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Perspective
By Rich Checkan
Of late, the markets have been gyrating more than Elvis Presley in his prime. Driven by sound bites, the markets shoot higher or lower based upon the latest news clip.
Russia and Ukraine were planning to meet in Turkey for peace talks. Gold sells off and stocks surge. Then, when Russia blows off the peace talks, gold and silver launch higher as equities retreat.
A court suspends President Trump’s tariffs as the U.S. and China call a ceasefire in trade wars. Stocks take off and gold pulls back. A higher court overturns the decision as China and the U.S. blame each other for violating the terms of the ceasefire and escalate the trade war. Gold and silver erupt as stocks take a breather.
The volatility can be unsettling for investors, but I do not see it going away any time soon.
Investors are trying to determine the end game. They are trying to position themselves for whatever the new normal will be. So, they jump at every hint of a trend.
In the background, they are grading the successes or failures of the second Trump administration. The first quarter has come and gone. The first one hundred days have come and gone. The second quarter has come, and in less than a month, it will have gone.
And we continue to wait and see how successful President Trump will be in carrying out his agenda.
Of course, none of this should be a surprise. This is what I wrote in the January edition of Information Line…
“For the past year, the world has been watching the petri dish known as Argentina. President Javier Milei has been working his experiment of slashing government and balancing budgets with incredible success. He has challenged the establishment… and he is winning.
Why would we not expect similar results in the I.O.U.S.A. from President Trump and his Department of Government Efficiency (DOGE)?
My theory is that investors are waiting to see. Until they do, gold and silver will take a pause. I see either a slow increase in gold and silver prices or range-trading for at least the first quarter of 2025… and most likely for the first half of 2025.
I believe it will take that long to measure the results of the incoming administration.
If the new administration is successful, gold and silver will still climb, but they will do so in a slow and methodical fashion.
If the new administration runs into entrenched swamp critters, the climb for gold and silver will be more rapid.
Either way, I see both metals moving higher by year end.”
Big Beautiful Bill
"I think a bill can be big or it could be beautiful, but I don't know if it could be both." - Elon Musk
We will soon see.
President Trump’s “Big Beautiful Bill” has passed through the House of Representatives, and it is currently being worked over in the Senate.
Most believe it will pass with a simple majority in the Republican-controlled Senate. But it will not be an easy road. Budget hawks are not happy with the “Big” part of this bill.
The bill is expected to increase the debt by $1 trillion!
So much for budget cuts.
So much for smaller government.
So much for a smaller military budget.
So much for fiscal conservatism.
I have long been a critic of Chairman Jerome Powell and the Federal Reserve. If I were Elon Musk, this is where my D.O.G.E. cuts would have started. I do not believe they have any idea what they are doing, and I absolutely believe free markets can do what they are trying to do better than they ever could.
BUT… I have also been clear that Chairman Powell and the Federal Reserve could never solve the debt issue without Congress balancing the budget.
If you ask me, the “Big Beautiful Bill” confirms that neither Democrats nor Republicans have learned this important lesson yet. They have no will to do the hard things. They have no will to stop overspending. They have no will to cut entitlements.
Therefore, they have no will to shrink the debt.
Gold Is Going Higher
I said it in January. I will say it again now.
Gold is going higher. (And silver along with it.)
I see no other way for this to end.
Everyone is waiting to see whether President Trump 2.0 will be successful. Will he be able to do the necessary to put this country back on firm fiscal footing?
If the answer is the “Big Beautiful Bill,” then, the answer is “No.”
By the end of this quarter, we should have that verdict. We should know for sure if we are on the road to fiscal health or if we are on the road to financial ruin.
In either case, you will need gold more than you ever have in the past. When “Wait and see” turns into “Waited and saw,” you will be glad you took the opportunity to secure your portfolio with gold and silver.
Or… you will regret that you had not done so.
As long as politicians say yes to overspending, the Federal Reserve has no choice but to expand the money supply (the very definition of inflation). That leads in every case to diluted purchasing power.
Everything of any value will cost more in U.S. dollar terms. No ifs. No ands. No buts.
And yes… gold and silver will always have value, so they will absolutely cost more.
Take this opportunity now to buy some cheap gold and some cheap silver. You will be glad you did… for there is no better way to Keep What’s Yours!
Embrace dips as buying opportunities.
Visit our online store. Send us an email. Call us toll free at 1 (800) 831-0007.
We stand ready to help.
—Rich Checkan
Editor's Note: Jim Woods is the editor of Investing Edge, Bullseye Stock Trader, Fast Money Alert and his latest publication, Crypto & Commodities Trader. A self-described radical for capitalism, he celebrates the virtue of making money from his Southern California horse ranch.
