Stocks have returned less than nothing in real money
I’ve noted several times in the past couple of years that millennium to date, stocks, despite their seemingly impressive performance in dollar terms, have lost money in terms of gold.
This continues to be the case. But how about more recently? Let’s take a look at the past five years. Stocks are slightly down in terms of gold.
This StockCharts exhibit is of the broad stock fund VT in terms of the gold fund IAU. That they are both ETFs and total returns ensures an apples to apples comparison. VT is virtually the entire world stock market in one ticker. Its expense ratio is slightly lower than IAU, actually giving it a slight advantage, so if anything this chart slightly overstates the performance of stocks relative to gold.
It changes the pricing units from dollars to gold. This is as much a commentary on the dollar and the incredible losses its issuer has inflicted upon it as it is on stocks. This extends to wages paid in dollars as well, which goes a long way towards explaining the deep discomfort average Americans express about their economic circumstances. While financial media promote the CPI as a measure of inflation and the purchasing power of the dollar, the people know their reality is different. Political animosity and civil unrest are just a couple of the consequences. Media are talking bread and circuses while living standards decay.
Upper echelons with considerable stock holdings have been insulated from most of these losses, widening the wealth gap. But on average even they aren’t quite keeping up. Only the upper echelons of the upper echelons, the upper ranks of the corporate, financial and political establishments have been outpacing inflation. Make no mistake. Inflation happens because the rich and powerful benefit and they control the machinery that produces it. Their claim it’s necessary to fight unemployment is Orwellian PR to sell it to the working class it victimizes. The stock market, meanwhile, serves as an emissary of the Ministry of Plenty, driven higher in nominal terms by virtue of being quoted in depreciating dollars while in reality, on a long trip to nowhere.
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On my mind … the overbought conditions in metals (h/t Mega).
Overbought can become even more overbought, but elevates the risk of a sharp pullback. The pace at which prices have been rising smacks of too far too fast, suggesting that fast money speculators have joined smart money investors. I know of no magic formula to identify when that selloff risk outweighs the prospects for more overbought. The fundamentals, including particularly the pressure that nearly $40T of US.gov debt puts on Fed.gov to inflate, argue for yet higher dollar denominated prices in the medium to longer term, while the overbought conditions argue for lower prices in the short to medium term, another balancing act for which I have no magic formula.
As a practical matter, everyone has to decide for oneself how to balance those risks, but commonsense diversification principles appeal to me. Set a percentage target to each of the basic asset classes of stocks, commodities and bonds, and diversify within each class as well. Just one example was recently cited here.
The main risk to those overbought conditions, ironically, would be higher official inflation data. It could take just one hot CPI report to spark speculation of a less inflation-deranged Fed, and consequently less urgency to hold hard money, sparking a selloff. The longer term rationale to hold hard money would remain, suggesting such a selloff would be a buying opportunity.
Mega’s dispatch from England:- Clueless
Watching what i suspect is the take down of my Prime Minster…….was he too bold or too weak?
Right now he under heavy attack from well informed places.
The latest is he has pulled a fast one over tax, a scam …..it looks bad, but this is just one of the troubles he is facing…………..
Digital ID:- This was one of Tony Blair’s wet dreams, i no idea if its just an attempt to suck off public money for an IT system that will bugger all good or if its an attempt to pull something right out of “1984”……but millions have already signed an on side site to say “NO!”
Its bringing out protesters onto the streets of Liverpool.
Ah yes My city is to play host to the Labour party conference this week. Liverpool was picked as its the most left wing place in the nation. Sadly its also working class & the Working class have sussed that Labour has dumped them to suck up to the “New arrivals” & their religion.
The PM is due to address the party on Tuesday…………even among the party 60% want him gone with another 16% “Unsure” of leadership…………that’s how bad it is.
Up again today………………
Year to date returns (in dollars)
US Treasuries (GOVT) +5.44%
US stocks (VTI): +13.89%
Rest of world stocks (VXUS): +26.38%
Copper (CPER): +19.67%
Gold (IAU): +43.75%
Silver (SLV): +57.84%
Platinum (PLTM): +72.43
The past year has been exceptional for gold prices. Or has it?
