Friday, 29 April 2022 — Albert Park

By Callum Newman Editor, The Daily Reckoning Australia

[8 min read]

• Stock investors…watch the gap below
• Don’t fall for the official statistics, it’s smoke and mirrors 
• Elections…have a say, but they make you pay
• Preserving your wealth with a safe-haven asset

Dear Reader,

The Australian Financial Review reports this morning:

‘India is scouting investments in Australian critical mineral mines to power its booming electric vehicles industry and reduce its dependence on China.

‘India’s Mining Minister Pralhad Joshi will lead a delegation to Australia in June, with the state-owned Kabil consortium tipped to take an equity stake in a critical minerals mine.’

Welcome to theme of the 2020s. The whole world is now chasing for a shrinking set of EV battery mineral assets.

And no wonder. Tesla came out with their sales and revenue results last week. It’s still booming.

Yesterday, we also saw lithium behemoth Pilbara Minerals say its latest auction for its next cargo got a bid 140% higher in price than last October.

The EV battery boom rolls on!

That’s why our small-cap team is focusing on what we’re calling ‘lithium’s little brother’. EV batteries don’t get built without it. For all the details on that, go here.

Now let me pass on to our guru of that other beautiful metal — gold!

Regards,

Callum Newman,
Editor, The Daily Reckoning Australia

*****

By Brian Chu Editor, The Daily Reckoning Australia

Dear Reader,

Another eventful and extraordinary month is about to end.

One thing that's dominating recent headlines are meltdowns.

The woke society, comprising Big Tech, Hollywood celebrities, liberal academics, and champagne socialists, has collectively gone into a meltdown as Tesla’s founder and self-proclaimed ‘free speech absolutist’, Elon Musk, paid US$54.20 a share to take ownership of the social media platform Twitter.

The moral outrage from many ‘blue checkmarks’ (verified public identities and influencers) went off the charts.

There was much sanctimonious outcry against a billionaire who decided to buy up a business to implement whatever agenda he wants, in this case, free speech. It's a travesty that Elon Musk would allow people to say what they like (as long as it doesn’t explicitly direct people to break the law) for fear of hateful speech that can hurt the feelings of minority groups and the vulnerable part of society.

This comes from ‘compassionate and empathetic’ people who support censoring opposing opinions, calling for the torture, rape, and murder of those they declare ‘hateful bigots’ because their views differ.

In other words, it’s a private company, but they cannot do whatever they like!

Watching that meltdown was satisfying, and I reckon there are more to come…

Stock investors…watch the gap below

Meanwhile, there’s the other meltdown, which is the broader market as fears rise about rate rises. The US markets have pretty much given back the gains they made since the conflict in Ukraine began. This is the S&P 500 Index since the start of 2021:

It could accelerate downwards from here now that the Federal Reserve is looking for more aggressive rate hikes in the coming months.

What about Australia? The figure below shows the ASX 200 Index:

Like 2008, the ASX 200 Index seems to be more resilient due to our economy’s reliance on commodity exports. Higher commodity prices coming from inflation have propped up Australian stock prices.

But are we going to be the ‘lucky country’ again?

I’m not so sure this time.

Don’t fall for the official statistics, it’s smoke and mirrors 

After all, the Australian Bureau of Statistics reported that the official inflation rate rose from 3.5% year-on-year in February to 5.1% in March. This has prompted the Reserve Bank of Australia (RBA) to hint at a potential rate hike soon, even as early as next Tuesday. The criteria for the RBA to decide to raise the interest rate lies mainly on inflation remaining above their target of 2–3% over an extended period.

Many will take the official statistics to be true. You know that I don’t. Not at all. I wrote about why last year, which you can read here.

I’m confident that none of you would believe that the price levels rose only 5.1% in the last year when we have paid much more at the grocery stores (especially fresh produce), filled up our car at the petrol station, and paid our bills. Even the government knows that inflation is biting and cut our excise tax by half to bring down the price at the pumps to less than $2 a litre.

The government’s excise tax cut is inadequate, nor an optimal way to bring relief to the people.

It is a cheap political stunt.

The only thing that’s cheaper and more idiotic is the Biden administration using the strategic oil reserves (used for emergencies and wartime) to bring down the price by a couple of cents (and then having the Press Secretary Jen Psaki brag about this favour the administration did for its people).

