Friday, 24 March 2023 — Albert Park

By Brian Chu Editor, The Daily Reckoning Australia

[8 min read]

Dear Reader,

For the past three years, a virus gripped the world in fear that required many to isolate themselves from family and friends. Authorities, the media, and health practitioners advocated social distancing, masking, vaccinations, and staying at home to prevent a contagion. These measures may’ve appeared to curb the spread, but their impact on the global economy and society is incalculable.

Nowadays, much of society is trying to put the outbreak behind them, going about in some semblance of normality.

However, just as one catastrophe is behind us, we’re running headlong into another that’s unfolding in a big way.

Interestingly enough, it’s another crisis of contagion. This time it’s a financial one involving debt, trust, and fear.

We’ve seen a few banks that have already collapsed or merged into another to try to prevent the disaster from erupting. Swiss National Bank provided significant financial support to UBS Group [NYSE:UBS] to help them buy Credit Suisse [NYSE:CS], which has all but fallen foul under its pile of bad debt and crumbling asset value. This act of rescuing a once major investment bank could send ripples across the system and destabilise it.

I know it may seem impossible to compare how to manage a virus outbreak and a banking crisis.

Of course, a depressed asset can recover and become a ‘good asset’…so you can salvage the situation and avert a disaster. The same can’t be said regarding a pathogen that could harm or kill.

However, a virus outbreak and a banking crisis share in its vulnerability for panic and hysteria.

And herein lies the problem. There’s another contagion brewing…a financial one this time…and everyone is focused on protecting their wealth from the blows to come.

I propose a better question: How could you come out ahead of everyone during such a crisis?

This is what I want to discuss today…

Green agenda out, but commodities boom is assured

The world is in a real mess. The global lockdowns and the ravages of governments seeking to impose socialism and woke ideologies have left many developed nations in shambles. Think about many major cities — even the richest nations are gridlocked with rusting and crumbling infrastructure. And then there are developing nations with a growing middle class that’ll consume more to improve their living standards.

Don’t think it’s just about a clean energy revolution and electric vehicles (EVs). I think that’s a nice cover story to humour the public. A recent article from Reuters (surprisingly) showed that electric vehicles could actually waste more resources. Insurance companies revealed they’d have to scrap vehicles damaged in a minor accident…because a scratched battery pack is too expensive to replace. The gloss behind EVs and the green agenda is already unravelling.

To further show that this agenda is fast breaking down, many investors are already pulling out of funds that are tied to the Environmental, Social, Governance (ESG) paradigm. Bloomberg analyst for ETFs Eric Balchunas reported recently that there’s been a whopping $5 billion of fund outflows from the iShares ESG Aware MSCI USA ETF [NYSE:ESGU].

Also, the entire ESG brand is being exposed as a form of crony capitalism that has no place in a free market. The CEO of BlackRock, Larry Fink, has decided to walk back on his commitments to ESG, facing pressures from the US House of Representatives challenging their legitimacy of constraining allocation of capital to maximise investor value.

The leading proponent has tugged his tail between his legs and therein spells the demise of this toxic investment ideology.

It’s time to think from a different perspective. How about taking the view of a societal renovation to improve living standards?

Forget about a globalist world order involving some supernational governing body like the United Nations or some World [insert term here] Organisation. There’s no future for them.

I’m talking about a global shift from China being the world’s factory to a multipolar world order where countries will get into regional blocs and work to improve the allocation and utilisation of their resources.

And this points to a massive boom in commodities going forward.

Position for potential life-changing gains with this strategy!

I highlighted last week that investing in real assets — precious metals, commodities, real estate, and shares in mining, agricultural, energy, and manufacturing companies — are ways to capitalise on the opportunities that can come up during a market panic.

Now, it’s one thing to recognise this…it’s another to have the emotional resilience to resist herd mentality. After all, investors can sell indiscriminately when they see everyone else doing the same. It’s the ‘last man out’ problem. No one wants to be there when the cupboard is bare.

But truth be told, those who know what they’re doing could seize such opportunities and ride them to significant gains.

Those who know my forays into investing in gold mining companies know that I’ve grabbed the bull by its horns in the past…and it was rewarding! Of course, I learnt to manage risk from the inevitable losses I had along the way.

And my gains are dwarfed by the giants like Rick Rule, Eric Sprott, Peter Schiff, and Pierre Lassonde. I learnt my craft off their experience and insights.

You can do the same.

It’s a tall order to tackle this on your own. There’re so many commodities out there, with several hundred companies to choose from.

Which commodity should you pursue?

Which company is worth taking a punt?

This is where my colleague, James Cooper, can take the reins and guide you. His newsletter, Diggers and Drillers, has garnered praise from many who’ve signed up in the last four months. An accomplished geologist, James has experience in uncovering some noteworthy finds. Some of these finds are now mines in operation.

He’s now about to unveil a premium service to those who want to take a chance in investing in early stage commodity explorers. Whatever minerals or metals you’re intrigued about, James is going to seek the explorers with the most potential in order to give you the chance to make some immense gains.

It’s not for the faint-hearted or those seeking a secure dividend stream. This is akin to skydiving or traversing a glacier. No barriers, no cushions…and maximum thrill.

If you’re excited by this, put your name down here for our ‘Graduation Day’ event, scheduled for Thursday next week. All the details will be revealed then…including inside intel on a specific play James is looking at right now. Click here to ensure you don’t miss it.

As central planners wring their hands in woe and wrack their brains thinking how to use sweet, empty words to calm the masses, you’re going to ride the commodity bull that they’ll unleash and hopefully walk away with serious gains.

God bless,

Brian Chu,
Editor, The Daily Reckoning Australia

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

There are only two ways to resolve the debt crisis — either inflation or deflation. Either the bad debt (as much as US$50 trillion of it, by our estimate) gets written off or inflated away.