Let’s compare the past year with the year before.
From 2024 1001 to 2025 0929:
IAU rose from $50.21 to $72.16.
From 2023 1002 to 2024 1001:
IAU rose from $34.64 to $50.21.
Past year: +43.72%
Prior year: +44.95%
In fact gold has been a remarkably steady performer over the past two years. It did NOT just start taking off this year. It started taking off TWO years ago.
The point? The vast majority of mainstream reporting on it has been garbage. Earlier this year it was tariffs, now it’s a government shutdown, supposedly driving gold higher. If it were such news events, it would have taken quite a remarkable series of them to drive gold higher at nearly 10% each quarter like clockwork for the last two years. Or it’s really just one thing, and it didn’t start this year.
We could go as high as two things. Out of control debt and inflation, and the weaponization of the dollar. the latter especially including the seizure of Russian reserves. The US has given the world compelling incentives to replace its dollar reserves, and that’s what it’s doing. The surest way to lose an “exorbitant privilege” is to abuse it.
The implications are that it will continue until either the US stops abusing the privilege or until the dollar is an also-ran in international reserves. The Federal Reserve and the federal government would both have to become credible stewards of the dollar again. That being unlikely, gold will continue on its path to regaining its role as the world’s preferred money.
Another point. Gold may not be as overbought as it appears. On a linear chart, it appears to curve upwardly, as if the rate of gain has been accelerating. It has not. Any time you plot a large range of constant growth on a linear chart it looks that way. Properly plotted on a log chart, over the past two years the price is a linear trend channel with a steady slope of about 9.61% per quarter, or about 44.33% annualized.
Very well behaved.
Five year log chart of gold.
ITS GETTING KILLED THIS MORNING!!!
I must have missed the news they solved that government shutdown thing.
Up again, now near $3900…………….i wonder what EJ would say?
Gold hit $3893.95 overnight.
The short term is always a crap shoot. But it’s at the top of the aforementioned trend channel. So this leg up from the April-August trading range is about exhausted; I think it’ll stay under 4K for a while.
There’s no ceiling long term, though, because there’s no limit on how far the $ can fall.
The Supreme Court has ruled that Lisa Cook can remain at the Fed until hearing the case on its merits in January. This isn’t good news; it should have been a slam dunk. Hopefully the Supremes will ultimately affirm that indeed Fed officials can be held to high standards of financial conduct and that they are accountable to someone aside from the financial elite.
The government shutdown is so far a nonevent. I have no dog in this race; to the extent it’s about whether to reinstate the abrupt ACA tax credit cliff that existed prior to 2020, the Reps are on the wrong side of history. That was a defect that needed fixing and to bring it back would not just be financially flawed but politically losing as well. To the extent it’s about extending ACA benefits to illegal aliens, the Dems are on the wrong side of history. That’s also both financially flawed and politically losing.
The original ACA tax credit had a point at which one marginal dollar of income increased tax due by hundreds or even thousands of dollars. That was insane and if the Reps bring that back they will deserve the political doghouse the public will put them in. Dems will deserve the same if they try to extend taxpayer largess to people who aren’t even legally in the country.
Probably just a coincidence that the big ramp in gold prices started around 2023.75, same time as the resumption of M2 expansion started.
MSM is still flogging the notion that gold’s rise versus dollar debasement is connected with vague worries of “Fed independence” due to the firing of Lisa Cook.
None of them will show you a chart like this in support of such musings though; you’d be hard pressed to even find the event on the plot.
It would also undermine their propaganda that it was caused by tariffs, government shutdowns, etc, none of which have managed to break the time barrier and reach back to October 2023 when this took off.
Mega’s dispatch from england:- When good friends fall out
Things here in blighty are now turning to winter, indeed there is a large winter storm blowing a gale right now. On the political front the Tory party is about to have its national conference, the numbers don’t look good. Since the Reform party took the Trump/Hard right ground the Tory party is looking a little “Lost”.