Feature
I Wish Every Day Was TACO Tuesday
By Jim Woods
One of the best lessons I ever learned about how markets really work can be encapsulated in the following maxim: “Money always goes to where it’s treated best.”
On Tuesday, May 27, money flowed back to where it is treated best, and that means back into equities. And it did so with vengeance, as the S&P 500 spiked over 2% while lifting all major S&P 500 sectors along the way.
The reason for that bullish Tuesday surge has become a bit of a banality, as it was the now-familiar move in the Trump tariff era of reversing a stance on trade policy. Indeed, a reversal, or postponement, or reduction, or alteration of a proposed tariff rate from President Trump has become so commonplace that Wall Street now has created an acronym for it. Hey, Wall Street loves acronyms, and its latest en vogue expression is the following: TACO Trade, which stands for Trump Always Chickens Out.
The idea here is that President Trump makes hyperbolic tariff proposal on a goods coming from major U.S. trading partners (China, the EU, Mexico, Canada, etc.). But within a matter of days, he backtracks and either delays the implementation or exempts enough goods that the tariff itself loses much of its bite.
According to the TACO Trade thesis, the best way to play those hyperbolic Trump tariff statements and eventual reversals is to “buy the dip,” because the president will inevitably reverse his stance, which will cause money to flow back into equities.
Yet is this TACO Trade situation really true? Well, the answer, so far, is yes.
Consider that the president started this meme of sorts by exempting United States-Mexico-Canada Agreement (USMCA) goods from additional Mexico/Canada tariffs, and that had the effect of dramatically reducing the impact of the initially proposed tariffs on our bordering neighbors. Mr. Trump then postponed all of the so-called “reciprocal tariffs” against U.S. trading partners just a week after the now-infamous Rose Garden “Liberation Day” announcement.
Shortly thereafter, the president reduced the truly exorbitant Chinese tariffs just a few weeks after their implementation. Then, on Memorial Day weekend, Mr. Trump backed off yet again, this time on his threat of 50% tariffs on the European Union (they were delayed till July 9, which is the expiration date for the rest of the reciprocal tariff exemptions).
Now, if we analyze the TACO Trade here (i.e. the buy-the-dip thesis), we see that it has indeed worked quite nicely. The following data comes to us courtesy of my friends at Sevens Report Research, a group whose publications I unequivocally recommend.
Consider…
• The S&P 500 has gained 2% since the March 4 tariffs on China and Mexico.
• The S&P 500 has rallied nearly 10% from the Apr. 2, “Liberation Day” declines and 11% from the date Trump announced 145% tariffs on China (Apr. 11).
• The S&P 500 is higher than it was prior to last Friday’s 50% EU tariff threat.
Here we can once again see that money always goes to where it’s treated best, as the returns here are indeed conclusive: the TACO Trade has worked, and buying stocks on extreme tariff-related threats has been a smart trade. Now the question becomes, will the TACO Trade continue to work? The answer is, yes, it most likely will.
I say that because of another Wall Street maxim that’s consistently operating, and that is that “history doesn’t always repeat, but it often rhymes.” In this case, history suggests that the president will treat tariffs as a threat, or a negotiating tool, if you prefer. Whatever you call it, I don’t think Mr. Trump will follow through on tariff threats that become destabilizing or extreme, as he knows what happens to markets when he does.
Finally, one thing I want to note here is that just because the TACO Trade appears to be in place, that doesn’t mean we no longer need to worry about tariffs or a trade war. And just because the president has consistently backed off the most extreme tariff threats, the Overton Window on tariff normalcy has been altered, and altered for the worst, in my view.
Consider that right now, there are 10% tariffs (import taxes paid by American companies) in place for all U.S. trading partners with 35% tariffs on Chinese imports and 25% tariffs on steel and non-USMCA products from Canada and Mexico (energy products are tariffed at 10%). And while none of these are as intense as the original threats, they are all still much higher than they were pre-Trump. And while we do not yet know what those tariffs will do to the economy or inflation, my suspicion is they won’t result in positive economic data.
The takeaway here is that the TACO Trade should not lead us into complacency about the negative effects of tariffs and the trade war, as just because something isn’t as bad as feared, it doesn’t mean it isn’t bad.
So, while we can take advantage of this situation by buying the dip after extreme Trump tariff toutings, the wider and long-term reality that the tariff burden for the U.S. economy and globally is at multi-decade highs will slow growth and boost inflation—and that is a new paradigm we all must contend with going forward.
Editor's Note: Adrian Day is president of his eponymous money management firm, offering discretionary accounts in both global markets and resources. He also manages the Europac Gold Fund. To see if a managed account might be right for you, call ASI and we'll make the connection. Call 1-800-831-0007 for more information.
