1. The Global Run on the Gold Bank Continues. Is Your Gold Safe?

    Most people who have heard of the huge gold depository buried under the Federal Reserve Bank of New York assume that’s where most of the U.S. gold hoard is stashed away. That’s not true.

    It is true there are 6,000 tons of gold at the New York Fed, but that gold does not belong to the U.S. It belongs to foreign governments and the IMF, which leave it there in safekeeping. (The U.S. gold is divided between Fort Knox and West Point with a relatively small amount kept at the Denver mint.)

    The other large third-party depository in the world is the Bank of England, which also has about 6,000 tons of gold. Only about 600 tons of that gold belongs to the U.K. The rest belongs to other governments.

    The question is why other governments trust the U.S. and U.K. to secure their gold. In a financial panic, the Fed or Bank of England could easily seize that gold and hold it for their own account. As revealed in this article, foreign central banks are starting to realize this and demand return of their physical gold bullion to home country vaults.

    The stampede began several years ago when Germany demanded the return of most of its gold from the Fed and the Bank of France vaults. Austria, Netherlands, Azerbaijan, Hungary and some other countries followed suit to demand the return of some or all of their gold. Other nations such as China and Russia have always kept their gold reserves in their own vaults and never trusted custody to the U.S. or U.K. Now we can add Poland to the list.

    This article reports that Poland is demanding the return of about half its gold from the Bank of England vaults. These gold transfers involve more than just shipping the physical gold from one vault to another. London and New York are centers of gold trading in physical and derivative forms. Physical gold can be leased or hypothecated to trading banks for purposes of covering short sales used to suppress the price of gold.

    As gold leaves New York and London, it becomes unavailable for leasing and other market-manipulation schemes. This may be one reason for the recent rise in gold prices, since less gold is available for manipulation.

    In any case, a full-scale “run on the bank” for gold has now started. Like most bank runs, this dynamic will only end when most or all of the gold is gone. No one wants to be the last in line to take custody of his gold. Things are about to get interesting at the gold vaults.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  2. Federal Reserve Throws Cold Water on Facebook’s Libra Cryptocurrency

    The biggest news in cryptocurrencies lately has been the announcement by Facebook of a new cryptocurrency called libra. With billions of Facebook users worldwide and established communications channels, Fakebook’s libra seems well positioned to succeed where other cryptocurrencies have failed.

    Libra is envisioned as a “stable coin,” which means that the value of one libra is pegged to a stable store of value such as a reserve currency or the IMF’s special drawing rights (SDR). That value is maintained by placing funds that users pay to acquire libra in liquid instruments such as Treasury bills, bank deposits or other cash equivalents. Sounds good. But is it?

    Libra may be too good to be true. Regulators in Europe, China and the U.S. are already raising objections. As this article reports, Federal Reserve Chair Jay Powell is already cautioning about libra. According to Powell, “I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering…data protection, [and] consumer privacy– all of those things will need to be addressed very thoroughly and carefully, and again, in a deliberate process that will not be a sprint to implementation.”

    Most of the concerns raised publicly involve matters such as anti-money laundering (AML) rules and “know your customer” (KYC) rules. Cryptocurrency systems also typically require a money transfer license. Most of these objections are easily met and established cryptocurrencies and exchanges have satisfied the rules. But the real objections to libra are much more serious.

    By maintaining a pool of liquid assets to meet redemption requests from libra, Facebook will be operating a money market fund. Those funds require registration with the SEC and much more extensive regulation than the AML and KYC rules. Even more troubling is the fact that libra may be viewed as a bank and not very different from a central bank.

    Facebook will pay libra holders nothing in interest, but will collect interest payments on their liquid fund assets. That’s essentially what banks do in a zero interest rate environment.

    Also, in a financial panic, Facebook may not be able to sell its “liquid” assets fast enough to meet redemption requests by holders. That’s exactly what happened to money market funds in the 2008 panic. The result was a blanket guarantee by the Fed.