The Tory party only has itself to blame, it turned its back on Thatcher & since then has been a pro Euro neo Lib mass immigration Hell hole with little difference between it & the Labour party .
The Membership is falling FAST & at this rate the next conference could be held in a phone box. Things were not helped by one Boris Johnson, the former PM whom went on a spend-o-tron & opened the Floodgates to MASS immigration. Boris also has a thing for bicycles, strange because he a fat bastard.
Boris decided that all the poor(er) people should give up their cars & cycle everywhere. To wit he forced cycle lanes to be put everywhere closing off roads etc. Only now are they seeing that cars are a driver of economic attractively & “push Irons” are not!
Worst still the retired (Old farts) are the only people i see riding about. The younger folk don’t wish to be seen as “Old” thus its suddenly become “Un cool” to ride. Kids still do but they packing EV power, indeed i clocked on young man going up a steep hill at +40 mph!
Anyway…………..enjoy your Sunday
Gold has blasted through another century mark, hitting a fresh all time high of $3933.15 just now.
$3940.87 as of UK morning (8:55 am)
Silver $48.67
I wonder if this is going to be like the DOW was, you know when it hit 10,000 everyone said it was over bought?
$3965.44 … the $4000 mark is acting like a magnet. But it is now overbought in relation to that two year trend I discussed earlier. A short term respite should surprise no one. Bear in mind that overbought and oversold depends on the time frame context; this is a shorter term overbought condition that says nothing about the longer term trend. Unless the Federal Reserve suddenly discovers monetary prudence and Congress fiscal prudence, it’s a dollar down gold up world.
Euro Nazi designed “New” (low safety) EV’s for the PLEBS
https://www.carscoops.com/2025/10/dacia-hipster-previews-dirt-cheap-ev-for-europe/
Who would have thought that the death of Bretton Woods / Petrodollar would occur in our lifetimes?
one of my oldest memories is Nixon on TV ref the Gold standard………….
Goldman has just said “Gold $4900″…………its doomed!
…. and we have it.
$4006
https://www.gold-eagle.com/
https://www.kitco.com/
https://www.moneymetals.com/news
https://www.investopedia.com/gold-prices-top-usd4k-for-first-time-where-do-they-go-from-here-11826010
https://www.cnbc.com/2025/10/08/cnbc-daily-open-gold-skeptics-are-from-mars-investors-are-from-earth.html
https://finance.yahoo.com/news/live/stock-market-today-dow-sp-500-nasdaq-futures-tick-up-as-gold-reaches-4000-231516006.html
https://www.msn.com/en-us/money/markets/cnbc-daily-open-gold-skeptics-are-from-mars-investors-are-from-earth/ar-AA1O3fcO?cvid=68e5d1090de842668d7e2621cd9089ed&ei=9
https://www.gold-eagle.com/article/seismic-shift-morgan-stanley-recommends-602020-portfolio-20-allocated-gold
The implications of a widespread 20% allocation to gold, incidentally, would be massive. An individual can buy gold to 20%, but everybody cannot. For one to buy, another must sell. The only way that everyone could hold 20% in gold would be for the price of gold to rise enough to make it happen.
>An individual can buy gold to 20%, but everybody cannot.
I never felt that anything close to “everybody” would allocate any of their portfolio at all to gold nevermind 20% due to their mistaken belief that equities, at any price, will serve as an effective hedge against inflation. At these gold prices, even fewer retail investors will. Heck, even I’m highly hesitant to buy more gold to hedge my growing cash position.
However, what about central banks? Are they truly price insensitive buyers? I’m wondering if the central banks will continue their steady buying of gold reserves or if the galloping price might introduce a panic in them and cause them to increase the rate at which they buy gold at any price.
I also notice that, at least for today, the spot prices of silver, platinum, and palladium are each also up 2% or more. Could there be a scenario developing where retail and institutional investors will try to hedge fiat currency exposure with precious metals other than gold?
Whether they actually would is less important than if they tried. I don’t know what the average allocation to gold is among the world’s investors, but it’s much less than 20%.
