The Daily Reckoning Australia

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In times of geopolitical upheaval, it’s real assets…not Facebook or non-fungible tokens…that have their time in the sun.

We’ve seen that with certain Aussie resource stocks over the last few months.

And with what’s just happened in Poland, things have the potential to get even more intense.

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In Times of Chaos and Lies, Gold and Commodities Will Shine Through

Friday, 18 November 2022 — Burradoo, New South Wales, Australia

Brian Chu
By Brian Chu
Editor, The Daily Reckoning Australia

[7 min read]

In today’s Daily Reckoning Australia, the world appears to have dodged a global hot war for now, but it’s clear that things are far from cooling down. Someone wants to escalate the situation in Russia and Ukraine. There’s big money behind it, even more, if the conflict spirals out of control. Regardless, it’s critical to safeguard yourself in such times of chaos and confusion. Where do I place my cash in such troubling times? Gold and commodity stocks. Find out why…

Dear Reader,

Some years go by without much drama. Then there are years where an entire decade of events come one after another.

2022 is the latter category.

Barely a week goes by without an Earth-shaking event (or two).

Let me go through two noteworthy events recently taking up much airtime — the FTX collapse and that stray missile that hit Poland two days ago.

These two events don’t seem linked.

But let me show you how they may be…

Deep in the global information war

I mentioned in a piece in July that we are living in a global information war.

Each day, media outlets release stories to not only inform you of what’s happening, but they seek to shape how you perceive things. They may stir you emotionally and persuade you to adopt a particular view through their narrative. As a result, it’s possible for two people to perceive the same event differently — from different sources — and end up in disagreement. This can lead to societal division, isolation, and discord.

In recent weeks, this war has escalated further, with Elon Musk taking charge of Twitter. Instead of having a prevailing narrative on an event that comes from purportedly ‘trusted sources’, you end up having competing perspectives. Each side declares the other as spouting ‘fake news’ and ‘debunked theories’.

Literally, everything you read (including this article) may potentially spring a trap, leaving you a casualty to false information and narrative confusion.

How do you traverse through this psychological minefield?

I’d say follow the money trail and identify the ulterior motive — sometimes, that motive is out there in plain sight.

And the FTX saga is an intriguing case in point…

FTX collapses — a dirty money trail of corruption, deceit,
and something darker

Critics of crypto have enjoyed another week of ‘I told you so’ with the collapse of the second-largest crypto exchange, FTX.

This time last year, crypto investors were on top of the world.

Bitcoin [BTC] traded at an all-time high of US$68,000, and it seemed like it would send gold to an ignominious retirement.

Things turned around with the outbreak of the Russia-Ukraine conflict in late February, with Russian crypto investors facing expulsion from many exchanges in early March.

Token prices across the board plummeted. This accelerated with the demise of Terra Luna in May and Celsius in June.

With each high-profile demise of crypto tokens or trading platforms, the usual suspects come out to talk about regulating the crypto market and shilling their central bank digital currencies (CBDCs). The demise of FTX last week served to spark further calls for regulation on crypto trading and ownership.

What’s interesting is that FTX was a front for dark activities, which the liquidator is revealing for all to see. One that could end up implicating some of the globalist elites who are hell-bent on pushing people into CBDCs.

For example, the disgraced founder of FTX, Sam Bankman-Fried, is linked to influence-peddling using corporate donations to Democrat members of the US Congress. Furthermore, he was the second-biggest donor to the Biden campaign in 2020 and bankrolled heavily for the Democrats in the recent midterm elections (more about this here).

Those who ran FTX and its associated trading firm, Alameda Research, were a tight-knit group of young men and women from high society. They engaged in front-running the market, earning massive profits while shafting their customers.

Even the World Economic Forum regarded FTX highly. It earned a prominent ESG (environmental, social, and governance) ranking from the group and became an exemplar for other corporations to follow.

But since its demise, the organisation has removed references to FTX from its website.

Then there’s foreign aid to Ukraine, paid through taxpayer funds. So far, the US Government has sent more than US$50 billion to Ukraine:

Fat Tail Investment Research

Source: Twitter

[Click to open in a new window]

FTX was a preferred platform for such transactions.

Much of the funds seemed to have disappeared after they were sent or are untraceable. The Office of Inspector General earlier this month launched a task force responsible for auditing and tracing it.

I find the timing of setting up this task force and the demise of FTX, with exposure to its corrupt and nefarious activities, to be quite interesting.