    Facebook could face the same panic conditions and require a Fed bailout to save the financial system. Rather than walk into another trap that will enrich Mark Zuckerberg, it’s more likely the Fed will just say no to libra.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  3. Trump’s New Fed Nominees Are on Their Way to Confirmation. Good News

    There are currently two vacancies on the powerful board of governors of the Federal Reserve System. Those vacancies have persisted since the Obama administration.

    Obama thought Hillary Clinton would win the election in 2016 and fill the seats with reliable global elitists. Instead, Trump won and had the vacancies handed to him on a silver platter. Taking into account retirements and resignations of other governors, Trump has appointed three of the sitting governors (Michelle Bowman, Randal Quarles and Richard Clarida) and promoted sitting governor Jay Powell to chairman. The only governor not appointed or promoted by Trump is Lael Brainard. And the two vacancies remain!

    Trump will end up exerting more control over the composition of the Federal Reserve Board in a shorter period of time than any president since Woodrow Wilson, who appointed the first board when the Fed was created in 1913.

    Trump got shot down when he nominated Herman Cain and Steve Moore to fill the two remaining vacancies. But he’s back with two outstanding expected nominees in Christopher Waller, research director of the Federal Reserve Bank of St. Louis, and Judy Shelton, the U.S. director of the European Bank for Reconstruction and Development.

    According to this article, both Waller and Shelton have much smoother paths to confirmation than Cain and Moore. Shelton is particularly interesting because she has a Ph.D. degree. The absence of a Ph.D. hurt Cain’s and Moore’s chances.

    Shelton has also been previously confirmed by the U.S. Senate (for her existing position). A prior confirmation always makes a subsequent confirmation more likely, assuming no new derogatory information emerges.

    Best of all, Shelton is an advocate for the consideration of gold prices in monetary policy deliberations. She will not be able to implement a new gold standard from her position as a Fed governor, but simply getting some intelligent views on gold inside the board room at the Fed would be a major step forward in the return to a sound international monetary system.

    Think of Shelton’s confirmation as one small step for gold, one giant leap for a sound economy.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  4. Free-Riding Investors Set up Markets for a Major Collapse

    Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition.

    The best example is a parasite on an elephant. The parasite sucks the elephant’s blood to survive but contributes nothing to the elephant’s well-being.

    A few parasites on an elephant are a harmless annoyance. But sooner or later the word spreads and more parasites arrive. After a while, the parasites begin to weaken the host elephant’s stamina, but the elephant carries on.

    Eventually a tipping point arrives when there are so many parasites that the elephant dies. At that point, the parasites die too. It’s a question of short-run benefit versus long-run sustainability. Parasites only think about the short run.

    To read the rest of this article, click here.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  5. Robot Trading Will End in Disaster

    Today, stock markets and other markets such as bonds and currencies can best be described as “automated automation.” Here’s what I mean.

    There are two stages in stock investing. The first is coming up with a preferred allocation among stocks, cash, bonds, etc. This stage also includes deciding how much to put in index products or exchange-traded funds (ETFs, which are a kind of mini-index) and how much active management to use.

    The second stage involves the actual buy and sell decisions — when to get out, when to get in and when to go to the sidelines with safe-haven assets such as Treasury notes or gold.

    What investors may not realize is the extent to which both of these decisions are now left entirely to computers. I’m not talking about automated trade matching where I’m a buyer and you’re a seller and a computer matches our orders and executes the trade. That kind of trading has been around since the 1990s.

    I’m talking about computers making the portfolio allocation and buy/sell decisions in the first place, based on algorithms, with no human involvement at all. This is now the norm.

    Click here for the rest of this article.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  6. New Multi-year Gold Rally Has Emerged

    The dollar price of gold has been on a roller-coaster ride for the past six years. But the past six weeks have been a turbocharged version of that. Investors should expect more of the same for reasons explained below.

    The six-year story is the more important for investors and also the more frustrating. Gold staged an historic bull market rally from 1999 to 2011, going from about $250 per ounce to $1,900 per ounce, a 650% gain.

