Free eLetters

August 2020

Berkshire Hathaway Should Rationally Own Bitcoin

August 13, 2020John Banks

Believe it or not, Berkshire Hathaway is a concentrated stock with a high degree of geopolitical risk. Its positioning is risky, with heavy exposure in a handful of notably vulnerable areas today. The solution is elegant and simple: Berkshire should purchase billions worth of Bitcoin. In fact, we think it would be irresponsible for Berkshire not to do so. Buying Bitcoin would offset Berkshire’s concentrated risk and help the company fulfill its fiduciary duty to investors. There is really no

Read now

Vladimir Putin Said What?

August 12, 2020John Banks

On Aug. 11, Vladimir Putin announced to the world that Russia has confirmed a successful COVID-19 vaccine. He assured the world it was safe, and that his own daughter had taken it. “I know that it works quite effectively, it forms a stable immunity,” Putin said. “I repeat: it has passed all the necessary tests.” That last part, about passing all the necessary tests, was an outrageous fabrication in our opinion. The Association of Clinical Trials Organizations, a Russia-based industry

Read now

Stimulus Failure Today Means More Stimulus Tomorrow (the Stock Market Knows This)

August 11, 2020John Banks

The stock market continues to trade vigorously, with the S&P 500 in touching distance of all-time highs. This bullish behavior has many investors confused. Those who are optimistic about a U.S. economic recovery think the market is looking past the short-term news and forecasting blue skies ahead. Those paying attention to the data, meanwhile, are left wondering whether the market has lost its mind. The answer, in our view, goes back to the inevitable nature of stimulus, and the “policy

Read now

Terms You Should Know: Financial Repression and Fiscal Dominance

August 10, 2020John Banks

There are two financial terms that explain what is happening right now. Most investors don’t know these terms, but they are common knowledge among central bankers. The Bank of International Settlements, also known as “the central bank for central banks,” has even published white papers discussing them. The terms are “Financial Repression” and “Fiscal Dominance.” Financial Repression is about what the Federal Reserve is doing now. Fiscal Dominance, meanwhile, covers the factors that are forcing the Fed to engage in

Read now

How Supply Shocks Create Stagflation (and Why We’re Headed That Way)

August 7, 2020John Banks

Inflation is a funny thing. It comes in different varieties and can show up in different places. As such there is no “one size fits all” version of inflation. The classification really matters. Take the difference between asset price inflation and wage inflation, for example. It is often the case that one exists without the other. Equity and real estate values can go up, while wages stay flat or stagnant. You can also see the reverse — though we haven’t

Read now

Gold, Bonds, and Equities are All Saying the Same Thing

August 6, 2020John Banks

There is a narrative that says the market has lost its mind, and that divergent market signals no longer make sense. The market is broadcasting multiple messages, and the messages are in deep conflict. Through this interpretation, three areas in particular — gold, bonds, and equities — are in direct conflict, and seem to be at odds with each other. Here is how that looks: Gold at nominal all-time highs, surging above $2,000 per ounce, says times are bad and

Read now

Ugly Goldilocks is Turning into Mutant Goldilocks

August 5, 2020John Banks

A number of years ago, long before Jerome “Jay” Powell became Chairman of the Federal Reserve, your editor proposed something called the Ugly Goldilocks scenario. You likely know the children’s story of “Goldilocks and the Three Bears.” Goldilocks didn’t want the porridge that was too hot, or the porridge that was too cold. Instead she ate the porridge that was neither too hot, nor too cold, but “just right.” Wall Street has long used the phrase “Goldilocks Economy” to describe

Read now

The U.S. Dollar Just Had its Worst Month in a Decade

August 4, 2020John Banks

In the month of June, we sent a report to TradeSmith Decoder subscribers titled “The Best Time to Buy Gold Stocks in 90 Years.” The report emphasized the precious metals stocks we liked best — many of which were purchased for the TradeSmith Decoder model portfolio — and noted the likelihood of accelerated currency decline. In the following month, July 2020, the U.S. dollar saw its worst single month in a decade, according to the Financial Times. The trade weighted

Read now

Big Tech is the Zero-Coupon U.S. Treasury Substitute

August 3, 2020John Banks

As U.S. Treasury yields fall toward zero, and the Federal Reserve deliberately erodes the value of U.S. debt, investors will be forced to seek new safe havens. A broken and dysfunctional U.S. Treasury market, no longer appealing in terms of yield income or downside protection, will create a bond-sized hole in a great many investor portfolios. That hole will have to be filled with something. Precious metals and Bitcoin will be clear winners in this environment and will benefit greatly

Read now

July 2020

The 60-40 Portfolio is On Its Last Legs

July 31, 2020John Banks

The 60-40 portfolio has been a cornerstone of retirement strategy for decades. Around the United States and the world, hundreds of millions of retirees have had, or still have currently, some version of a 60-40 portfolio. For American retirees, though, a serious problem looms. The 60-40 portfolio is on its last legs. It is simply going to stop working as intended, for reasons that are impossible to stop. When investors fully realize what has happened — a process that will

Read now

How the Gold Price Could Go Parabolic in a “Reverse Bank Run”

July 30, 2020John Banks

If you think the recent moves in gold and silver are wild, buckle up. There is a realistic scenario where the gold price goes full-on parabolic, and it could happen at any time. If this scenario takes hold, we could see the gold price blast through the $2,500 level, or even the $3,000 level, within a timeframe of weeks or even days. If this happens — again, the scenario is not at all guaranteed, but plausible — silver would likely

Read now

The Robinhood Retail Mania Has Now Gone Global

July 29, 2020John Banks

On July 13 we explained how Silicon Valley engineered a retail trading mania. As it turns out, the mania has gone global. “India’s retail investors are leaving their mark on a risky corner of the nation’s $1.9 trillion share market: penny stocks,” Bloomberg reports. “A custom index of 800 stocks that quote below 5 rupees (7 U.S. cents) has trounced the S&P BSE Sensex index by 36 percentage points this year.” In June, Bloomberg goes on to add, the penny-stock

Read now