Acknowledge the complexity of the world and resist the impression that you easily understand it. People are too quick to accept conventional wisdom, because it sounds basically true and it tends to be reinforced by both their peers and opinion leaders, many of whome have never looked at whether the facts support the received wisdom. It's a basic fact of life that many things "everybody knows" turn out to be wrong.
- Jim Rogers
Everyone seems to hate the junior resource sector right now. It’s been dropping since last March and seems headed for the graveyard. I’ve watched it closely for twenty-five years and never seen such gloom. That’s what you get at bottoms. The chart of the XAU over Gold shows the most pessimism in three years. That’s a good thing. We are in the process of turning. - 321gold.com Bob Moriaty
To be successful in the market, 99% of the people have to think you’re wrong.
- Jeb Handwerger
Thomas Kuhn’s groundbreaking Structure of Scientific Revolutions coined the term ‘Paradigm Shift’ concluding 2 ways of new discovery: Tacit Knowledge or getting clubbed in the head.
September 2001 provided a personal new outlook helping others out of T261 from World Trade Center alive. Recanted one moment listening to Phillip Roth on Technical Analysis. Fifteen minutes later during a break all alone in a north facing room watching Tower 1 Explode.
Lesson #1 - Prepare for Controlled Demolitions.
In October 2001 a chance meeting with a new friend, former 1970/80’s hedge fund manager, repeatedly me what I thought of the gold market at the gym in Solana Beach, California. During the summer of 2002 the XAU / HUI indexes continued with a stealth bull market despite the sales of excess from the NASDAQ bubble.
Lesson #2 - Never let my schooling interfere with my education. [M. Twain]
Most everything I had learned at The U.S. Naval Academy in Annapolis, MD was turned upside down during the years 2001/2002.
Modern Portfolio Theory & Fee Based Assets Under Management [AUM] were the primary goal of the large brokerage houses on retail levels back in 2001. Instructions were not on Graham & Dodd Security Analysis much less Austrian Economic Theory. The evolution of brokers now becoming ‘advisors’ who not only have never experienced factory, farms or extraction industry careers [producing real wealth] but now were encouraged to outsource trading and execution to external experts.
Mental conditioning, decades of artificially low cost of capital & hubris has created an unusually institutional fund managers sanguine sentiment. Western World Securities Industry pendants have not experienced a Bear Market in Equities much less Fixed Income in over 42 years.
The WSJ is a shell of its former self now degraded to a consumer reports [consumption], political commentary philosophy [coercion] & entertainment focus [bread & circuses]. One could read most financial services publications and have no idea the levels of the yield curve inversion, the scale of debt or the seriousness of debts in the overly western securitized world.
Lesson #3 - Flow of Funds [Richard Russell]
You are either a contrarian or you will become a victim. - Rick Rule
Critical Thinking Web content with Empirical Data are becoming increasingly rare. Bob Moriaty’s 321gold has remained a site with principled editorials. Recency Bias by the masses can be a gift identified in Bob’s book ‘Nobody Knows Anything.’ Today’s flow of funds from institutions has only just started to look outside global equities & fixed income.
Finding mentors and learning from those with real experiences is critical and 321gold helped connect me with industry Richard Russell [shared an office at near Morgan Stanley, La Jolla], Doug Casey and David Galland.
Gold is not the enemy of general equities but ratios are important during financial asset manias. Current Gold / SPX ration is 0.434. The 2001 > 2011 bull market was just a warm up with the chess board now changing due to structural changes with upcoming U$T actions, rollovers and the sheer scale of global debt. Estimates of capital allocation in investable assets in USA Inc remains at a paltry 1/2 of 1% with historical precedents near 6-7% in 1980. David Garofalo [FCPA, FCA & former CEO of Goldcorp] notes Global Debt to GDP is 3.5 TIMES [350%] that of the 1970’s [100% TO GDP] making it NEAR statistically impossible for central banks to act with same vigor to raise interest rates [Taylor Rule] to remotely stabilize the currency.
