10-10-2017 TUESDAY AFTER LUNCH MONEY MEMO
By the Financial Foghorn
News You May Have Missed
[And There seems to be a lot of that going on these days]
“Something bad is going to happen sometime” is not an investment thesis,
but it’s true.” Jim Rickards [So Prepare…FF]
October 10: Gold – Rigged. Silver – Rigged.
Back in the day when the Foghorn was a lowly portfolio manager, (no caps) at Santa Barbara Bank and Trusteeshipping, I would visit my clients at their home, or in the their nursing home, and see how the relationship was going. I would always ask if they were “receiving” their statements. And they would always say, “yes.” And usually, they would point to the desk or a tall filing cabinet “over there” somewhere and say, “See, that’s where I put them.” And there they’d be, pristine in their SBBT envelope, almost NEVER opened.
Now, I could have taken this as a sign that the customer trusted us, or they didn’t worry about their holdings doing anything rash in a month or so, but that wasn’t the real issue. The “RI” [real issue] was…they were scared to open the damn things because of what they might find in there: A sudden drop in one of their favorite holdings (one inherited from dad), or the shares of the company they worked for for 35 years, or some big winner they’d picked up on a whim from a tip buddy. A jolt to one of their favorites, something they had an emotional connection to in their present frail physical condition would be terrible. So, “No lookie, no hurtie.” Ok, our bank was better than Indymac Bank. Not saying much though.
I believe that mentality is how investors are facing the world today. Don’t look too closely. There be germs in that woodpile. But we gotta look.
The client and I would kibitz about the world and the markets in general, and we’d move on with our merry day. Never should a bad word intrude on these little house calls. Doctors don’t make house calls, trust portfolio managers should, but they have to be a tad discreet.
Now, without trying to bend or mend that little happy-meal time visit to a trust customer, let me proceed with my close to final offering here. Foghorn is going off. Somewhere…to seek what he must find to sort hisself out for the remainder of the movie. I’ll be RVing for a bit, then landing, possibly landing again somewhere. He doesn’t know, but these little literary sojourns may become a travelogue or a diary…or nothing jottings out in the big old world there. According to Rick Redfern at Doonesbury, there are a million “bloggers doing this sort of thing. I’m just joining a choir already in progress. [After 9 years of doing this, I hope I’m already a choir member.]
Let’s look at the financial landscape: Houses, cars, pills, tech, and food, my summary pic for the bigger landscape constituting our beleaguered economy.
- From Simon Black, writing as Sovereign Man we have an October 4th, 2017 story about housing, leading to crypto currencies ICOs :”Angelina Umansky, a 39-year-old spa owner from San Francisco, was visiting a friend in Miami two weeks ago when she heard about a new condo development downtown.Hoping to find a vacation home, but worried that others were interested, too, Ms. Umansky arrived at the sales office at 8 a.m. the day after seeing some model units.About 50 other buyers were already in line. Two hours later, a sales agent summoned her and said she had four minutes to decide which unit to buy. She acted fast, offering $350,000 for a two-bedroom, two-bathroom unit.
Ms. Umansky thinks she got a bargain; when she called on behalf of a friend less than eight hours later, she was told the asking price on a unit like hers had climbed to $380,000, a nearly 9 percent price increase.”
Above is the opening story from a New York Times article published February 3, 2005, pretty much the very TOP of the biggest real estate bubble in history.
This is the type of behavior that happens in a mania– people stop buying assets because of the investment’s strong fundamentals. They have no intention to hold. They just want to flip quickly and make easy money.
Except, instead of pre-construction condos, however, today’s flippers are participating in the most frenzied sector in the market: initial coin offerings (ICOs). This sort of madness of crowds is sort of like crowdfunding meets cryptofinance. And I would toss in a Ponzi noun there someplace…
Crypto tokens trade actively in the market; speculators buy and sell these tokens, and prices have been rising at an unimaginable pace. These things are not money – no real store of value here. And they’re not an investment in a classical sense, they’re just pieces of wood or metal that have some notes on them…and people are splurging their life savings on stuff they can’t define, can’t really spend, and can’t really even touch.
ICOs are getting so frothy that even celebrities are starting to endorse them. Floyd Mayweather (a boxer type, obviously not bothered by having been hit on the head a lot without a helmet…) posted a photo of himself on a private jet in front of piles of $100 bills saying “I’m gonna make a $hit Load of money on August 2nd on the Stox.com ICO.” Please note that FF is not in any possible way endorsing such an ICO!!
Paris Hilton (another human with a missing IQ) has chimed in and told the world she was looking forward to participating in the Lydian Coin ICO (whose founder happens to be facing jail time). No offense Floyd or PH, but these are all signs of an extraordinary, massive bubble.
- CARs: Nothing going on here except subprime lending, and an derivative explosion waiting around the proverbial corner.
- Pills are stable…Big Pharma’s trillions are still running the table.
- Tech…wind coming out of the sails. Commoditization happening. No big sneeze gizmo on the horizon.
- Food… Don’t see any big changes except more bad fertilizers feeding the poor in place. UP-shot: not much bang coming for economy. More likely to roll over at some point due to the failure of rigging.
Ok, FF opinion time; The U.S of A is bordering on Bankruptcy. All the political rhetoric and Nukes BS is just noise. There is a real reset coming with the dollar going a lot lower in world markets than it is now. I’m with Jim Rickards on this stuff.
If you have some gold and silver tucked away, you’ll survive. Nobody is going to have any fun in what’s coming. Life is change. Finance will be a bigger change. Get prepared. It’ll be a two year drama.
NOT ETFs. You want physical metal or shares maybe a closed end fund [GGN] [NOT SIL} held at a big brokerage house that ain’t going away.
FF believes this is a positive letter…So, it goes.