    Then, gold nose-dived into a bear market from 2011 to 2015, falling to $1,050 per ounce in December 2015, a 45% crash from the peak and a 51% retracement of the 1999-2011 bull market. (Renowned investor Jim Rogers once told me that no commodity goes from a base price to the stratosphere without a 50% retracement along the way. Mission accomplished!)

    For the rest of this article, click here.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  7. Trump Declares War

    He is apparently declaring a currency war on the rest of the world. Trump resents China and Europe cheapening the yuan and the euro against the dollar in order to help their exports and hurt ours.

    He says it’s time for the U.S. to cheapen the dollar also. Trump has a point. If you put a 25% tariff on many Chinese exports to the U.S. (as Trump has done) or a 25% tariff on German cars exported to the U.S. (as Trump has threatened to do), it can be a powerful way to reduce the U.S. trade deficit and generate revenue for the U.S. Treasury.

    But a trading partner can undo the effect of the tariff just by cheapening its currency.

    To read the rest of this article, click here.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  8. Request Your Support to A Heroes Journey Production: Last Out-Elegy of a Green Beret

    Dear Friends,
    Greg Parsons, CEO of Semper Capital, is a former US Marine and a friend of ours who I would like to introduce to you. Greg and his firm have focused their philanthropic/charitable efforts around our Military Veterans.  One of the groups they work very closely with is The Heroes Journey, founded by a retired Green Beret Lieutenant Colonel, Scott Mann.  The Heroes Journey helps service members transition to civilian life by learning to tell their own stories.  Military men and women “find their voice” in transition with the aid of books, workshops, and virtual training.  Scott Mann spent nearly two years writing his story.  Today it is a play: Last Out-Elegy of a Green Beret.  (See the Trailer:  https://vimeo.com/345946945)
    Semper Capital and CAVU Securities, LLC are proud to bring Last Out to New York City, September 14 & 15, 2019. 
    Here is the ask: Greg needs your help to make this a reality in the form of sponsorships, introductions to other like-minded influential folks in NYC, donations, ticket sales, etc.  If you are interested and able to help, Greg’s managing director, Tom Donnelly, tdonnelly@cavusecurities.com, would like to set up a time in the coming weeks to formally introduce you to the project and see where/how you can be helpful.
    Please see more information about the production below along with a recent interview of Scott Mann with Mike Huckabee: https://youtu.be/Cmqh3-FfadQ.

    LAST OUT: ELEGY OF A GREEN BERET

    A Heroes Journey Production

     Last Out—Elegy of a Green Beret –(Click here to watch quick video Trailer:  https://vimeo.com/345946945 )is a validation of the sacrifices of our country’s heroes and offers a window of opportunity for those seeking training services and storytelling skills to bridge the transition from military to civilian life.

    Last Out—Elegy of a Green Beret is a theatrical production by Ret. Lt. Col. Mann that universally depicts the impact of war on veterans and their families.  Last Out is a validation of the sacrifices of our country’s heroes and offers hope to those struggling with the transition to civilian life. Last Out stimulates a dialogue to promote understanding, compassion, and community cohesion.

    This play is produced by The Heroes Journey, an organization dedicated to supporting veterans and giving them the tools and training they need to share their stories and to bridge the transition from military to civilian life. Each performance is followed by a powerful audience discussion led by the cast, and free resources and reference materials are provided to help combat veterans return to civilian life after deployments. This project has been presented to diverse audiences comprised of veterans, military families, and civilians at theatres across the country.

    The Heroes Journey

    After terrorists launched an attack on the United States on September 11, 2001, Lt. Col. Scott Mann and his teammates in the 7th Special Forces Group were fueled by a sense of purpose.  “We were pushing a much more kinetic path to get at the bad guys and put scalps on the barn,” he said. “It is safe to say a large part of our regiment did the same thing until about 2009, 2010. There were more Taliban than we started, and we lost our way.”  When Lt. Col. Mann came home, he found it hard to shed that purpose and to readjust to civilian life.  He spent a few years in a dark place.