The larger insight here is that investors’ collective asset allocations control asset prices. Not just gold, but all assets. It’s very general.
To illustrate, imagine there are only two investors, each with an allocation of 10%. Investor A can increase his allocation to 20% by buying from Investor B. But investor B has to sell, leaving him with 0%, assuming no change in prices.
Is there any way that both investors could increase their allocations to 20%? Not without creating more stuff, because every purchase is also a sale. There can be no net buying. The only way they can both have a 20% allocation, all else being equal, is for the price to double.
It doesn’t matter how many investors there are so long as you’re considering all of them. There can be no buying without an equal amount of selling.
This is the thing that’s been driving gold higher. Investors are collectively increasing their allocations, even though they can’t collectively buy. The only way that can happen is for the price if gold to rise relative to their other investment assets.
Checking out some of those links reveals that allocation targets are rising. Central banks … major Wall Street firms. Even small movements upward in response have tectonic effects in the price of gold, because that’s the only way global allocations can increase.
“Could there be a scenario developing where retail and institutional investors will try to hedge fiat currency exposure with precious metals other than gold?”
It’s already happening. In the past year silver and platinum prices have risen even more than gold. If anything gold has been held back just because it’s less volatile and less correlated with stocks. The next shoe to drop would likely be not only more of the same but spreading to other commodities like copper and energy. It will eventually be recognized as the inflation that it’s been all along.
I think the key is not getting too granular about it, focusing on assets as a whole rather than one at a time. There is no such thing as the price of gold in isolation. Or anything else. It’s all ratios … the ratio gold to dollars, gold to euros, stocks to yen, etc. You can’t even make a decision about your allocation to one asset without affecting your allocation to another.
Even central banks aren’t just “buying gold”. They’re selling other things like USD, UST, etc and are changing their asset allocations. Portfolio management boils down to comparing assets with each other and setting allocations based on their relative attractiveness in the context of your time frames, circumstances and goals.
Inflation hedge? Stocks are a good inflation hedge. Gold is a good inflation hedge. Just not necessarily at the same time. Which is what makes a mix attractive.
But best not to narrow one’s thinking to ‘hedges’ in the first place. The asset menu has currencies, bonds, stocks, commodities, each having its own strengths and weaknesses. When currency is going down, we have a special name for it, “inflation”, but different names when other things are going down, like “bear market” or “rising rates”. Conventions like these distort our thinking. Putting all assets on the same footing can be very clarifying.
$4035 @ 08:25 am uk time…………
I fear a supertanker of inflation & how long till governments start to notice GOLD…….eg Mega TAX on it?
I recall EJ warning about it & the Italians wanting a TAX on it “The people must not be allowed to benefit from it” said their finance minster back in 2008.
BASTARDS!!!!!
Never say never. But if (or should I say when) governments get that desperate, it’s hard to imagine they would ignore the much bigger pot o’ money that’s in stocks. Some here in the US have floated the notion of new taxes on retirement accounts, effectively a partial seizure. Or requiring some portion of them to be invested in “safe” government bonds.
I know of no bulletproof way for we ordinary folk to completely protect ourselves from desperate governments. As a practical matter though we can protect against the mode of seizure that’s already in progress … inflation.
Anyways, Jess wants her walk…………….see you later
https://news.sky.com/story/gold-smashes-past-4-000-per-ounce-but-there-is-good-reason-to-be-worried-13446794
The amnesiac MSM is still flogging the notion that gold’s rise versus dollar debasement is connected with vague worries of “Fed independence” due to the firing of Lisa Cook, tariffs, government shutdown, and sundry other passing headlines.
None of them will show you a five year chart in support of such musings though; you’d be hard pressed to even find such events on the plot.
None of these have managed to break the time barrier and reach back to October 2023 when this took off. MSM are just now grudgingly glomming on to the real reasons with references to the “debasement” trade.