But let’s say it’s just a coincidence (for now). One thing is for certain, ‘stakeholder capitalism’ and socially responsible investing have clearly taken a king-hit.

Peace talks, stray missile, and an embarrassing mass-retraction
of ‘fake news’

In the past week, Ukrainian forces managed to reclaim parts of Kherson after Russian forces vacated the city. While some perceived this to be a decisive defeat of Russia, even the mainstream media, with its pro-Ukrainian leaning, cautiously hinted that this may be a strategic move by Russia as winter approaches.

Things became more interesting as Ukrainian President Volodymyr Zelenskyy said he was ready for peace talks. This contrasted with his hard stance last month, where he declared this impossible.

At this point, one would hope that the poor citizens of Ukraine can go back home and rebuild just as winter approaches.

Except we woke up yesterday morning to news that a missile hit Poland, killing two civilians.

There was much speculation as to who launched the missile, with many fingers pointing to (you guessed it) Russia. Not long after, a chorus of Ukrainian officials (including President Zelenskyy himself), foreign leaders, and media outlets (here, here, and here) claimed that Russia wanted to provoke war by firing the missile.

There was heightened tension for several hours until the Polish President Andrzej Duda and the Biden Administration announced that the missile may have been fired by Ukraine as a defence measure against Russian strikes.

The Associated Press, along with several media outlets, was forced to retract its fake news reports, one that could’ve brought the world close to an international hot war.

In the meantime, Ukraine received another pledge from the US of US$37.7 billion in taxpayer-funded aid.

As tensions remain high, let history guide your investing decisions

The world appears to have dodged a global hot war for now, but it’s clear things are far from cooling down.

Regardless of your leanings and views, what you should realise is this:

Someone wants to escalate the situation in Russia and Ukraine. There’s big money behind it, and even more if the conflict spirals out of control.

Take what the officials, media outlets, and online influencers say with a grain of salt. The first casualty of war is the truth.

Regardless, it’s critical to safeguard yourself in such times of chaos and confusion.

The collapse of FTX has gutted the crypto market once again. But I assure you that it’ll rise from the ashes. Right now, it’s dangerous territory best left to the most gung-ho of investors.

On the other hand, the global supply chain remains in bad shape. But a rising demand for commodities will continue as many countries seek to return to some form of normality.

The Bloomberg Commodities Index is showing signs that the worst is behind it:

Fat Tail Investment Research

Source: Thomson Reuters Refinitiv Datastream

[Click to open in a new window]

What about gold? It’s bounced nicely in US dollar terms in the past two weeks:

Fat Tail Investment Research

Source: Thomson Reuters Refinitiv Datastream

[Click to open in a new window]

The Federal Reserve might still raise rates to combat inflation going forward. But it’s hitting the critical point where it could topple the markets.

Where do I place my cash in such troubling times? Gold and commodity stocks. History has shown commodity prices will do well.

Fat Tail’s newest service, Diggers and Drillers, as well as Jim Rickards’ Strategic Intelligence Australia — of which I am a part of — could help you navigate through the upcoming storm.

Click the above links to find out more about how you can take part in this opportunity!

Regards,

Brian Chu Signature

Brian Chu,
Editor, The Daily Reckoning Australia

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Barbarians Inside the Gates
Bill Bonner
By Bill Bonner
Editor, The Daily Reckoning Australia

Dear Reader,

The Middle-Class Delenda Est (the middle class must be destroyed).

In the next couple of days, we will look at Baltimore rowhouses…the plight of small farmers during the Roman Empire…and the meaning of ‘common sense’, among other things.

All of these themes come together in one extraordinary and magnificent spectacle — think Gone with the Wind meets Stalingrad — that is, the destruction of the middle class and the societies that depend on them. From CNBC: ‘Household debt soars at fastest pace in 15 years as credit card use surges, Fed report says’:

Total debt jumped by $351 billion for the July-to-September period, the largest nominal quarterly increase since 2007, bringing the collective household IOU in the U.S. to a fresh record $16.5 trillion, up 2.2% from the previous quarter and 8.3% from a year ago.