Newsletter Sentiment and most have been calling for a crash in stocks priced U$D [Federal Reserve Notes]. Milkshake Toasts all around. Stanley Druckenmiller noted the insane decade plus of free money creating an incredible market capitalization of sewage swimming naked. Only question is do Black Swans arrive as expected or could the market rhyme differently?
Sentiment on $BPGDM [stockcharts.com] ran down to 14% last week.
Unlike 2008 the gold shares have not been in a 7 year bull market.
Unlike 2008 investor sentiment is all in on The Big Short.
Suppose the crash is Invisible [James Dines] with a revaluation [denominator] of gold north of $3-$4K?
Rollover data for U$T and corporate fixed income in the next 18 plus months is alarming. In addition where will future demand emerge on upcoming U$T auctions?
Ross Beaty recently noted the Forrest thru the Trees distortion of the precious metals share prices to the metal in 2023. We’re seeing self made billionaires buy their own stock in selected deals on the secondary markets.
Mark Spitznagel’s Dao of Capital teaches us strategies of two great battlefield masters Sunzi & Clausewitz utilizing the inter-temporal roundabout paths to defeat a far superior enemy in magnitude. Accumulating specific companies with real assets & skin in the game management with capable financial prowess under MINIMAL VOLUME > NO INTEREST is a longer term cyclical game.
Summer 2022 saw a bottom in the XAU at 90. This summer we’ve seen a retest with the Gold Bug’s Index [HUI] trading at valuations lower than the epic bottom in 2001. These metrics make sense given the value in the shares vs the metal.
Recency Bias Consideration > Rick Rule often illuminates the amount of lifestyle companies on the TSXV. The depression has wiped out many with near zero IPO’s this past summer. A complete depression in the venture exchange priced in gold has the index down over 90% since the bull market commenced. CEO.CA commentary boards full bore manic depressive.
Fighting waves in the ocean is a losing battle. Preparing for the next rogue wave to harness could be life changing. Gerry Lopez elegant rides at the Pipeline in Hawaii were all about preparation & harnessing forces out of ones control.
Don’t fight forces, Use Them. - R. Buckminster Fuller
We continued to increase our capital stack this summer yet note the current situation seems to be close to change. This morning some indexes are up with gold down and sentiment indicators appear a full cleanse of most the weak hands. Back in May 2023 Bob Moriaty noted it wouldn’t take much for Gold to go up $200 in a single day [collateral risk, counter-party risk, etc] in response to the current banking crisis. The late great Sam Zell noted our system was entering Weimar conditions teetering upon the confidence of foreign capital in U$T markets.
This could be a really explosive rally in the juniors… coming up. - Ross Beaty [2023]
Wealth & Capital are essential to the Entrepreneur. Negative real interest rates [not nominal] destroy savings in traditional financial instruments. Inflection points / Opportunities in life can be potentially critical when clarity & consciousness are in peak form. No matter what our goals or dreams entail the successful continually learn from those who have excelled in any vocation while respecting the macro environment around us.
During the year 2002 a continued transition from being a contracts / purchasing manager with Honeywell Commercial Aviation Systems to a surfer living in a VW Van created an environment of extreme focus on specific goals. At the time I knew enough to start with coins for all clients in early 2003 as the price of metal was near century lows inflation adjusted. Today, the precious metal shares are near century lows with historic precedents provided by Bob Hoye on the intrinsic vale of gold producers during the last Great Depression.
Unknown to most who trade looking at squiggly lines on X / Y liner charts is the looming challenge with supply destruction to balance sheets of large gold producers. Robert Friedland of Ivanhoe notes “assets are ephemeral” where promises to pay can be eternal. Asymmetrical returns may be ahead for those who have done their homework and acted upon a potentially 50 year storm sale.
Carpe Diem - CAS
P.S. Large Retailer Lowe’s reported losses due to theft near $1B this past Friday in line with Target ‘shrinkage’ from peasants looking to steal coins in front of steamrollers. Here is your chance to grab specific collateralized assets legally…
Everything moves in cycles… So twice a century, the ocean lets us know just how small we really are. - Bodhi; Point Break [1991]
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