Jim Rickards sez “Gold $23,000″………….just saying
I think Frank Holmes quoted $7000 the other day. Which is right? We’re going to go to $X and then what? Eventually both, just at different times. They’re all milestones on the way to the ultimate destination. As the USD approaches zero, the number of them it takes to buy an ounce of gold approaches infinity.
USD->O, AU/USD->♾️
Right now we have a short term overbought condition to deal with. Whether we do some retracing or just burn it off, who knows? A few months I predicted gold would drop back below $3000 before breaking $4000, and that didn’t happen. In terms of dollars the main risk is higher official inflation readings prompting less expansive monetary policy. Not that the alternatives like stocks are any clearer. The only sure thing is the long term that central banks will destroy their issue. Between now and then, the stocks and gold relationship is probably the more useful.
We just heard that the Bank of England are working on a secret project that involves the new digital ID card with a CBDC!……………..total bastards
So another piece of the jigsaw puzzle falls into place and the picture becomes clearer as to why the establishment has been pumping crypto lo these many years.
Get them comfortable with digital tokens and to part with their gold. One victory and one smashing defeat.
Silver has broken $50 and hit a new all time high.
………….long way to go
Quite a milestone for silver. It has not hit a new high since 1980.
A little selloff in gold today. It’s less of a gold thing than a dollar thing though … the USD is correcting from an oversold level, as indicated not only by forex trading but across asset classes. Stocks are down in USD today too.
GETTING KILLED!!!!!!!!!!!!!!!!!!!!
look out below!!!!
Gold and platinum both hammered.
Copper and silver both gained.
To put the gold and platinum declines in perspective, they reversed two days’ gains to trade back to where they were Tuesday. We thought the prices were impressive then.
Feeling unwell today, i be returning to bed shortly ……………however i have noticed that suddenly “They” are pumping 2nd hand stuff. Ad after Ad & even government comment on how “Good its is to reuse refurbished Tec or clothes……
It all pointing to worries about balance of payments & rising costs on NEW gear.
I hope you feel better soon.
Common government theme these days. … austerity for thee, but not for me.
Gold has regained the $4000 mark after selling off sharply. If it closes the week above this level it will have been an important technical signal of resilience.
Stocks are selling off, putatively on apparently deteriorating China relations. Even Treasuries are up today.
Apparently Trump has put an additional 100% tariff on China imports as retaliation for China export controls on rare earth metals.
Two wrongs might make a right in geopolitics, but not in geoeconomics. The US has stupidly eviscerated its own capacity to produce rare earths and now punishes both itself and China for its blunder.
Bouncing about the $4k mark…………lets see where it settles
Trump V China is getting “Warm” ish……………..
Trump is a bull, and our economy a China shop.
Council pension scheme ploughs £16bn into ‘shadow bank’ lending
Local Government Pension Scheme invests sum following bankruptcy of several US businesses
One of Britain’s biggest pension schemes has invested £16bn of savers’ money into “shadow bank” loans, amid growing concern this corner of financial markets is on the brink of crisis.
The Local Government Pension Scheme (LGPS), which looks after the retirement savings of six million local council workers, has invested the sum into the troubled private credit market, official data show.
Private credit is a $3tn (£2.2tn) market that involves money managers lending to companies. Private equity firms that typically extend these loans are not subject to the same strict regulation as banks and this corner of finance is much less transparent than stock and bond markets.
Investors have been on high alert about the shadow banking sector following the bankruptcies of US businesses heavily reliant on private credit.
————————————————————————-
Ok, so this bubble is bursting & the powers to be are using “safe” funds to do it!!!!!
Got a link for this?
https://www.telegraph.co.uk/business/2025/10/11/council-pensions-plough-16bn-into-shadow-bank-lending/
Push the ESC button before the page finishes loading & you be able to read it all
Mega’s dispatch from England:-
Well, Well
As we edge closer to financial arm-a-gag-in the Limey deep state is now going full chat ref Digital ID/CBDC…….this weekend Bitcoin bloodbath will do little to dismay their interest is said subject.