Hard Stuff
The Question Will Soon Be Answered
By Adrian Day
Over the past year, the most oft asked question from gold investors was “Why aren’t the gold stocks moving?” And the corollary was “Why aren't investors buying gold stocks?”
After all, with the gold price at record highs, mining margins wide and expanding, balance sheets strong, and valuations low, one might expect a flood of money into gold stocks. But, on the contrary, we have seen a flood of money out of gold stocks…until the past couple of weeks.
Gold Stocks Have Not Performed That Badly
In truth, the major gold stocks are up 43% over the past 12 months, which is by no means shabby (and a multiple of the returns of the S&P). But the gold price itself is up almost as much (40%). Aren’t gold stocks supposed to display leverage to gold, particularly in the early stages of a bull market? And indeed, historically, they have, often double, tripling or more gold’s returns.
The disconnect is not illogical, as we have discussed before. The gold price has been driven primarily by three groups, each with their own somewhat distinct motivations:
• Central banks diversifying out of the dollar in the face of dollar weaponization
• Chinese investors concerned about a possible yuan devaluation and wary of their banking system
• Wealthy families concerned about the global fiscal situation
All three groups, given their motivations, want physical gold, and not mining shares.
North American investors, on the other hand, looking not for insurance but for profit, generally buy gold when inflation is high and rising; interest rates low or negative; the economy weakening; and the dollar declining. Until recently, that was seemingly the precise opposite of the macroeconomic environment in North America.
Interest Returning as the Economic Narrative Shifts
I say “seemingly”, because there have been signs for some time now that the economy is not as strong as the headlines suggest (strong retails but rising credit card debt; strong new jobs creation, but most of them government or part time; and so on). And inflation, though it has come down from the post-Covid highs, remains well above both where it was pre-Covid and the Federal Reserve’s own (arbitrary) target.
Nonetheless, the headlines and the narrative did not conjure an economic environment conducive to investing in gold. Add to that the fact that the S&P has been going up pretty much month-by-month, then there was little reason for investors to look elsewhere, and certainly not to gold stocks.
There are signs this may be changing. Much of the economic narrative is shifting, on GDP and on jobs, on the small business outlook, as well as concerns about the impact of tariffs on the economy and on inflation. Although the Federal Reserve is stubbornly holding to its rate policy, at some point they will be forced to cut rates. That may come because of job market weakness or may come to ease the burden of the federal government’s debt service payments. (To be clear, the Fed cutting rates at the short end will not help the government sell more long-term bonds. But with most of the government debt now being funded at the short end, it may help reduce the interest burden overall.)
Concern about the outlook for corporate profits amid the tariff embroglio may see some weakness or volatility in the stock market which will lead investors to look elsewhere. As money comes out of the erstwhile market leaders it will roll over to many markets and sectors, including global stocks, small cap stocks and value stocks, but some of it will move into commodity and specifically gold stocks.
It Won’t Take Much to See Dramatic Moves
With the gold equity space being so small–-about $600 billion total world wide, relative to over $15 trillion market cap for the top five tech stocks––only a small shift into the gold stocks will have an outsized impact. Right now, investors in the U.S. in aggregate hold less than 0.5% of assets in the gold sector, compared with 2% traditionally. Again, we do not have to get back to 2% for the impact on prices to be significant. In previous gold bull markets––1976 to 1980, 2001 to 2008, 2008 to 2011––the gold stocks tripled, quadrupled and more. What we have experienced in the gold shares so far in this bull market is but the beginning.
Source: VettaFi
Although last week saw more outflows, and the total outflows this year are close to $3 billion, the inward flows earlier last month are encouraging, given how dramatically they turned. And the junior stocks are beginning to catch-up, with the GDXJ (the VanEck Junior Gold Miners) actually outperforming the GDX (the majors index) over the past two month, while the real juniors, the S&P/TSX Venture Mining Index, is playing catch up rapidly; on a one-year basis, the return of the juniors is barely one-third that of the GDX or GDXJ, but again in the last couple of months, the gap is closing. This is another sign of renewed interest from individuals.
As the U.S. economy continues to weaken, as the Fed’s narrative on rates changes, and as we see more volatility in the stock market, interest in gold stocks will increase. Over the next year, we should see that leverage in the stocks that we have seen historically.
And all the while, the stocks remain undervalued, with the senior miners trading in the lowest decile of their historical valuations on many metrics. This is the perfect time to invest in gold stocks.
Editor's Note: Bill Bonner is the Founder of Bonner Private Research and owner of the Agora Companies. This article was originally published by Bonner Private Research on May 28, 2025. You can also find parts I and II there. You can subscribe to Bonner Private Research here.
The Inside Story
Epitaph for Trump II, Part III
By Bill Bonner
Donald Trump seemed unaware of it, but he had only a few days to accomplish something too. And he faced one critical objective: to stop the federal government’s perennial deficits.
