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Perspective
By Rich Checkan
Since last month’s presidential election, U.S. equities have soared for the most part. Bitcoin has as well. But gold and silver went the other direction initially.
They are slowly but surely recovering.
That puts a couple questions at the tip of everyone’s tongue…
1. Why did markets move as they did post-election?
2. Is that the end of gold’s and silver’s bull runs?
First, we will address the moves in equities and Bitcoin. Then, we will put aside any fears of the end of this bull market in precious metals.
The Trump Bump
Former President (#45) Donald J. Trump was considered positive for stocks but negative for cryptocurrencies. Current President-Elect (#47) Donald J. Trump is considered extremely positive for both stocks and cryptocurrencies.
For stocks, his anticipated positive impact is quite obvious. He advocates for smaller government, less regulation, and lower taxes. All three are expected to provide ample wind in the sails of businesses.
With businesses free to create, innovate, and expand, profits are sure to follow. With a lower tax obligation, it is expected that those increased profits will find their way back into research and development as well as in the hands of employees and stockholders… people who spend money in the real economy.
Further, President Trump is expected to be a strong proponent of lower interest rates and easier money.
The Dow, the S&P 500, and the Nasdaq all rallied since the election on the belief that President trump will be successful and money will find its way to Wall Street.
The pro-cryptocurrency version of President Trump is a complete 180-degree turn from where he stood on cryptocurrencies in his first term.
Back then, President Trump famously called Bitcoin a “scam.”
He credits his sons for educating him about Bitcoin, cryptocurrencies, decentralized finance (defi), and the like. As a result, his embrace of all things crypto during his campaign paid huge dividends.
As the pro-crypto candidate, both donations and votes rolled in. Many attribute his win to the mobilization of the crypto community.
During the campaign, he publicly launched World Liberty Financial… a DeFi platform and digital bank with his sons. He branded it “The Defiant Ones.” In his words on X (formerly Twitter)… “For too long, the average American has been squeezed by the big banks and financial elites. It’s time we take a stand—together.”
In addition, he has been fairly vocal about the need for a change at the head of the Securities and Exchange Commission (SEC). And with Gary Gensler’s announcement late last month that he will resign in January 2025, President Trump and the crypto community will get their wish.
Chairman Gensler has been at the forefront of an enforcement crusade against the crypto community that has led to over 2,700 enforcement actions and over $21 billion in penalties assessed.
Given all that, it is not surprising at all to have seen the Dow Jones Industrial Average near $45,000 and to see Bitcoin breach $100,000 since the votes were tallied on November 6th.
Golden Dip or Something More?
With gold dropping to $2,550 an ounce and silver falling to below $30 an ounce post-election, there have been concerns that the bull market is over for gold and silver.
Rest assured… nothing could be further from the truth.
First off, if you are holding gold as wealth insurance in your portfolio, you should never sell it unless you have a financial crisis. Gold serves that purpose at $2,000 as well as at $2,600.
However, if you hold gold and silver for profit, it is important for you to determine whether this is the end of the bull market to be sold into or a dip to be embraced by buying well.
To determine this, I look at a series of indicators based upon the previous two bull markets in precious metals (1971 to 1980 and 2001 to 2011). When one or two trigger, I start to pay attention. When four to five trigger, I start looking for the exits.
Here they are…
Duration – I expect a bull market to last roughly ten years. As a result, I believe we have at least five more years to go.
Gold Price – I expect the peak of the bull market to reach the same levels as the move from $850 per ounce in 1980 to $1,921 per ounce in September of 2011… roughly two to three times the previous high. That would suggest a peak gold price between $3,800 and $5,700 per ounce.
Gold/Silver Ratio (GSR) – I would expect it will take between 35 and 50 ounces of silver to buy one ounce of gold at the peak of the bull market. Today, it takes roughly 85 ounces of silver.
Sentiment – At the peak of the bull market, I expect everyone to be talking about how much money they are making in gold and silver. I just finished a stretch of four conferences in the span of a month and a half. I took an untold number of Uber rides over that time period. Not a single Uber driver uttered the words gold or silver.
Interest Rates – In order for investors to be deterred from buying gold and silver because of the better perceived return from Certificates of Deposit (CDs) at a bank, I expect interest rates will need to be high single or low double digits… somewhere between 8% and 12%. We recently reached 5.25% to 5.50% before the Federal Reserve started cutting rates.