Starmer our beloved “Dear Leader” is suddenly finding the press has backed off in a big way. A clear sign that he now understands he is to tow the line or else. The news this morning that the pension fund whom looks after the pensions of local government employees has “SUDDENY” thought it a good idea to “Invest” £11 billion of said funds into the Shadow banking system…………….am sure the Ukraine retreats & Elon suddenly finding that the US tax player was funding a lot of “Strange things” is in no way connected.
My late father told me the tale of going to Germany in the 1950s after WW2 to do his national service. He was in the RAF & found the locals very friendly. He found a load of parachute silk & gave it to one of the local site workers whom asked him to dinner.
It turned out this guy had been in a command HQ as the war ended, he told my Dad that it was almost funny watching it all collapse……………..i only hope i can summon the humour when it happens here……..
Morning Gang
OK, So China just upped the anti ………..sez they “countermeasure” anything Trump does ref Taxes…….Monday markets should be “Interesting”
Ah…………….so
https://www.telegraph.co.uk/business/2025/10/12/britain-at-risk-of-falling-into-chinese-debt-trap/
Gold opens the week higher, platinum much higher…
https://www.kitco.com/price/precious-metals
The Dutch government has just seized control of a major Chinese semiconductor company Nexperia.
They’ve suspended the Chinese CEO, handed voting power to a non-Chinese director, and placed the company’s shares under the control of a third-party trustee.
All justified under a wartime emergency law meant for things like bread and fuel rationing despite that the Netherlands wasn’t being invaded.
$4100……….just saying
Another century passes in just a few days.
Hard to believe it’s a scant 7-8 days from breaking $4000 to packing on two more century marks.
It comes as Bank of America lifted its forecasts for gold to reach $5,000 per ounce in 2026.
The bank said the Trump administration’s “unorthodox policy framework” has helped to support gold prices as debt levels in the US rise and the president pushes for the Federal Reserve to cut interest rates to 3pc in the US.
The bank said a 14pc increase in investment demand for gold, similar to what has been recorded this year, could push the price to $5,000 per ounce.
“For a rally to $6,000/z, investors need to increase their purchases by 28pc – not impossible, but a tall order,” analysts said.
Wall Street bank scrambles to contain fallout from private credit implosion
The collapse of US car parts maker First Brands triggers ‘shadow banking’ fears
Gold is now overbought just about any way you look at it, even stretching the upper bound of the two year trend channel on a log chart. That means it’s gone superexponential … a hazardous situation for the short term outlook. Nothing investors need be concerned about, but traders beware … it signals the entrance of fast money that can leave just as fast as it came. The chart says this move stops short of ~$4400 tops … or enters an entirely new phase…
As if to underscore the point, the metals have become almost as hot on CNBC as AI … a headline topic on its “Fast Money” program. When the mainstream financial media start getting excited about something, I start getting nervous about it.
Today’s moves:
Copper (CPER) +4.36%
Gold (IAU) +2.45%
Silver (SLV) +4.03%
Platinum (PLTM) +1.75%
For comparison:
Bonds (GOVT) +0.04%
Stocks (VT) +1.60%
The cusp of hyperinflation?
Gold has not only beat stocks for the day and the week and the month to date, but for the year and decade … and the century and the millennium.
But don’t hold your breath waiting for the mainstream to acknowledge that.
This should probably be a post on its own, but that would have to wait for a spot in a less demanding schedule. If there is anything getting crazier than metals prices, it’s the Artificial Intelligence mania.
AI is real enough, but media coverage of the benefits is eclipsing the costs. Not only are these advanced processors expensive, but they are subject to rapid obsolescence as competition mounts and trillions of capital are being thrown into development. That means those already high costs are going to need repeating frequently.
Not to mention the prodigious energy consumption. Some of these new data centers would consume as much power as entire cities. It could well turn out that building a data center means building a dedicated nuclear power plant to support it. That’s not gonna be cheap.
There is mounting criticism of circularity in AI finance, as Company A invests in and buys from Company B, Company B invests in and buys from Company C, and Company C invests in and buys from Company A.