And while debt is increasing, job prospects are receding. Charlie Bilello updates us on the job cuts in the tech industry:

  • Twitter: cutting 50% of its workforce (estimated 3,700 jobs).
  • Facebook [NASDAQ:META]: cutting 13% of its staff (11,000 jobs), its largest round of layoffs ever.
  • Snap [NYSE:SNAP]: cutting 20% of its workforce (1,200 jobs).
  • Shopify [NYSE:SHOP]: cutting 10% of its workforce (1,000 jobs).
  • Netflix [NASDAQ:NFLX]: cut 450 jobs in two rounds of layoffs.
  • Microsoft [NASDAQ:MSFT]: cutting <1% of workforce (1,000 jobs).
  • Salesforce [NYSE:CRM]: cutting 1,000 jobs.
  • Robinhood [NASDAQ:HOOD]: cutting 31% of its workforce.
  • Tesla [NASDAQ:TSLA]: cutting 10% of its salaried workforce.
  • Lyft [NASDAQ:LYFT]: cutting 13% of its workforce (700 jobs).
  • Redfin [NASDAQ:RDFN]: cutting 13% of its workforce.
  • Coinbase [NASDAQ:COIN]: cutting 18% of its workforce (1,100 jobs).
  • Stripe: cutting 14% of its workforce (1,000 jobs).

In addition to these cuts, Amazon [NASDAQ:AMZN] has announced a hiring freeze, Apple [NASDAQ:AAPL] has paused almost all hiring, and Google [NASDAQ:GOOGL] is reducing new hiring by 50%.

War and taxes

Jobs, debt, housing, income, inflation — when these go the wrong way, the middle class is doomed. Add war and taxes…and the destruction is complete.

But the US won’t be the first country to destroy its middle classes. It’s what great empires, as well as banana republics, do. From Ancient Rome to modern Venezuela — eliminating the middle class is not just a by-product of a corrupt elite, it’s the name of the game.

The success of the Roman Empire was mostly thanks to its middle-class farmers and craftsmen. They were the backbone of the Republic, ready to take up their swords and shields as duty called. They were a largely homogenous group, sharing the same culture and values.

But they were a threat to the ruling class, too. Dispersed and independent, they were not so easily distracted by circuses in Rome or so cheaply bought off with the free bread distributed to urban mobs. And they might turn on the elite as well as support them.

As the Republic became an Empire, it expanded its borders in a series of almost permanent wars around the periphery. Generals gained wealth and glory, returning in triumph with their booty…including slaves.

Middle-class farmers had small plots of land that they worked themselves, with their families, and sometimes a few slaves. But when the imperial conquests really got rolling, the number of slaves grew proportionally. In the capture of Epirus alone, in the Third Macedonian War, 150,000 people were sold into slavery.

The slaves changed the domestic economy and the soldiers and free farmers found themselves squeezed. In the early days, a citizen-soldier did his duty and soon returned home to take up his plough again. But as the Empire became more far-flung, it stationed its young men in Africa, Spain, and the Middle East, on bases hundreds of miles from Rome, often with a tour of duty that lasted as long as 20 years.

When they got home, the soldiers found their farms long neglected. Their families often had to borrow in order to survive until the fighting men returned. Then, to pay the debt, the farm was sold to elite landowners. These rich men consolidated the small farms into ‘latifundio’ that were worked by teams of slaves, rather than free men.

Large plantation-style farming then lowered farm prices; independent farmers had a hard time competing. This, combined with the constant need for more soldiers, inflation, and higher taxes, led many farmers to abandon their land…and finally, to sell themselves and their families into slavery.

Common nonsense

‘What goes around, comes around’, is an expression arising from observation and embedded in the popular mind as ‘common sense’.

‘Be nice to the people you meet on the way up’, is another common dictum, ‘because you will meet them again on the way down’.

As it turned out, the rich and powerful met invading barbarians.

By then, the ‘Roman’ army had disintegrated. But it had ceased being ‘Roman’ anyway. When the middle class was destroyed so was the stock of loyal, patriotic soldiers willing to fight and die for the homeland. The empire had been forced to turn to mercenaries and pay-to-fight armies that were reliable…but only to a point. And as the Empire’s finances dissolved, the pay-to-fight soldiers often didn’t get paid and didn’t fight. In the heat of battle, many turned against Rome.

Finally, the Empire was unprotected; there were no citizen soldiers to rally…and no middle class to keep order.

Odoacer deposed the last emperor in 476. By then, the barbarians — which included Goths, Huns, Alans, and other Germanic tribes, escaped slaves, starving and displaced peasants, deserters, and brigands of all sorts — roamed freely over the country, raping, pillaging, stealing, slaughtering, enslaving, and destroying everything and everyone they came in contact with.

More to come…

Regards,

Dan Denning Signature

Bill Bonner,
For The Daily Reckoning Australia

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