Basically, governments are sticking it to their people.

Elections…have a say, but they make you pay 

Now, many will find comfort in Australia’s democratic system. Better yet, they claim that it’s an all-inclusive political system where voting is compulsory for every citizen above the age of 18.

Therefore, you can’t say that you weren’t heard…and the results reflect what everyone wants.

In a society without corruption and bad faith, this is correct.

The only problem is that there are some who are way ahead of us that have found a loophole in this game.

Let’s just say the biggest winners in elections are those who get into parliament (fat, cushy salaries and pensions) and the corporate lobbyists who hedge their bets by sponsoring both parties.

Left or right, red or blue, it doesn't matter much.

The most you can hope for is to work out which side will make you pay less and keep whatever liberty you still have left.

This election is no different.

Instead of ‘may the best man win’, it's ‘may the worse one lose’.

Preserving your wealth with a safe-haven asset

It seems like Australians are up for some testy times ahead.

There’s an election coming up where we’re choosing between two unelectable parties. On top of that, there’s a potential RBA rate hike as global markets unwind the excess binge-buying from phony money.

The best strategy is to position your wealth in the right place.

Will your investments help you sleep soundly at night?

If not, it’s a good idea to have some gold in your holdings. It is unequivocally the safe-haven asset.

Even better is that the fiat currency system is truly careening out of control and any wrong moves by central banks could cause the decoupling of our markets from fiat currencies.

When that happens, how high can gold go?

One can only imagine.

God bless,

Brian Chu,
Editor, The Daily Reckoning Australia

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

We’re on our way back to Ireland…for our grandson’s first birthday.

It was probably a good time to leave.

‘A police report has been filed against you’, our lawyer told us last night.

‘You’ve been charged with robbery and gender violence.’

Bill: ‘Huh?’

Lawyer: ‘Yes…well…I filed a complaint against Carlos’ widow, Janina. And against the municipality (the local government). And then I asked the farmhands to take away the building supplies they had delivered to the house. So, we just moved them to another part of the farm.  

‘But she charged us both with robbery. I already went to the prosecutor and explained. He was angry because he said we should have asked permission before moving anything. But we know we can’t leave them there. Because by the time we get an order allowing us to move them, they’d already have finished the house…and they’d be living it in. And then we’d never get them out.’

The strange Originario War goes on. In the courts. Out in the mountains. So far, there has been arson, property damage, and a pushing match between one of our cowboys and the Originarios…but no serious violence.

And until now, the tiny valley where we grow grapes has been spared any trouble. There are no families there…and no Originarios, except Janina.  

And as long as Carlos was alive, Janina was kept in check. But he was found drowned in our reservoir two months ago.  

‘But what about “gender violence”?’ we asked.

Our lawyer laughed. 

‘It’s the latest thing. They just throw it into everything. It means whatever they want it to mean. Of course, there was no real violence. You were there. Elizabeth was there too. We were very polite.’

We had tried to reason with Janina. She came into our little office at the ranch. We exchanged kisses on the cheek. Very friendly.

We explained that we needed the house for someone else who would take Carlos’ place at the vineyard. We offered to rent a house for her in town…and give her money every month.  

She cried. 

‘That house is where my children were born’, she whimpered. ‘I just want to stay there for another year.’

Enter, Big Brother

It is hard to judge people from a different culture. You never quite know what to make of them. But we sensed something was not exactly what it seemed. She wrung her hands. She looked down. Tears filled her eyes. And then, when she was contradicted, she looked up fiercely…as if she were about to attack.

‘You’ll have to carry me out of there’, she challenged us.

‘But Janina’, countered our lawyer:

‘It’s not your house. It’s part of the farm. We want to help you, but we still need to operate the farm. We’re willing to give you money. We can help you find another place. You just can’t live there, because that’s a place we need for the vineyard caretaker.’

It didn’t make sense for her to stay there. Or to want to. She would be all alone, far from anyone else. Her children need to go to school. The school is a long way from the vineyard. Carlos used to drive them, but she doesn’t drive. And it takes two hours on horseback.