And for all the wonders that AI may bring, it’s not gonna fix your leaky faucet, repair your roof, make a pot roast, change your oil, or repave your potholed road. Information is important, but the essentials of life are physical things like food, shelter, and transportation. They will continue to require human labor and industrial-revolution-era machinery.
Much of immense sums of capital being sunk into AI are malinvestment that will ultimately turn out to exacerbate scarcity of more vital products and services. The inevitable reconciliation of capital flows with real world priorities is going to be messy.
Classic ponzi-bubble
With Rare Earthes/Copper/Silver……………rather getting expensive how are they going to make a profit on an EV??
Talk round the camp fire is london can’t cover its silver contracts, NY NOT going to bale them out……………
It may be that the fiat system is unraveling. Well … we’ve long known it was unraveling … but this may be a new phase, instigated first by the Fed’s 2020-2021 moneypalooza, second by the weaponization of the dollar in 2022, and third by the Fed’s abandoning its inflation fight in 2023-2024. Of course we could trace its roots back much further than that, but I think these three events collectively marked the point of no return.
I’d be remiss not to mention the runaway debt situation, but see it not so much as an independent issue as a byproduct of runaway Fed policy.
Recall that this relentless explosion in gold prices didn’t just start this year. But if it does surpass that $4400 mark without at least taking a breather, that would be evidence the tailspin is at hand.
The Federal Reserve recently cut the Fed funds rate and it seems they’re signalling that they’re going to cut again at the next meeting later this month. Beyond that, Powell is suggesting that the Fed will stop bleeding off its balance sheet.
https://www.wsj.com/economy/central-banking/powell-hints-at-end-of-campaign-to-shrink-feds-treasury-holdings-a2e9b065
It seems the USD is really starting to go down the swirler fast if the roaring gold price is an indicator. My question is, do you think the Federal Reserve will meaningfully defend the purchasing power of the USD if gold hits, say, $5,000 per troy ounce this year? Between the Trump administration’s and Congress’ refusal to return to a lower deficit, instead opting to further increase the deficit, and the Federal Reserve’s bringing even easier monetary policy, it seems there is absolutely zero will in any of the halls of power for responsibility governing this country.
At the rate things are going, it’s looking like an engineered sudden stop will be required to arrest the processes already underway which seem to be getting out of control.
Screaming gold prices are bad optics for the Fed and they have to be watching them, but I think they will stick like leeches to their official “inflation” stats especially the PCE deflator. They will dismiss even them to a degree because the setup is already in the works … Trump is in pole position to be the fall guy for a surge in “inflation”. The establishment hates Trump and tariffs so it’s two flies with one swat.
What we’re seeing in asset price inflation will find its way into consumer price inflation, so even with most of it filtered out via statistical massage it’s only a matter of time.
Apparent some microscopic progress on deficits is being made. It’s nowhere near enough though and seems unlikely to last. At some point I suspect a step up in debt monetization, euphamised as “yield curve control”, is ahead. Along with the wastewater already under the bridge, this is likely what the metals-vs-currency markets are keying off of.
Most central bank currency is going down the swirler. Even if in the forex markets “the dollar” starts looking better, it’s just “the best-looking leper in the colony“.
Ok, so what to do?
We know they intend to go with CBDC, Russia sez they going to transfar the debt into that. Then Gold back the $?
Mike
Why is oil missing out?
Good question! I don’t know, but oil has always marched to its own drummer. That’s why it’s not modeled in Synthetic Systems … too noisy. It’s plausible that “drill baby drill” policy is having an effect; Chinese stockpiling, the lagged effects of green policies, etcetera could all be playing into it. It’s also probably reflecting economic weakening, which would also explain why of the four metals I track, copper has been the weakest performer lately.
But none of this would be permanent. It would eventually move at least roughly with other prices towards the end of the pricing chain.
Is AI investable? I covered a few factors earlier.
Let’s boil it down to its essence. At these valuations, AI stocks can very well pay off, but it could easily take twenty years. But consider how much infotech has changed in the last twenty years … over the next twenty years today’s AI tech will have become obsolete.
It’s just waaay tooo high a price to pay for something with so limited a shelf life.
