Soaring Debt, Negative Interest Rates Set Up Gold’s Next Run

July 6, 2021

One glance at this chart should silence any talk of “a return to normalcy”. We are emphatically not headed in a normal direction.

The liquidity being generated by this debt binge is pushing up prices in a wide variety of sectors. Shipping costs, for instance, are soaring…

… which is raising manufacturing costs for any company that buys materials or components from overseas (in other words all of them).

At the same time, a tsunami of hot money pouring into the financial markets is turning investors into speculators. Where most stockholders, both professional and amateur, used to hold their positions for years, today’s overstimulated players now go in and out in months.

And they do it with borrowed money. Margin debt – created when an investor borrows against existing stocks to buy more – is spiking, not just in nominal terms but as a percent of GDP.

Over in fixed income, hot money has kept bond yields from rising along with inflation, producing a negative inflation-adjusted (i.e., real) yield on 10-year Treasuries, something not seen on this scale since the inflationary 1970s.

Gold had a spectacular run in the 1970s, and ought to do well in the even more chaotic environment we’re now creating. But silver might do even better. A declining line on the next chart indicates silver outperforming gold (while both rise).

When should the precious metals bull market really get going? Probably not until the current bemusement turns to panic. But in the meantime, seasonality is becoming positive as we enter what are generally the best months of the year.

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The little bugger was something special:

Little Bear was born in Palm Springs, California. He lived in New York City, the countryside of New Jersey, South Beach Miami, Paris, Brittany (France), Santa Fe, San Francisco and Dallas.

He loved to travel, making the scene in Madrid, Amsterdam, all over France, and Brussels; on boat trips on the North Sea and the canals of Brugges (Belgium); and by logging in several cross country trips across the United States.

Little Bear was an action dog, who loved the open street Cafes and the freedoms of the open spaces. While only 18 pounds, he was the Leader of the Pack. I can still visualize him roaming the New Jersey estate of Jacqueline Kennedy Onassis, followed by a herd of much larger dogs.

Little Bear was a smart as they come. Once, when moving from the countryside, Little Bear was studying the movers. He then kept running to the woods back and forth for hours. One of the movers came to get me, totally astounded. Little Bear had dug up all his bones and toys buried in the woods and put them into a pile next to the moving truck to make sure his things were moved also.

Everyone thought Little Bear acted human. Years ago, a Shaman from Peru was visiting and saw Little Bear. He had his translator tell us, "this is not a dog, he may look like a dog, but he is not." People used to call Little Bear a little person in a dog suit.

Little Bear was full of life and energy. Every day for Little Bear was new, exciting, and full of possibility. He was entertaining, tenacious and demanding -- always figuring out a way to get exactly what he wanted and never taking no for an answer.

Little Bear was the perfect companion in every way; a joy and inspiration to so many. We shall miss him very, very much.

This Table is dedicated to his memory.

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24 karat gold is pure elemental gold.

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