    “What I found in my own transition is I became dark after a couple of years and it was only through learning to tell my story, my hero’s journey I guess, that I started to reconnect with my purpose and find my way home.”

    To assist others who are encountering similar struggles, Lt. Col. Mann and his wife, Monty, formed the non-profit organization The Heroes Journey.  The Heroes Journey helps service members transition to civilian life by learning to tell their own stories.  Military men and women “find their voice” in transition with the aid of books, workshops, and virtual training.

    Last Out—Elegy of a Green Beret

    Every year 200,000 Veterans transition from military service into civilian life. It is a challenging time that often results in significant personal changes for veterans who must re-discover their voice. Storytelling, a powerful form of communal therapy, is a dynamic tool for coping with the stresses of military transition and strengthening our communities.

    “In a back-and-forth time frame covering over 25 years of time (1989-2015) it resembles an ancient Greek tale about warriors and heroes’ journeys–but in this case an American warrior, a Green Beret,” noted a DC theater critic after a performance over Memorial Day weekend. Indeed, Ancient Greek tragedies were a form of storytelling aimed at imparting the experience of war, and when a veteran’s own harrowing struggles are recognized in the story of Last Out, there is a validation that opens the door to letting go and healing.

    The play follows Army Green Beret Danny Patton as he fights in battles ranging from tribal Afghanistan to his own living room.  As the corrosive gears of war begin to rip apart Danny’s family, his integrity, and his soul, he is thrust into one final, eternal mission.  With Valhalla beckoning, Danny discovers that combat can be fueled by vengeance or by love…depending on the price you are willing to pay.

    Taking two years to complete, Last Out—Elegy of a Green Beret is based on true stories of modern war told from a downrange and home-front perspective. With a cast made up entirely of veterans and their family members, Last Out is a theatrical experience intended to help civilians better understand the cost of combat to our veterans and their families, and to help warriors utilize the power of story to let go of their pain, healing the wounds of war.

    You’ve heard the war stories of the “first in.”  This is the untold story of the Last Out.

    Thanks for your time and again, to learn more about how you and your firm might support our Military Veterans, please contact Tom Donnelly, tdonnelly@cavusecurities.com, a Semper Capital company.

  9. U.S.-China Trade War Enters a New Phase. But It’s Only a Truce for Now

    The G20 summit in Osaka, Japan, came and went on June 28–29 without much substance except for the meeting on the sidelines between President Trump, President Xi of China and their teams of advisers. Of course, the subject was the ongoing trade wars between the U.S. and China.

    Trump was poised to raise tariffs on the remaining $300 billion of goods imported from China that were not already subject to tariffs. Trump had severely damaged the business of China’s Huawei, the world’s largest manufacturer of telecom equipment. China had retaliated with tariffs on about $150 billion of U.S. imports and had curtailed large purchases of U.S. agricultural produce, especially soybeans. The trade wars were escalating quickly.

    As this article details, the result of the G20 meeting was a kind of truce in the war. Trump agreed not to impose tariffs on the additional $300 billion of imports (but did not reduce any existing tariffs). Trump also eased up on U.S. tech sales to Huawei (but did not end the prohibition of Huawei’s products in the U.S. 5G network).

    Xi agreed to resume purchases of U.S. soybeans. On the whole, this truce stopped the escalation (for now) and provided some relief for both sides.

    Importantly, both China and the U.S. agreed to resume the trade talks that ended abruptly in early May. Stocks rallied on the news, interest rate cuts were stalled and gold fell. Suddenly, the “risk off” mentality became “risk on” and safe-haven assets lost favor.

    We’ll see how long this lasts. The open issues in the trade talks are the hardest to resolve (theft of intellectual property and enforcement mechanisms), and there’s no reason to believe they will be resolved quickly.

    It may be the truce continues through the 2020 election in order not to disturb the stock market and to help Trump’s reelection chances. But the new cold war between China and the U.S. will last longer than the election cycle and probably longer than Trump’s and Xi’s times in office. Investors should be prepared for the long haul, which means adaptable supply chains and slower growth in China.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.