Black Swans, Ordinary Swans And Metals

Market Analyst, Author, and Founder of The Deviant Investor
January 8, 2021

TA GLANCE

Expect more of the same for 2021 – massive debt, central bank “printing,” and dollar devaluation, while consumer prices and inflation rise.

Gold and silver have been insurance and protection for thousands of years. They will shine in 2021.

Regression to the mean suggests lower prices for stocks and higher prices for commodities.

Breaking News:

  • Gold rose $12 to $1,895 for the week ended December 31, 2020.

  • Silver rose $0.51 to $26.33.

  • As usual, the DOW rose to another all-time high on December 31.

  • Tesla stock, already in the stratosphere, closed at $705 on Dec. 31. It sold for $71 in March 2020. What bubble?

Black swan events are, by definition, unpredictable. But “ordinary white swans” events are easy to see and predict.

CONSIDER “ORDINARY” OR “WHITE” SWANS.

DEBT: Official U.S. national debt ended the year at $27.5 trillion, up from $23.2 trillion one year ago. Our “print and devalue” central bankers enable our “borrow and spend” politicians, a union that thrives in a “fake money” world.

Prediction: National debt, which has doubled every 8 to 9 years for decades, will increase. Will it be up $3 trillion or $6 trillion in 2021?

DOLLAR DEVALUATION: The dollar has devalued from 1/40th of an ounce of gold in 1971 down to 1/1,900th ounce of gold in 2020.

Prediction: Dollar devaluation will accelerate, given the current recession/depression, massive unemployment, forthcoming bipartisan “stimulus,” and the usual graft and corruption. Another easy prediction!

ELECTION SHENANIGANS: Polls show that most republicans believe the election results included hundreds of thousands or millions of fraudulent and/or flipped votes. Democrats believe, according to polls, that the voting was mostly honest.

Prediction: Since elections have been “fudged” for decades, probably centuries, it’s an obvious prediction that more fraudulent elections will occur. Note: if the Powers-That-Be (PTB) wanted honest elections, they would create honest voting. Since it’s obvious that “fudging” has occurred for decades, one must conclude honest elections are undesirable.

INFLATION: Because the Fed devalues the dollar every year, our green pieces of fiat paper buy less, and consumers pay more for food, medical care, trucks, drugs, cigarettes, and most other items. The political and financial elite pay higher prices for donations, payoffs, access to politicians, bribes, and “speaking fees.”

Because pension payments, Social Security checks, and other expenses are often indexed to inflation, as “measured” by the CPI, the PTB adjust the CPI to show minimal inflation. Everyone who buys food, consumer goods, and vehicles knows the CPI is largely irrelevant. The CPI must show low inflation or huge government expenditures would be even larger. Que the statisticians to manage the official inflation rate lower…

Prediction: The dollar will continue devaluing and consumer prices will rise. A “tall coffee” may not cost $10 by the end of 2021, but most commodity prices will be higher. Houses, stocks, and bonds… maybe not.

Read: Stockman “David Stockman on Janet Yellen’s Return

CENTRAL BANK “PRINTING:” Call it QE, monetization, or free currency units. More “printing” will occur in 2021 – 2022, unless government cuts spending drastically, central banks exit the “fake money train,” and the PTB become responsible. (Not Happening!)

Prediction: More QE – an easy prediction. Why will the Fed stop at $7 trillion? If $7 trillion was good and/or necessary, why not $10 trillion, or $30 trillion? More is always better… UNTIL IT ISN’T!

FEAR AND DISTRACTIONS: Politicians understand they should never waste a crisis. Sometimes it’s necessary to make something into a crisis. Lockdowns come to mind…

Prediction: Fear and distractions help conceal crimes, corruption, scams, failed policies, poor management, and a plethora of other conditions that transfer wealth from the many to the few. Easy prediction—more fear and distractions are coming. The wealth transfer will continue.

QUESTIONS:

  • If grams of cocaine create a temporary feeling of euphoria, do kilograms create permanent happiness? If grams are good, and kilos are better, why do hard-core drug addicts look burned out and old?

  • If $billions of QE stimulate the economy and appear to create prosperity, will $trillions of QE create permanent prosperity and wealth? If $billions are good and $trillions are better, why are European and American economies so weak? Why is unemployment at all-time highs? Why are food banks necessary?

  • If central banks can create wealth and prosperity by “printing” currency units, why are “banana republics” poor? Who wants to become a Zimbabwe billionaire?

