Free eLetters

September 2020

Berkshire Hathaway Makes a Surprise Move in Japan

September 1, 2020John Banks

For a guy who just turned 90 — his birthday was Aug. 30 — Warren Buffett is still razor sharp. He is certainly not “washed up,” as flash-in-the-pan day trader Dave Portnoy called him earlier this year. Every once in a while, Buffett makes a surprise investment with billions. It is typically an unexpected move — the kind of thing that wouldn’t have occurred to Wall Street, but seems smart, possibly even brilliant, the closer one looks at it. The

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August 2020

Dear America, We’ve Had Our Fill of Dollar Assets. Sincerely, The World

August 31, 2020John Banks

Something interesting and exciting — and profoundly bullish for precious metals and Bitcoin — happened on Thursday and Friday of last week. To explain what happened, and why it’s a big bullish deal, we need to walk through the chain of events. On Thursday, Aug. 27, Federal Reserve Chairman Jerome Powell gave a historic speech from Jackson Hole, Wyoming, live-streamed over the web, about changing the Fed’s inflation mandate. To briefly summarize the key point, Powell said the Federal Reserve

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Where Does Inflation Come From?

August 28, 2020John Banks

A reader asks a great question about inflation. Here it is, slightly edited for clarity: Your article, Money is a Social Protocol, Built on a Network, Enabled by Technology, is one of my favorites. It describes the actual essence of money, and instead of employing empty phrases like, “Money is a medium of exchange,” which is true, but is obvious and not instructive. Rather, your article discusses what money actually is to real people in real social networks in the

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Rushing a Vaccine to Market is a Terrible Idea

August 27, 2020John Banks

On the COVID-19 front, there is hope that the United States can rush a vaccine to market. Mark Meadows, the White House Chief of staff, expressed this view to the press on Aug. 23, saying the Food and Drug Administration (FDA) and National Institutes of Health (NIH) need to “feel the heat” on vaccine timing. “If they don’t see the light, they need to feel the heat, because the American people are suffering,” Meadows added. Other officials have expressed similar

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They Kicked Exxon out of the Dow

August 26, 2020John Banks

After 92 years, Exxon Mobil was ejected from the Dow Jones Industrial Average — along with two other names — as S&P Dow Jones Indices announced on Aug. 24 the biggest shake-up to the Dow’s line-up in years. Exxon, in various forms, had been a part of the Dow Jones Industrial Average since 1928. But not any longer. As a battered and tattered energy stock, Exxon had to go. As of April 2020, the entire U.S. energy sector — the

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Money is a Social Protocol, Built on a Network, Enabled by Technology

August 25, 2020John Banks

Money is a social protocol, built on a network, with technology enabling the network. This goes for all forms of money, even gold. It also applies to all pre-metallic forms of money, and all manner of monetary objects that have existed through the ages. The concept of money as a networked social protocol is inherently a strange thing. This helps explain why so many people have such a hard time understanding money, in terms of what it really is and

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Long-term Rates Can’t Rise Too Much — If they Did, the US Government Would Go Broke

August 24, 2020John Banks

The yield on the U.S. Treasury 10-year note, as of this writing, is 65 basis points. This means that, for every $10,000 worth of 10-year notes purchased at recent prices, you get $65 in annual interest payments. That is an incredibly low yield, not far from the all-time low for interest rates — with “all time” covering 5,000 years of financial history. (There is interest rate data for ancient Mesopotamia circa 3,000 BC.) That 65 basis-point yield is also low

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The Market is Bidding Up Winner-Take-All Cash Flow Streams

August 21, 2020John Banks

The market is bidding up pandemic-proof cash flow streams. When you look at stock price behavior through this lens, the picture makes more sense. This further implies the stock market is not reflecting economic recovery, or a “return to normal,” but rather the stark realities of a post-pandemic landscape. To put it another way: In a world where consumer behavior has radically shifted because of the pandemic, a great many companies will be net losers, but a handful of companies

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Why is the U.S. Housing Market So Strong?

August 20, 2020John Banks

The U.S. housing market is bizarrely strong right now. But why? Before attempting to answer, we’ll look at some data. On Aug. 17, the U.S. National Association of Home Builders (NAHB) reported home buyer foot-traffic at all-time highs. Based on the NAHB/Wells Fargo Housing Market Index, or HMI for short, homebuilder confidence levels are also at all-time highs, matching a December 1998 peak that represents the highest point in the 35-year data series. Then, too, we know houses are being

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Look Who’s Buying Gold and Gold Stocks Now

August 18, 2020John Banks

Last week we argued Berkshire Hathaway should rationally own Bitcoin, and laid out the case as to why. We aren’t holding our breath, however, because Warren Buffett despises Bitcoin. (According to Becky Quick of CNBC, he has called it “probably rat poison squared.”) Buffett is also disdainful of gold and has been so for decades. In the Berkshire Hathaway annual letter for 2011 — which was written in February 2012 — Buffett compared gold to farmland and energy assets. He

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Programmable Digital Currencies Are Coming — Here’s What That Means

August 17, 2020John Banks

On Aug. 13, a top official confirmed that the U.S. Federal Reserve is preparing for a digital currency. Lael Brainard, a member of the Federal Reserve Board of Governors since 2014, told an audience last week that the Federal Reserve was experimenting with “a hypothetical digital dollar for research purposes,” according to Bloomberg. Brainard also said the Federal Reserve was partnered with research teams from the Boston Federal Reserve and the Massachusetts Institute of Technology (MIT) in a “multi-year effort

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How Gresham’s Law Drives the Bitcoin Price

August 14, 2020John Banks

“Gresham’s Law” has been around a long time. It was coined in 1860 by Henry Dunning Macleod, a Scottish economist. But Macleod named Gresham’s Law after Sir Thomas Gresham, a 16th century English financier. Nicolaus Copernicus, the Renaissance-era astronomer who proposed that the Earth revolves around the sun, rather than vice versa, also described a version of Gresham’s Law in a treatise written in 1519, the year Sir Thomas Gresham was born. For this reason, it is sometimes referred to

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