The Daily Reckoning Australia