U.S. Dollar – For investors to turn away from gold in favor of U.S. dollars, the dollar needs to be strong and getting stronger. Granted, the U.S. dollar is relatively strong against its major currency counterparts, but it is far from strong. A year and a half ago, the U.S. dollar was trading at 116 on the U.S. Dollar Index. Today, it sits at 106 after briefly touching below 100.
Social and Political Stability – Gold is a safe haven asset of choice during periods of social and political instability. Unless peace breaks out both internationally and domestically all around the world, gold is needed now more than ever.
Not a single indicator is triggering at the moment.
As a result, there is no other conclusion I can draw. Gold and silver selloffs after the presidential election are simply dips in a larger bull market. They are not the end of the bull market nor the beginning of the bear market.
They are absolutely dips to be embraced. They are absolutely opportunities to buy well. They are absolutely healthy as we build toward higher prices for both gold and silver.
Those of you who bought at the $2,550 or sub-$30 lows have already been rewarded.
Those of you who have not bought yet still have the opportunity to do so below the pre-election price levels.
Got Gold?!?!
Got Silver?!?!
To Keep What’s Yours, simply contact us today. Visit our online store. Send us an email. Call us toll free at (800) 831-0007.
Embrace this dip…
—Rich Checkan
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 November 19, 2024. You can subscribe to Bonner Private Research here.
Feature
Sky High
By Bill Bonner
Uh oh... here’s tech showboat, Cathie Wood:
"The Reagan revolution extended through President Clinton’s administration, leading to lower taxes, stronger GDP growth, and a bull market rewarding active equity management that lasted nearly 20 years. We believe that this bull market has just begun to broaden out. "
Morning in America? Better check the clock.
Donald Trump is in a tough spot. Because this economy today is in no way similar to the economy that greeted Ronald Reagan. It is almost the exact opposite — with a 4.5% Fed Funds rate…rather than the 20% rate that greeted the Gipper. And when Reagan looked at the feds’ books, he found $900 billion in debt. Today, there’s $36 trillion in debt, rising at $3+ billion per day.
As for asset prices, in 1980, they had been sinking since 1966, not rising 44 times in the last 44 years.
Reagan also had the benefit of a real inflation-fighter at the Fed — Paul Volcker, who could reduce interest rates as inflation cooled off. Lower rates meant higher asset prices. And as Volcker won the fight against inflation, the bond vigilantes could hang up their spurs. They weren’t needed.
But today, asset prices are already sky high and ready for a correction. And since the Great Boom ended, in July 2020, the Fed can no longer support the stock market without risking two unhappy consequences.
First, as we’ve seen since September, the bond vigilantes are back in the saddle. The Fed cuts short rates... and long rates rise. Investors know what time it is. They expect more inflation. Not only that... they seem to be doubting the good faith and full credit of the US government itself. Our Investment Director Tom Dyson comments:
"U.S. Treasury rates are the highest they've been in decades relative to everyone else's rates.
Not only are Treasury bond yields cheap relative to stocks, but they're cheap relative to corporate bonds, bonds from other countries, and commercial property cap rates.
In other words, it looks to me like Treasury bonds have lost value relative to the rest of the asset universe... stocks, foreign bonds, corporate bonds, junk bonds, property etc, etc...
Which implies investors are specifically marking down the creditworthiness of the federal government’s paper. "
Second, higher long-term rates set in motion trends that are the opposite of the Reagan years. Instead of rising real asset values, we should see them fall. Instead of an economic boom, we should see a bust. And instead of financing small deficits at declining interest rates, the Trump team will be financing big ones at increasing real rates.
So, what’s new? No situation is so grim... or so hopeless... that a determined leadership in Washington can’t make it worse. And since were looking for the ‘worst case’ scenarios, let’s look a little further.
Prominent among the additional risks is the call for trade barriers. The US doesn’t just import stuff. It also exports stuff — $3.5 trillion worth each year. And it wouldn’t be at all surprising if the countries that suffer higher US tariffs, set up some tariffs of their own. This is what happened after misters Smoot and Hawley enacted a tariff bill in the US in 1930. Trade declined and much of the world went into a depression.
Trade is what keeps the world economy in business. Only very poor countries — who have nothing to export and no money to buy imports — don’t rely on trade for a substantial part of their GDP. The others need to buy and sell... and depend on it not only to meet their daily needs, but also to keep up with their debts.