‘I’ll stay near the school during the week and just go to the vineyard on the weekends’, she proposed.    

‘But there will be another family there. You certainly can visit…but someone else will have to live in the house’, we explained.

‘It’s a house that is for an employee. Always has been. That’s why you were there. Because someone has to live next to the vineyard to take care of the watering and everything. Now that Carlos is no longer with us, sadly, someone else will have to do it.’

We didn’t mention it. But the person who is supposed to live in the house now — and take Carlos’s place in the vineyard — is his brother.  

Omar is a big man, with a handsome smile. He had been ‘married’ to Janina’s sister. When that didn’t work out, he took up with the daughter of one of our employees, a pretty woman named Lucretia. But Lucretia had a daughter by a previous paramour; the girl is now a teenager. Omar says he gave the girl a gentle slap to put her in her place. Lucretia called the police and Omar is now forbidden to see his family.  

‘You’ve got to get her out of there’, Omar said to us, referring to his twice sister-in-law.

‘She is a wicked person. She’s trying to take my grandmother’s property. I can’t work with her around.’

The whole family hates Janina and suspects that she’s responsible for Carlos’ death. Earlier in the day, we visited Carlos’ grandmother, Eleena.

Eleena is a wiry woman, her face deeply crevassed by wrinkles and slightly bent from age. She lived her whole life up in the mountains at a ‘puesto’. You get there on horseback, following the river up the valley. After a while, you see a patch of green off to the left. Then, you find a path leading up the side of a hill to the flat top above. It is a beautiful spot, with fruit trees, ancient grape vines, and stunning views of Indian ruins on both sides. The stone pre-Incan terraces are still there. But the Earth has long since been washed or blown away. Protected by steep hills on three sides, the spot must have been inhabited for a long time. It has ‘morteros’ — holes made for grinding corn and other grains — in the large rock next to Eleena’s mud hut.  

The Inca conquered this area less than 100 years before the Spanish arrived. But the Inca were smart. They took a few hostages, demanded regular tribute, and left the locals alone. The Conquistadors were harder to please. It took them at least 100 years to subdue the many tribes of the area. Then, they cleaned out the valley — sending some to work on large farms…and others were exiled to far-away regions where they would cause no more trouble.

Today, there are no people here who are ‘indigenous’ to the area. All are immigrants. Your editor is merely the most recent arrival.

Eleena would still be in her mountain fastness, but her family insisted she move in with her daughter in town. At 80 years old, it was too risky for her to stay on her own, hours away from our farmhouse.  

‘She was never nice to me’, said Eleena of her grandson’s spouse.

‘She wanted me to sign something saying I was leaving my farm to her…but I refused. And then she stole things from my kitchen…like my cheese and knives.’

Valley of Death

One of the curiosities of the valley is that you don’t know who actually ‘owns’ what. Eleena spoke of ‘her farm’. But her farm is actually part of our farm. She has the right to stay there, legally, only because we allow it. But ‘legally’ doesn’t get you very far here.  

We own things. But we can’t control them. The police don’t help. You have to negotiate, bribe, threaten — whatever you can do to keep a bad situation from getting out of hand, which is why it is so important to keep Janina away from the vineyard. Her brother is an Originario activist. If she were allowed to stay, it wouldn’t be long before others were there too. Then, under the protection of the ‘Originario’ law (if a person claims to be ‘Originario’, he cannot be expelled from your property), the group could not be dislodged.  

Soon after, the valley — where there haven’t been any real Indians for at least 400 years — would be proclaimed ‘tribal land’.

‘This is a good thing’, our lawyer concluded.

‘What’s a good thing?’ we wanted to know. We’ve never been accused of robbery before. It didn’t feel particularly good, but maybe we’ll get used to it. ‘Gender violence’ wouldn’t look so good on our resume either. Perhaps the neighbours would be warned if we moved in nearby.

‘I mean, that they went to the prosecutor, rather than burning down another of our houses…or breaking our gates. I’d much rather fight it out in the courts, than on the ground.’

‘It’s already been a week since we moved her building supplies’, he continued, sounding a little like Caesar to the Soothsayer. 

‘And we haven’t had any more problems.’

‘Yet’, we added.

Regards,

Bill Bonner,
For The Daily Reckoning Australia