The answers are obvious, even though our politicians and central bankers may not want to see them.

a)“Printing” currency units increases wealth for only a few. The non-elite pay with higher prices, unemployment, fear, distractions, and a lower standard of living.

b) Cocaine, heroin, and “meth” may induce a short-term euphoria, but they create ugly long-term consequences. The same is true with “printing” fake currency units. Fake money creates fake prices and fake wealth. The world will rebalance during the coming years, and fake money and fake assets will suffer.

c) Debt can’t increase forever. Do you see a “black swan” on final approach?

d) When it’s time to “pay the piper,” the PTB will create another crisis, blame someone else, and extend and pretend to keep their wealth transfer working…

e) When stocks are too high (like now) they correct lower. That correction might occur soon, or maybe the “fake money train” can delay a collapse for years. My bet is soon…

f) When the dollar is devalued, when fake money is flooding out of central banks, when governments spend like there are no consequences… expect real money—gold and silver—to rise rapidly when measured in “fake money” prices.

g) Gold finished 2020 up 28% from its March low. Silver finished 2020 up 124% from its March low. Higher prices lie ahead. Read: “Overwhelming Demand for Silver.”

h) Stock indices and margin debt are too high.

WHAT ABOUT BLACK SWANS?

  1. Pandemics: They are unpredictable unless you participate in their creation. The COVID-19 virus was less destructive than the political and medical responses, fear, lockdowns, depression, abuse, and craziness.

  2. Currency crisis and inflation. Yes, a currency crisis is possible, and unexpected. It could become a “black swan event.”

  3. War. From Hemmingway: “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin.” A major war could be a “black swan event.”

  4. Fed losing control: Read “Will the Fed Lose Control in 2021?” Most people naively believe the Fed is in control, knows what they are doing, and will take care of the middle class. History suggests otherwise. Losing control would be a “black swan event.”

  5. A Derivative Crisis: It happened in 2007-08. If few are expecting a derivative crisis, it could become a “black swan event” this decade.

  6. Another unexpected, catastrophic event… Many possibilities exist. UFOs, solar flares that destroy satellites, global internet collapse, responsible government, self-terminating central banking…

THE WHITE SWAN EVENTS ARE EASY TO PREDICT:

  • Debt will blast higher.

  • The dollar will continue its multi-decade devaluation.

  • Elections will be compromised until the PTB want honest elections.

  • Inflation is “baked into the cake.” Consumer price inflation will replace stock and bond asset inflation.

  • Central banks will “print.” What else can they do?

  • Fears and distractions. Yup, more are coming.

WHAT CAN WE DO?

ANSWER: Protect your savings and retirement with silver and gold. They will rise as dollars are devalued, as inflation rises, as central banks print, and as people lose faith in the PTB.

Alternate answer: Predict the next Tesla bubble and climb aboard. If that seems risky or unlikely, go back to silver and gold.

BLACK SWAN” QUESTIONS:

  • The “black swan events” are difficult to anticipate. However, gold and silver have been money for thousands of years and will remain valuable long after our financial system resets because of excessive debt, “printing,” craziness, and “black swan events.”

  • Would you rather own ten ounces of gold in a non-bank storage facility, or $20,000 in cash, knowing you will hold them for five to ten years?

  • Do you trust your politicians and central bankers more than you trust your gold hoard?

  • Do you believe silver bullion prices will rise faster than the CPI?

  • Would you prefer to own gold and silver bullion or digital and paper assets when the next “black swan event” lays waste to the economy?

CONCLUSIONS

  • Expect massive increases in debt, central bank “printing,” dollar devaluations, and consumer price inflation. How much they increase depends upon our politicians, central bankers, and their inflationary policies.

  • As 2021 begins, gold and silver are priced low (see previous articles) when compared to the S&P 500 Index, the NASDAQ 100 Index, M3, national debt, and GDP. Gold and silver will shine at least until 2025—2026. Stocks could regress to their mean (lower).

  • Gold and silver are not the best answer for all situations, but they have protected people for thousands of years. They are important in today’s environment.

Miles Franklin will convert digital and paper dollars into real money—silver and gold. Our politicians and central bankers will continue to devalue dollars. Convert “fake money” to real money before the stampede out of the fake stuff occurs.

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Gary ChristensonGary Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy and central banking.

The volume of all the gold ever mined can occupy a cube 63 feet on each side.

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