Wall Street media still cling to their anti-gold pro-crypto bias. CNBC’s Michael Santoli today euphemised Friday’s bitcoin crash as a “correction”. But MarketWatch’s Mark Hulbert points out that this “correction” was bigger than Crash of 1929. Say it, Michael; c-r-a-s-h crash. And just yesterday, Santoli referred to gold as “analog bitcoin”.
We can only hope Santoli was speaking tongue in cheek.
The 60:20:20 portfolio is all the rage since Morgan Stanley’s Mike Wilson advocated it a few weeks ago. It doesn’t hurt that gold has gone mainstream over the course of just the past few weeks. But references to it here at Financology go back much further, for example on the Model Portfolio page last updated 2024 0913.
The 60 part would emphatically not be an S&P 500 stock allocation – too top heavy with just a handful of high flyers – but globally diversified. It could be as fancy as you like, but a simple ETF implementation could be as few as three funds, VT, GOVT, IAU.
Just to reiterate here my support for it, which derives from, among other things, the volatility studies discussed in The Impermanent Portfolio. Although not a believer in one-size-fits-all investing, it’s a good reference point for allocation. You might even call it a variation of the Permanent Portfolio updated for 2020’s bond market risks and a global equity allocation, as well as of the traditional 60:40 stock:bond portfolio. Look for more about it in a future update of the Model Portfolio page.
A.I……………?
AI is being hyped to Maris & back, it reminds me of the early 1980s & “Turbo”.
Turbo engines suddenly burst on the car scene F1 & Rally, Turbos were “Cool”.
So we had “Turbo” toothpaste, “Turbo” aftershave………….etc
A.I is to me the same, normal software is now called “AI”………..
SHOW ME THE BEEF
You lucky, jammy Limy bastards!
https://www.carscoops.com/2025/10/a-government-grant-could-make-toyotas-strangest-solar-concept-a-reality/
Yikes.
Gold $4329.67.
I’m sticking with my $4400 near term ceiling for now. If it breaks though, the it’s a new regime.
Am the wrong side of 60, is it too late for me to get into “Coke & hookers”?
Trump sez India has agreed to NOT buy any more oil, India sez no such call took place. Trump seeing “Green Goblin” this week……..seeing Putin next week………UKraine army collapse…………..
Last time it took 18% 30-year non-callable Fed Bonds, the destruction of the existing banking system as well as the dismantling of the WWII era US industrial capacity, 5 years of “recession” to tame the Fed-induced inflation bear.
What’s left this time to put on the breaks before a Weimar-level catastrophe?
Good question. I’m looking around and seeing no candidates ready to step up.
It would clearly take a caliber of leadership we haven’t seen since the Reagan-Volcker era. A willingness to accept transient unpopularity for lasting benefit. Volcker was vilified as the most hated man in America at the time, and he had to have known that was going to happen, and accepted it. The recession was no fun to be sure, but laid the foundations for two decades of prosperity. Volcker was later celebrated as one of the century’s most respected financial leaders.
Since then we’ve had mostly the opposite kind, those willing to throw the future under the bus for current approval. Now the future is here.
How bad does inflation have to get? I hope it doesn’t have to reach Weimar levels. At this point we might count ourselves lucky to escape with an Argentina type scenario where a leader like Milei can be elected; although the jury is still out as to whether even he can hang in long enough to get the job done.
America has a history of getting leaders with the right stuff when it really needs them, but a major obstacle right now is that the accumulated federal debt limits what even the most talented and well intentioned people can do. And it’s nowhere close to even having that.
My thoughts…………….
A “collapse” of the $ system serves few in the “Game”. I think that the Bear & the Dragon have offered the Eagle a deal…………i think the Eagle is moving in that direction. The Lion & the Cock are going to be the biggest losers ………………
Gold/Sliver has 5,000 years of history…………everyone gets it.
Already seeing new headlines lining up to throw rocket fuel on the fiat fire:
https://www.gold-eagle.com/credit-fears-resurface-dragging-wall-street-lower-gold-breaks-4300oz