The defining stupidity of the whole boom-bubble era, 1980 to 2024, was the role of interest rates. From double digits — 15% for a 10-year Treasury in 1981 — down to no digits at all. On August 3, 2020, the yield on a 10-year treasury note was not even a whole number... it was just a fraction of 1%.
Pushed down by central banks all over the world, the ultra-low lending rates led to an ultra-abundance of debt... now totaling more than $300 trillion.
Take away the $25 trillion in international trade... or even a small portion of it... and it becomes much harder to keep up with debt payments. Here’s Bloomberg with an analysis of Trump’s tariff proposals:
"Of all the goods traded globally, 20% either go to the US or come from the US. In our model with tariffs, we’re looking at that falling to 9%. "
We don’t have 100% confidence in these figures, but that looks like a loss to the US economy of about 10% of its GDP. And then…loans of all sorts go unpaid. Business profits shrink. Banks go bankrupt.
In short, in addition to the massive financial correction described above, we could have another worldwide depression... similar to what happened in the 1930s.
That is a worse case scenario. But it’s not the ‘worst case’ scenario. It wouldn’t be the end of the world, in other words.
But we’ll come to that tomorrow.
Editor's Note: Jeremy Szafron is a Canadian-based broadcast reporter and producer turned investor, media entrepreneur, and philanthropist. Currently serving as the Anchor at Kitco News, Jeremy brings a wealth of experience and a proven track record of journalistic excellence to this role. His appointment is set to enhance the narrative in finance and commodity news, offering unparalleled insights and engaging content to a global audience.
Hard Stuff
Dollar Devaluation Exposed: Why Only Gold, Bitcoin Hit 'Real' New All-Time Highs During Last 10+ Yrs
By Jeremy Szafron
Gold is up more than 800% in the last 24 years, outperforming all major indices this millennium, says Rich Checkan, President and COO of Asset Strategies International.
Checkan exposes the devaluation of the U.S. dollar, adding that equity markets' record highs have not been "real" due to the greenback's loss of purchasing power.
"In the last 24+ years, gold is up 818%. This dead asset that doesn't kick off interest or dividends is outperforming all the major indices so far this millennium," Checkan tells Kitco News anchor Jeremy Szafron on the sidelines of the New Orleans Investment Conference. The discussion focuses on gold's market behavior post-election, geopolitical tensions, and the impact of fiscal policies on precious metals and other investments. Checkan also shares his outlook on Bitcoin.
Click to view.
Editor's Note: Nomi Prins is a best-selling author, financial journalist, and former global investment banker. Prinsights Pulse is a new, free publication that’s curated by Nomi Prins. Designed for everyone from executives at large institutions to individuals seeking to enhance their financial understanding, this powerful newsletter provides essential insights into economic trends that affect us all. This article was originally published on November 13, 2024. Click here to discover more of Nomi's insights.
The Inside Story
This is What Wall Street Banks are Hiding in the Post-Election Euphoria
By Nomi Prins
Here's why the Fed's own research could be showing hidden signs of financial black clouds on the horizon.
In the rush of post-election market euphoria, the biggest banks on Wall Street were among the winners.
The XLF ETF fund, which tracks the financial sector through the biggest financial firms, has risen for five straight months, reaching a high of $50 this week.
Much of that upside was attributed to the performance of the largest banks in the sector. Many of those large commercial banks have been getting even bigger by acquiring smaller ones – with several gobbling up community banks across small towns around the U.S.
The move is part of a growing trend that’s creating fewer banks. The biproduct of this trend is an even more concentrated financial industry. History shows us that this shift is also a recipe for risk.
Back in 2007 and early 2008, I wrote extensively on budding problems in the banking sector. The big banks were holding too many faltering subprime loans and what we now call toxic assets (if you want a primer, read my book, It Takes a Pillage.)
Sadly, no one listened then. Yet the top-heavy nature of the banking system was a major factor contributing to the 2008 financial crisis. Certain big banks were “too big to fail.” I'm not saying we’ll have a similar crisis; central banks stand too eager to step in with printing money – but that doesn’t mean clear skies either.