And on Wednesday, the Fed signalled which way it would go. From Bloomberg: ‘Fed Caught Between Inflation and Bank Crisis’:

‘All eyes in the financial and economic world will be laser-focused Wednesday on the Federal Reserve as Chair Jerome Powell tries to balance his fight against inflation against a sudden banking crisis.

‘Powell and his colleagues began their meeting Tuesday with the outcome unusually unclear. While most economists expect a quarter-point interest-rate hike, some say policymakers should pause…’

You’ll already have the news by the time you read this. But from our point of view, it hardly matters. The Fed has already begun its ‘stealth pivot’. And even though Wall Street still hasn’t crashed…and the economy still hasn’t gone into an official recession…the powers-that-be are on the brink of panic.

Meanwhile, at the end of the world…

But here in Argentina, we are steeped in crisis…surrounded by ineptitude…immersed in corruption. It gives us a sense of deja-vu…as if the future of the US could be read in the pages of the Buenos Aires Herald over the last 70 years.

So rather than speculate about what the Fed will do…we’ll look around us.  

Rick Rule invited us to open our eyes last week. Rick is an old friend who was tracking puma in Patagonia and decided to stop for a visit. He asked the same question many Dear Readers have posed:

‘You could live anywhere, why do you live here? Yes, it’s beautiful in a rugged kinda way. But so is it where Dan lives in Wyoming. And they don’t have inflation at 105% in Laramie.’

Rick was referring to the latest inflation report. Over the last 12 months, Argentina’s inflation rate has gone up from 100% to 105%:

‘INDEC: Prices jumped 6.6% in February, inflation 105.8% over last year…’

That’s the highest inflation reading in 32 years. It reminds people of what may come next: hyperinflation. The last time inflation hit more than 100%, it ran all the way to 5,000%...when people needed a wheelbarrow full of pesos in order to buy a cup of coffee.  

The peso is going down against the dollar fast, too. When we arrived just a month ago, we were offered 370 pesos per dollar, on the black market, of course. Now, the exchange rate is 392 per dollar.

Functional disfunction

‘I’d also like to know how an economy can function with 105% inflation’, said Rick.

‘It seems impossible. Who comes to work? Who votes for a president who allows inflation to get so high? How do people make ends meet? And yet, the electricity works. The airports are open and the planes fly. The steaks are thick and tasty. The wine is delicious. You’d almost think nothing was wrong.’

Our reply follows:

‘Economists long ago singled out Japan and Argentina as economies that didn’t seem to fit any of their models. But there are some things that are always and everywhere true…

‘…and as Milton Friedman put it “if you want more of something, subsidize it; if you want less of something, tax it”.

‘We don’t know anything about Japan, but we’ve been coming down to Argentina for nearly 20 years. It’s a country rich in resources. And know-how. But poor in public policies. Here, they subsidize poverty and tax the producers. And they’ve turned Argentina into a poor country.

‘People around here are poor. Most are unemployed. But it’s hard to find people to pick grapes. You almost have to beg them to come to work. It wasn’t always like that. Even 20 years ago, when we first came here [we had come in a group…with Rick], it wasn’t like this.

‘Just look at Buenos Aires. There are thousands of buildings that are relics of a Belle Epoch…a time when average Argentines had the money and the ambition to build nice buildings. Now, a few still want fine suburban houses…but most live in the run-down relics of Buenos Aires…or the unfinished, improvised housing in the outer boroughs.

‘The GDP per capita is only $10,000 per person. Even people on Social Security get three times as much in the US.’

When the music stops

We invited Rick into the living room, where we have a grand piano given to us by a friend.

‘That piano was owned by Robustiano Patron-Costas. His story tells us a lot about what happened here. He was a very energetic investor who became one of the richest men in the country (at a time when the country had a lot of rich men) by doing something remarkable. He developed a vast sugar-producing industry, in the middle of what had been almost wasteland. He built a refinery…houses for the staff…a hospital…a railroad.    

‘He got very rich. And he was urged to run for president… a kind of gaucho Calvin Coolidge who represented “conservative” voters who believed that they could improve their lives by hard work and hard money. That is, he approved of what we called in our latest book “the win-win deal” and disapproved of anything that got in the way.

‘But there was another, fast-growing element in Argentine society. Back then, people believed that democracy would solve all their political problems…and the idealists were eager to extend the vote to all citizens. Today, that seems like the right thing to do. But it suddenly changed the political calculus of the country. Politicians found they could win by appealing to the masses of immigrants in the capital city, Buenos Aires. And they appealed to them by offering them various “social” benefits — that is, free stuff.  

‘This is essentially what the “Peronists” did. And they won election after election, promising more and more programs, for the next 7 decades. More and more unproductive jobs. More and more welfare.  

‘But wait…where to get the money? Tax the rich!  

‘Robustiano was the perfect enemy. Immensely wealthy. Old-fashioned. A bit of a fuddy-duddy. And he represented the Old Order…people who had gotten rich before the government began actively managing the economy.    

‘He was accused of exploiting his workers (who previously had no jobs, no education, no incomes and no health care.) His gentleman’s club in Salta was confiscated by the new, leftist government. And the political situation became so tense, he had to flee to Uruguay.

‘From then on, it was one disaster after another. 

‘Boom, bust, boom again…Inflation, crash, default, coup d’etat, military takeover, war, new currency, new government, inflation again.

‘Whee! What a ride!

‘After 7 decades, Argentines have learned how to survive’, we concluded, ‘but not to prosper’.

Our advice: invest in wheelbarrows.

Regards,

Bill Bonner,
For The Daily Reckoning Australia