‘The Russians already learned a few things.’
—General Heinz Guderian, upon seeing shells from his Panzer tanks bounce off the Russian T-34’s armor.
No responsible historian would endanger his tenure by rushing into an obituary for the second Trump administration. It has barely begun.
Historians typically wait at least fifty years before trying to understand a major event. By then, people have forgotten what it was really like…and are ready to listen to a good story.
So, they create a ‘narrative’ — a plot line — that appears to make sense of it. Then, over time, new narratives appear, each one in line with the intellectual currents of the day.
And yes…even this early, it does look as though the white lines of Trump II are already drying on the highway. Some lead to charming back roads — largely circumscribing the worst ‘woke’ tendencies of the last administration. Some lead to nasty back alleys where old scores are settled…and some to strange and exotic new places.
Annex Canada? Develop Gaza? Tell Apple where to make its phones?
The major thoroughfares are marked out pretty well, too. We’ve seen two of them already. One ran into a brick wall — when it became obvious that Elon Musk was no match for the entrenched federal bureaucracy. He could send them scurrying for cover…but without Congressional backing, the campaign went nowhere.
Another, which we saw yesterday, was like the Wehrmacht’s attack on Stalingrad. It was a sideshow…full of sturm und drang, and it swallowed up an entire army…but it was pointless and ultimately suicidal. So too was Trump’s ‘Trade War’ expensive — both to consumers, who will have to pay higher prices…and to the president, who squandered his precious time and political capital on an unworthy objective.
By July, 1941, the Wehrmacht had advanced at lightning speed across Western Soviet Union…capturing millions of prisoners and destroying most of the Soviets’ aircraft on the ground, along with much of their fighting capacity.
Thereupon, the Germans made a fateful mistake, dividing their forces to strike in three different directions. In the North, they ran into the aforementioned brick walls of Leningrad. In the South, Stalingrad was a one-way street; you could get in, but not out. The Wehrmacht’s third prong was the only one that made much strategic sense. If they could take Moscow, they might have a fair chance of dictating peace terms. Even this was unlikely, but not impossible. (Germans knew only too well that they couldn’t afford a long, drawn-out war.)
In four months, von Brauchitsch’s army was supposed to be in Moscow. But the attack had been delayed until September. And it was deprived of the tanks, guns, planes and soldiers that had been split off to the North and the South.
On October 7th came the first snowfall. The roads turned to mud. Later, according to General Fedor von Bock, the temperature fell to MINUS 49 degrees, the coldest winter of the century. And the shivering, exhausted Germans, with the domes of the Kremlin in sight, could go no further.
This failure meant that the whole war effort was doomed. The Soviets had more men, more fuel, more tanks, more rifles. They were disorganized and ill-equipped in the early days, but as Heinz Guderian observed, they soon ‘learned a few things.’ After the Wehrmacht squandered its ‘first 100 days’, it was just a matter of time before Soviet soldiers were in Berlin.
Donald Trump seemed unaware of it, but he had only a few days to accomplish something too. And he faced one critical objective: to stop the federal government’s perennial deficits. As long as those deficits continued to exceed the rate of GDP growth, the US financial crisis would become more serious and more imminent.
Bringing spending under control had to be Donald Trump’s number one objective. And yet, he made it almost impossible to achieve. First, he assured voters that he wouldn’t touch Social Security. Then, he actually increased the military budget. And finally, as the House of Representatives wrangled with soaring Medicaid costs, he told Republicans not to “f*** around with Medicaid.”
But if you can’t cut these big programs…what can you cut? What’s left? In order to reach a balanced budget, Trump needed to cut $2 trillion of expenses. He ended up cutting nothing at all.
The ‘big, beautiful budget bill’ turned into a highway to nowhere.
“While I love many things in the bill,” wrote Rep. Warren Davidson, “promising someone else will cut spending in the future does not cut spending. Deficits do matter and this bill grows them now.”
But Davidson and the very few other conservative Republicans were overpowered by Trump and their go-along, get-along colleagues.
And so, at the end of the first 120 days, the promise of the Trump administration was effectively shattered. Elon Musk is now out of the picture; his efforts to cut waste and inefficiency produced trivial results. The ‘Trade War’ was called off only a week after Liberation Day. And the Republicans’ Big, Beautiful Budget Bill conceded that spending — and the build-up of debt — will continue much as before.
The budget is still running two trillion dollars in the hole each year. The debt is still scheduled to grow to $60 trillion… maybe $70 trillion…over the next ten years. Interest payments are headed to $1,500 per citizen per year. And interest rates are going up.
Trump II has shot its wad.
We will leave it to future historians to fill in the details.
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