Today, the five largest U.S. banks (JPMorgan Chase, Bank of America, Wells Fargo, Citibank, and US Bank) hold combined assets of more than $10 trillion. That’s up from $6.8 trillion in 2014 and more than double the assets of the next largest 15 banks.
Meanwhile, their percentage of problem or non-performing loans (NPL) is rising. Below, we’ll unpack why that matters. But first, you should know what a practice called “extend and pretend” means on Wall Street.
Extend and Pretend
In a nutshell, it means that banks extend the maturity of a loan and pretend that the loan is healthier because it has more time for borrowers to pay it through smaller payments along the way.
There’s an accounting reason for this practice, too. Banks can set aside less capital for “healthy” loans. This means they can keep more capital on hand for other purposes – like trading and speculating.
Last month, the New York Fed released a paper called “Extend and Pretend in the U.S. CRE Market.” The research explains how Wall Street is using extend and pretend to make its commercial real estate (CRE) portfolios look better than they really are.
As the authors noted: “Banks with weaker marked-to-market capital – largely due to losses in their securities portfolio since 2022:Q1 – have extended the maturity of their impaired CRE mortgages coming due and pretended that such credit provision was not as distressed to avoid further depleting their capital.”
In English, that means banks turned today’s actual losses into tomorrow’s possible losses.
Non-performing loans are starting to inch back upward at the far right of the chart – and toward levels not seen since 2008. The chart below is signaling unsettling concerns that, despite all the big banks’ support right now in the markets, the numbers simply cannot hide.
The Maturity Wall
But there’s a reckoning to the “extend and pretend” practice – and there almost always is. It happens when bank loans crash into the “maturity wall.” That’s when the debt reaper shows up. That’s when the debt becomes due, its borrowers still can’t pay it, and then bank losses escalate quickly – often in a short time period.
The New York Fed’s researcher’s analysis found that “the maturity wall represents a sizable 16% of the aggregate CRE debt held by the banking sector.” The size of the CRE debt market is $5.9 trillion. So, we’re talking about a maturity wall of nearly a trillion dollars of potentially problem debt. That’s the size of the entire subprime loan market in 2008.
We are also facing a situation where “too big to fail” banks have gotten bigger – only this time, we are looking down the barrel of rising CRE loan losses. Highlighted by the chart below, delinquency rates on Commercial Mortgage-Backed Securities on properties overall have risen – with office properties accounting for over 9%.
Historically, we’ve seen a version of this movie before in the turmoil that led to the financial crisis of 2008. In 2008, the protagonist was subprime loans. This time around its commercial real estate loans.
Of particular concern, as you can see below, is the fact that CRE delinquencies are rising quickly.
U.S. banks are sitting on $750 billion in unrealized losses on real estate securities.
Unusual Whales recently detailed, “Public filings and research indicate that 47 out of 1,027 American banks with assets over $1 billion have potential liabilities and losses exceeding 50% of their capital equity. These are still unrealized losses, meaning the banks holding these assets haven’t necessarily lost money yet, but they could if conditions worsen.”
The New York Fed's research paper admitted as much. It noted how “Banks 'extended-and-pretended' their impaired commercial real estate mortgages in the post-pandemic period” warning that the modifications could lead to “credit misallocation and a build-up of financial fragility.'"
That's why provisions, or the amount banks set aside to absorb loan losses, are growing. This past quarter, the four largest U.S. banks set aside $8.4 billion in loss provisions. That’s up from $5.7 billion in Q3 2023.
JPMorgan was the top dog in loss provisions. The Wall Street bank booked $3.1 billion in loss provisions in Q3 2024, more than double (up 124.8%) the same period a year ago. Loss provisions also grew at Citi and Bank of America. That increase was driven mainly by CRE losses.
It may be that the bigger banks weather the CRE storm through “extend and pretend” methods. However, if the New York Fed itself is concerned, it signals that there might be stormy skies ahead.
For those considering alternatives to the biggest banks and financial volatility, one option to consider is to spread your money across multiple banks. That diversification offers a way to diffuse your risk that might escalate at any one bank.
You should also consider keeping an emergency fund of accessible cash outside of the banking system. While it sounds extreme, the move offers security in case something happens to your bank – allowing you to have your own reserve funds. If recent anomalies from the Silicon Valley Bridge Bank (SVB) to Signature Bank fiascos taught us anything at the end of 2022, it’s that having contingencies, even in the modern era, are worth consideration.
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